1. APEC 37th Meeting SMEs Working Group 2013
FINANCIAL INCLUSION AND
MSME PROGRAMS
IN INDONESIA
Pungky P. Wibowo
Director
Department of MSME and Financial Access Development
Bank Indonesia
APEC 37th Meeting
SMEs Working Group
2013

2. OUTLINE Access to Finance Condition in Indonesia
Financial Inclusion and MSME Program
Collaboration and Strategic Partnership 1 2 3

3. FINANCIAL INSTITUTION
FACTS OF INDONESIA
World Bank (2011) :
There is only 20% of Indonesian adults have owns account balance in formal financial institution
Indonesia has a huge economic potential and large market for financial services
Central Asia & Eastern Europe
50%
More than 13,000 islands
Population: million 1)
GDP Growth 2012: 6.23% yoy 2)
GDP per capita Dec 2012: USD )
Banking industry covers ± 75.8% of assets in financial sector
High income OECD & non-OECD
92%
Middle East & North Africa
42%
East Asia & Pacific
42%
Sub-Saharan Africa
12%
South Asia
22%
Indonesia 19.6%
Malaysia 66.7%
Philippines 26.5%
Thailand 77.7%
Vietnam 21.4%
India 35.2%
China 63.8%
Russia 48.2%
Brazil %
INDONESIA
20%
Latin America & Caribbean
40%
Source: 1) BPS, 2010; 2) BPS, 2012
Sourcer: Worldbank, Global Financial Inclusion Index , 2011
NUMBER OF
FINANCIAL INSTITUTION
Commercial Banks
120
Rural Banks
1.653
Insurance Companies
1397
Pension Funds
269
Multifinance Companies
200
Venture Capital 89
Securities Companies
754
Credit Guarantee Company 6
Pawn Broker 1
Source: Bank Indonesia and Bapepam-LK, 2012

4. INDONESIAN POVERTY CHARACTERISTIC4
There is a huge gap in poverty level disparity between provinces in Indonesia
(Jakarta = 4%, Papua = 31%, Indonesia = 12 %)
BIG GAP
Source : BPS, 2012

5. LEVEL OF ACCESS TO FINANCIAL SERVICES
More than 50 per cent of Indonesia household have no access to bank financial services
Less than 20 per cent of Indonesia poor household have access to bank financial services
Source : Improving Access to Financial Services in Indonesia, World Bank, 2010

6. THE ROLE OF MSME IN INDONESIAN ECONOMY
MSME are the back bone of Indonesia’s economy but they get only a small portion of banks’ financing
MSME play a crucial role in Indonesia’s economy:
MSME are dominating the business units with share up to 99,9% of total business units.
MSME absorbs around 97,2% of total labor force.
MSME contributes around 59.1% to the GDP.
The trend of MSME Credit
The Medium Scale Enterprise loan dominates the MSME Credit (49,73%)
The growth of MSME Credit around 15,39% (yoy) and around 10,83% (yod)
Source: MSME Statistics 2012, Ministry Cooperatives and MSME
Source: Bank Indonesia, June 2013

7. CONSTRAINT OF POOR HOUSEHOLD AND MSME
Innovation is needed to address the constraint of financial inclusiveness…
SUPPLY SIDE
Asymmetric information
Transaction cost vs Profit Gained
Service and Product are not fully fit to the need of people
High Technology for effective the distibution channel
Regulation and Policy for effective access to finance
DEMAN D SIDE
Limited financial capability, education, experience and psychological factors
Limited skills and capability in doing business
Formal identity problem

8. OUTLINE Access to Finance Condition in Indonesia
Financial Inclusion and MSME Program
Collaboration and Strategic Partnership 1 2 3

9. FINANCIAL INCLUSION FRAMEWORK9
Main Goal
To reach economic welfare through poverty reduction, distribution income, and financial system stability in Indonesia by creating financial system that can be accessed by whole people in this country
Poverty reduction
Financial System Stability
Equitable Income Distribution
Productive and high purchasing power society
Easy access to financial system
Target Groups
Migrant Employee Group and People in Remote Areas
Very Poor
Working Poor/ Productive
Near Poor
Non - Poor
Strategy
Financial Education
Intermediary/Distribution Facility
Supporting Regulation/ Policy
Mapping on Financial Information
Public Financial Facility
6 Pillars of Financial Inclusion
Customer Protection

10. BALANCING POLICY FOR FINANCIAL INCLUSIVE & PRUDENT OPERATION
Simplicity;
Customized;
Flexible
Equal Treatment;
Procedural;
Standards;
Compliance based;
Indonesia Policy

11. FINANCIAL INCLUSION AND MSME PROGRAMS11
Education (poor household & MSME)
National Campaign
Research and Diagnostic
Gov’t Credit Programs
G2P channel
Financial Identity Number (FIN)
MSME information system
Multilicensing
Provision of Credit / Financing by Commercial Bank and Technical Assistance for MSME development
Branchless banking
TabunganKu
“Start-Up” Credit
Land Certification
MSME Rating
Credit Bureau
Micro Insurance
Strategy
Program
Banking Mediation
Product Transperancy
FINANCIAL INCLUSION AND MSME

