Financial Inclusion Index (doc: WB Financial Inclusion Index 2011)
Financial inclusion has been an important policy goal for quite some time. However, to date a sizeable majority of the population, especially the poor and vulnerable people still have no access to financial services. This is due to limited availability and accessibility of financial services.
Social and off course economic benefits could be obtained if access to financial services could be improved. If the entire population have access to financial services, the government could distribute cash subsidies directly to the recipients' account. Therefore long queues for the distribution of the cash subsidies would no longer occur. As a result, financial inclusion makes people, especially the poor connected with economic opportunities. Thus it's fostering economic growth and individual welfare.
This is just an example of how financial inclusion can benefit people who are currently not connected into the financial system. Hence, the formidable tasks lie ahead to make financial inclusion become real.
The Challenge of Financial Inclusion
Financial inclusion defines as the right of every individual to have access to a full range of quality financial services in a timely, convenient,informed manner and at an affordable cost. It means that financial services are provided to all segments of the society, with a particular attention to low income poor,productive poor, migrant workers and people living in remote areas. Therefore, provide financial service and products need comprehensive financial inclusion strategy that are able to address all the different needs arising different needs segments of the population and do so through a holistic set of services.
This strategy aims to address all layers of the population but with a clear understanding that different layers have different social needs. However, it explicitly targets to those groups with the greatest needs or unmet demand for financial services and making sure that all key segments are taken into consideration. So,overcoming the barriers will create a fundamental breakthrough in simplifying access to financial services. in other word, Know Your Customers are needed for small value customers. All these things need to be done without compromising the principle of stability and prudent banking.
Therefore, the most important for the conceptual terms for inclusion should be, "Simplicity and reliability in financial inclusion, though not a cure all, can be a way of liberating the poor from dependence on public services. Further, the products should address their needs - a safe place to save, a reliable way to send and receive money."
According to Global Index data 2014, currently there 2 billion people that don't use formal financial services and more than 50% of adults in the poorest household are unbanked. The reason for these are because of the costs, travel distances and the often burdensome requirement involved in opening an account. Therefore, financial inclusion is a key enabler to reducing poverty and boosting prosperity. As the World Bank President Kim has called for Universal Financial Access (UFA) BY 2020.
In Indonesia the financial system is mostly dominated by banks. The total of financial assets that bank manage 79 per cent as the World Bank Report in 2010. However, most of the banks are present in densely populated areas,which are closely associated with the volume of economic activity that is in Java and more than 400 cities across Indonesia do not have bank branches. As a result, the banking sector is concentrated in and around Jakarta while low population and remote districts tend to be under-serviced.
From this information only, there is a need for synergy to be developed between the strategy for increasing access of financial services and economic development programs, as well as poverty reduction efforts. Taken together, the above findings underscore the importance of expanding financial service institutions abilities to offer both saving and credit services, while raising depositors' income through broader policies of economic development. These findings also underscore the challenge for Indonesia's formal financial system to expand its client base and to reach a much larger portion of the population.
Therefore the bank sector will remain backbone of financial inclusion. Bank will continue to play a major role in the provision of financial service. For this reason it's important to see how the branch networks can be strengthened and expanded to reach greater proportion of population.
Moreover with the help of technology, the bank can enable some of the mot important bottlenecks to overcome and increase the supply of financial service. Through the technology consumers can also carry out banking without ever stepping into a bank. This convenience can be great incentives for consumers to have a bank account. In addition, information and communication technology (ICT) can reduce transaction costs and expand the formal financial system outreach in regards to saving and loan services.
As a result branchless banking in the form of mobile banking (i.e mobile money), internet (electronic) banking; and transaction using a card or electronic machines technological breakthrough with huge potential for the extending coverage of financial services to consumers who are not yet served by the banking sectors.
The good thing is there is very high access of Indonesian residents to cellular telephone technology that makes it very convenient to increase access to financial services through the technology. This innovation could be combined with money services, utilizing retail networks as outlets for the banks.
Launching Low-cost Payment Network through Local Agents
This strategy aims to address all layers of the population but with a clear understanding that different layers have different social needs. However, it explicitly targets to those groups with the greatest needs or unmet demand for financial services and making sure that all key segments are taken into consideration. So,overcoming the barriers will create a fundamental breakthrough in simplifying access to financial services. in other word, Know Your Customers are needed for small value customers. All these things need to be done without compromising the principle of stability and prudent banking.
