Monday, 8 July 2013


Bank Indonesia launched a pilot project for branchless banking alias office less banks in 8 provinces involving 5 banks and 3 telecommunication companies on Wednesday. The objective was to test security, effectiveness and affordability of the said bank. If successful, it would be launched nationwide.

Trial and error of branchless banking had been carried out in North Sumatra, West Java, Central Java, East Java, Bali, East Kalimantan and South Sulawesi by 5 banks namely Bank Mandiri, Bank BRI, Bank BPTN, Bank Cimb Niaga, Bank Sinar Harapan Bali, and three telecommunication companies i.e. Telkomsel, XL, dan Indosiat. This trial and error project would exercised from May to November 2013.

The branchless banking program was expected to serve as foundation in the process of access expansion especially for the rural communities who were far away from banking infra-structure. If bank services were bad even the cities, imagine what life would be in the villages.

Branchless banking services were not rendered physically in the offices of banks or telecommunication companies but by technological facilities and third party services know as intermediary financial services [UPLK] as well as money liquidation centers [TPT].

The application of branchless banking was becoming a pressing necessity. BI’s data unveiled that only 17% of micro and medium business [UMKM] of the total UMKM in Indonesia had financial assistance from banks. As per August 2012 last, UMKM who had account in banks only numbered 9,027,461 or 17% of total UMKM which numbered 44,796,271 business players [or 83% of total UMKM].

The remaining credit unspent by August 2012 came to Rp 531,192.6 billion with portion of credit against total bank’s credit at 19,9%; while UMKM credit growth was 14.1% year on year per August 2012.

Credit for medium business constituted the highest portion against other recipients. Apparently there were three gaps which held back UMKM’s access to bank’s services in terms of scale, formality, and information. On the UMKM side, the number was high, potential, but poor access to banks. On the bank’s side, they needed information on UMKM potential UMKM as well as their fit-and-proper status. This was the cause of low financial access of UMKM to banks.

To bridge the gap, it seemed right if BI continued to develop policies to drive UMKM with UMKM of the real sector as final target, among others to promote financing of small business and to develop infra-structure of the financial sector. in addition to that also to conduct trainings for 35 nurtured clusters including 29 types of commodities with information through website info and intermediary bazaar.

BI was also developing regional credit insurance company [PPKD] which was expected to jack up regional economy through UMKM financing. For that matter, support the central and local government was called for whereby they could set directions for PPKD policies in the future.

In addition to the above, BI felt in necessary to categorize UMKM in terms of their potential capacity to pay credit installments. The credit bureau for UMKM was not known by UMKM so it was necessary to publicize their presence. The UMKM credit bureau would prove to be helpful to banks on the one side and UMKM on the other in the process of financial deals.

It seemed reasonable if BI stressed the importance of financial inclusion to save the save low income group including UMKM from the claws of brokers and moneylenders if they had no access to banks in their locations. To illustrate blood suckers [money lenders] set interest rate at 100% in terms of day tenure to farmers in that region. “The interest rate was as high as 100% on day to day basis.”

Provision of financial access to the small people was needed through sophisticated communication technology such as by way of branchless banking. Moreover today nearly everybody already had a hand phone. All that BI had to do was to change mindset of the people to use their hand phone. All that BI had to do was to change mindset of the people to use their hand phone not just to communicate but to use banking services.

Beside branchless banking, BI also would insist banks to extend technical counseling to the people in regard to banking services. Supposedly BI and banks also enhance technical aid to UMKM, such as helping them to make a proposal for credit application to banks.

Consequently, people’s easy access to banks would jack up national economic growth. Today the general perception of banks was that they were exclusive an inaccessible to the small people or the small people were reluctant to deal with banks. The easier the deals and transactions, the greater the implication on economic growth.

Therefore it was necessary to enhance financial inclusions which make banks easier to be accessed without social discrimination. The financial inclusion concept through expansion of service networking for the for the people had its objective to narrow social gap and promote welfare of the poor people.

As the public could easily access financial services, i.e. banks, they could apply for credit, transfer money etc; all the activities would be supportive to economic development. The point was that banks should open financial access toward inclusive growth. The promotion of financial services had the objective to promote people’s welfare and jack up national economic growth especially in the present condition where bank’s penetration was still low in Indonesia.

Data of the global financial inclusion index 2012 of the World Bank had it that only around 20 percent of Indonesia citizens above 15 years of age benefited financial services. The percentage was way below China and India where the percentage was 64% and 35% respectively.

At global level, the highest percentage of banked population were among developed nations included the organization for economic cooperation [OECD] where the percentage of unbanked population was only 8 percent at the maximum.

Meanwhile the highest percentages of unbanked population were in Africa 85%, followed by the Middle East and East Europe 49%.

Financial inclusion did not always mean credit extension at low interest. Customer’s ability to access banking services anywhere and anytime was an important factor in the financial inclusion system. The accessibility factor were often overlooked so banks were putting too much effort on capital raising and credit pipelining. Banks were playing less attention to rendering financial services.

By sophisticated technology, supposedly banks started to pioneer introduction of new products and services to enhance bank’s accessibility. By application of advanced information technology in banking services, it was expected that the number of account holders would increase from the present 60 million customers. Again it was to be borne in mind that access to banking services in Indonesia was still low. In this case to enhance saving was even more important that to expand credit extension. To deposit in bank was the initial commitment of a customer to bank’s services.

In the beginning, to deposit in savings account was more important than to obtain credit. Customer’s savings account was a source of income for bank to build asset and capital. From this capital, credit could be extended. Banks could not possibly extend credit without possessing capital. What was meant by savings deposit and credit in this context was micro savings account and micro credit.

To enhance micro savings. BI had launched the Tabunganku [My Saving Account] program. Meanwhile pipelining of the micro credit was among others through the people’s business credit [KUR]. One thing was sure, in fact the banking sector still had strategic plan as one of the actors in the financial inclusion system. (SS)   

Business News - May 31, 2013 

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