Indonesia is making great strides in driving financial inclusion for its unbanked population. Technology advancements and innovations are enabling the country’s financial sector to reach more people and provide them with access to services they wouldn’t have had before. The latest Bank Indonesia survey on financial literacy found that the number of Indonesians who were aware of and had used digital products increased from 15% to 69% in 2020. In this blog post, we will discuss how innovation is driving financial inclusion for Indonesia’s unbanked population. We’ll look at some of the innovative solutions being developed, as well as the potential impact of these developments on Indonesia’s economy and society.

What is financial inclusion?

Financial inclusion is the process of providing financial services to those who are excluded from the formal financial system. In Indonesia, this includes the vast majority of the population who are unbanked.

Innovation is driving financial inclusion in Indonesia by providing access to financial services for the unbanked population. Mobile banking, for example, is enabling people to access banking services without having to visit a bank branch. This is crucial in a country like Indonesia where many people live in remote areas.

Technology is also helping to make financial services more affordable. For example, micro-lending platforms like Kiva offer loans at much lower interest rates than traditional banks. This makes it easier for people to access credit and start businesses.

Financial inclusion is important because it gives people the opportunity to improve their lives financially. It can help them escape poverty and build a better future for themselves and their families.

The problem of Indonesia’s unbanked population

In Indonesia, it is estimated that over half of the population is unbanked, meaning they do not have access to formal financial services. This lack of access can limit opportunities for economic growth and stability, as well as lead to increased vulnerability to shocks.

The good news is that Indonesia is home to a number of innovative financial inclusion initiatives that are helping to drive down the number of unbanked adults. One such initiative is KPMG’s “Buku untuk Semua” program, which provides low-cost banking products and services to underbanked communities.

With programs like these in place, Indonesia is well on its way to achieving financial inclusion for all.

How innovation is driving financial inclusion in Indonesia

In Indonesia, financial inclusion is driven by innovation. In response to the needs of the unbanked population, a number of fintech startups have emerged to provide innovative solutions that make it easier for people to access banking services.

One such startup is Kudo, which allows users to conduct financial transactions through a network of physical “Kudo shops”. This model has been particularly successful in rural areas, where traditional banking infrastructure is often weak.

Another fintech startup that is making waves in Indonesia is Paytren, which offers a mobile app that allows users to make payments and transfers without the need for a bank account. This is a particularly relevant solution for the many Indonesians who are “unbanked” – that is, they do not have a formal bank account.

These are just two examples of how Indonesian fintech startups are driving financial inclusion in their country. By providing innovative solutions that meet the needs of the unbanked population, these startups are helping to close the financial inclusion gap in Indonesia.

Financial inclusion initiatives in Indonesia

In recent years, Indonesia has made great strides in increasing financial inclusion among its unbanked population. A number of innovative initiatives have been launched to provide access to financial services for those who are not served by traditional financial institutions.

One such initiative is the Bali Fintech Agenda, which was launched in 2016. The Agenda is a collaboration between the government, the private sector, and civil society to promote financial inclusion through technology-enabled solutions. To date, the Agenda has helped to develop a number of fintech products and services that are now being used by Indonesian households and businesses.

Another important initiative is the National Financial Inclusion Strategy (NFIS), which was launched in 2017. The NFIS aims to increase access to formal financial services for all Indonesians, including the unbanked population. One of the key components of the NFIS is the development of an inclusive banking ecosystem, which includes both traditional and digital banking channels.

The Indonesian government has also taken steps to improve access to finance for small businesses. In 2018, the government launched a program called KURUPEK (Kredit Usaha Rakyat Untuk Pemberdayaan Ekonomi Kreatif), which provides loans of up to IDR 10 million (approx. USD 700) to micro-, small-, and medium-sized enterprises (MSMEs) in the creative industries. This program has helped thousands of MSMEs gain access to formal financing and grow their businesses.

Conclusion

The growth of financial inclusion in Indonesia has been remarkable over the last few years. Through innovative technologies, Indonesia has seen a rapid increase in access to financial services for those who were previously unbanked. This increased access to banking products and services will be critical for improving the overall quality of life for many people in Indonesia. In order to ensure that this progress continues and is sustainable, it is important that regulations continue to keep pace with technological advances so that new innovations can bring even more people into the world of finance.