Therefore, the most important for the conceptual terms for inclusion should be, "Simplicity and reliability in financial inclusion, though not a cure all, can be a way of liberating the poor from dependence on public services. Further, the products should address their needs - a safe place to save, a reliable way to send and receive money."
According to Global Index data 2014, currently there 2 billion people that don't use formal financial services and more than 50% of adults in the poorest household are unbanked. The reason for these are because of the costs, travel distances and the often burdensome requirement involved in opening an account. Therefore, financial inclusion is a key enabler to reducing poverty and boosting prosperity. As the World Bank President Kim has called for Universal Financial Access (UFA) BY 2020.
In Indonesia the financial system is mostly dominated by banks. The total of financial assets that bank manage 79 per cent as the World Bank Report in 2010. However, most of the banks are present in densely populated areas,which are closely associated with the volume of economic activity that is in Java and more than 400 cities across Indonesia do not have bank branches. As a result, the banking sector is concentrated in and around Jakarta while low population and remote districts tend to be under-serviced.
From this information only, there is a need for synergy to be developed between the strategy for increasing access of financial services and economic development programs, as well as poverty reduction efforts. Taken together, the above findings underscore the importance of expanding financial service institutions abilities to offer both saving and credit services, while raising depositors' income through broader policies of economic development. These findings also underscore the challenge for Indonesia's formal financial system to expand its client base and to reach a much larger portion of the population.
Therefore the bank sector will remain backbone of financial inclusion. Bank will continue to play a major role in the provision of financial service. For this reason it's important to see how the branch networks can be strengthened and expanded to reach greater proportion of population.
Moreover with the help of technology, the bank can enable some of the mot important bottlenecks to overcome and increase the supply of financial service. Through the technology consumers can also carry out banking without ever stepping into a bank. This convenience can be great incentives for consumers to have a bank account. In addition, information and communication technology (ICT) can reduce transaction costs and expand the formal financial system outreach in regards to saving and loan services.
As a result branchless banking in the form of mobile banking (i.e mobile money), internet (electronic) banking; and transaction using a card or electronic machines technological breakthrough with huge potential for the extending coverage of financial services to consumers who are not yet served by the banking sectors.
The good thing is there is very high access of Indonesian residents to cellular telephone technology that makes it very convenient to increase access to financial services through the technology. This innovation could be combined with money services, utilizing retail networks as outlets for the banks.
Launching Low-cost Payment Network through Local Agents
BCA and Indepay Network signings (doc: Ben Ben Nur)
For this reason one of the biggest private bank in Indonesia known as PT Bank Central Asia Tbk (BCA) takes commitment to improve the services for people living in rural and less populated areas. They intend to strengthen the financial inclusion with the recent signing agreement
In this attempt to connect to the customers through branchless banking system, BCA has paired up with Indepay Network, accompany that have based in Singapore and specializes in doing such. Both companies have signed a cooperation agreement to launch Low-cost Payment Network. Previously Indepay has been operating in India since 2007 with aims of easing up the transaction process through a payment network.
The collaboration of the two companies was done on Monday
the 21th of December 2015 when Indepay signed a Cooperation
Agreement at the BCA Building Nusantara on Jalan Thamrin Jakarta. The BCA was represented by the Director of BCA, Suwignyo Budiman and Indepay Network represented by Rajib Saha, the CEO of Indepay Network. This signing agreement was also witnessed by Independent Commissioner of BCA, Cyrillus Harinowo; BCA Director, Henry Koenaifi and Vice President of Indepay Network, John Lee.
In his speech after the signing of the agreement, Suwignyo explained that BCA and Indepay has long been exploring each other to ensure that this cooperation can provide maximum benefits for BCA customers in Indonesia. During the signing Suwignyo discussed about plans for a pilot Project to take place a small trial for testing services through branchless banking with the use of agents in Grobogan, Central Java and Cigugur West Java.
In his speech after the signing of the agreement, Suwignyo explained that BCA and Indepay has long been exploring each other to ensure that this cooperation can provide maximum benefits for BCA customers in Indonesia. During the signing Suwignyo discussed about plans for a pilot Project to take place a small trial for testing services through branchless banking with the use of agents in Grobogan, Central Java and Cigugur West Java.
So far BCA has long focused on their services in
urban areas while Indepay is effective in providing support without the usage
of bank branches. Rajib Saha also said that transactions can be made without
having to travel far from their (customer) homes. Although it is true that
having personal agents can be costly, the services will make up for the
relatively small cost, replied Suwignyo when asked on the matter.
Post Signing the Agreement (doc: Ben Ben Nur)
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