12. Financial Identity Number
THE CONNECTIVITY OF FINANCIAL INCLUSION & MSME PROGRAMS 12
Financial Education
Branchless Banking
G2P transaction eg. Disbursement of social program
Bank Led/Telco Led
Hand Phone number
Price Information
As account number of no frill account “TabunganKu”
TabunganKu/
basic saving account
database
Financial Inclusion Information System
Survey Financial
Literacy
Financial Identity Number
Customer profil data
Research & Diagnostic
Credit Rating
Micro credit

13. Progress of Financial Inclusion Program: What have we done so far?13
2009
2010
2011
2012
2013
2014
Financial Education
Blueprint of Financial Education
National Campaign “Let’s Go to the Bank”
TabunganKu/ Basic saving account
TabunganKu
Indonesia Saving Movement (Gerakan Indonesia Menabung)
Let’s Go to The Bank
Intensive campaign of GIM
Financial Literacy Survey
Financial Identity Number
Baseline and Comprehensive Survey
FIN Information System Development
From this timeline, we can see that we start the financial education program in 2007 by tailored the education task force.
In 2008, we had deliver blueprint of financial education and had the national campaign “let’s go to the bank”.
Furthermore we already that the national campaign “3P” in 2009 and the following year we launched TabunganKu (No Frill account).
In the same year we doing the saving movement for student. By 2012, we already do the financial literacy survey.
Branchless Banking
Pilot Project
Guiding Principle for Branchless Banking Pilot Project
Research on Branchless
Banking Development
Start-up credit
Development of financing scheme and financing generic model
System Information of Financial Inclusive (SIFI)
Tailoring Strategy for SIFI

14. PROGRESS OF FINANCIAL INCLUSION PROGRAM
No.
Program &
Target
Goal
Progress 1.
Financial Education
Student
(elementary, junior high/equal, senior high/equal, university)
to enhance financial education
to input financial education to national curriculum
Integrate financial education into National Curriculum for Senior High School in 2013
b. Migrant worker
To enhance financial education
Assessment to integrate financial education into basic curriculum of worker training.
c. Certain society group including migrant worker
To enhance financial education.
Preparation of material and financial education plan. 2.
Financial Identity Number (FIN)
General society, especially unbanked people.
Provide the database of unbanked people , that can be accessed by financial institution to bridge the an asymmetric information.
FIN Database development :
Baseline survey : data
Comprehensive survey : 600 data 3.
TabunganKu / Basic Account
General society & student
To broaden the financial services access for society through “no frill account” product
TabunganKu
June 2013: 3,93 millions accounts in the amount of Rp4,31 trillions
Champaign : Indonesia Saving Movement
General society & Student
As an effort to increase society awareness to saving
Bank Indonesia, sent an appeal letter to all banking sectors to support the Saving day (Hari Rajin Menabung)

15. PROGRESS OF FINANCIAL INCLUSION PROGRAM
No.
Program &
Target
Goal
Progress 4.
Branchless Banking
Remote area society & Unbanked people
Enhance financial service access using technology instead of physical bank.
Branchless Banking Pilot project
Participant :
5 banks and 3 telecommunication companies
Conducted in 8 provinces in Indonesia.
Development of supporting regulations for Branchless Banking. 5.
Credit for beginner (Start-up credit)
Beginner entrepreneur
Developing financing scheme for beginner entrepreneur
Development of Financing Scheme 6.
System Information of Financial Inclusive (SIFI)
General Society
Tailoring financial inclusive policy and regulation.
As a base for decision making
Database study material.
Tailoring Strategy of SIFI

16. OUTLINE Access to Finance Condition in Indonesia
Financial Inclusion and MSME Program
Collaboration and Strategic Partnership 1 2 3

17. COLLABORATION AND STRATEGIC PARTNERSHIP
IN NATIONAL AND REGIONAL ECONOMIC DEVELOPMENT 17
Endorsement & constitution supports
Championship Sector
Sectoral fostering and development
Policy
Regulation
DPR / DPD
Bank Indonesia / OJK
Related Ministry
Banking Association
Education institution
National Economic
Regional Economic
Capacity Building
Infrastructure Synergy
Capacity Building
Regional Office of Bank Indonesia
Regional Government
BPD / BPR
Regional Banks and Rural Banks development
Finance Infrastructure: PPKD
Mapping leading sector & regional creative industry
Business model development.
Main player and regional host
Pioneer of Decreasing Micro Interest Rate

18. WAY FORWARD
In order to improve access to finance services, particularly for the unbanked people, Indonesia recognising:
The importance of combating financial illiteracy that can increase financial capability and assist the effectiveness of financial inclusion through financial education;
The importance of innovative delivery channel (namely branchless banking and Financial Identity Number (FIN)) in order to increase access and to broaden the outreach financial services for unbanked people;
The importance of a strong collaboration and coordianation among the parties involved to achieve synergy and avoiding redundancy for efficiency and effectiveness because financial inclusion is an ongoing process.

19. Thank You