NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, October 22, 2014

The benefits of financial services are certain in the course of economic development. Policy makers realize that a great deal may be acquired if financial services can reach people who are currently underserved.

The poor and the vulnerable are partly underserved because they feel that they do not have money and therefore do not need nor benefit from financial services. However, such a reason is groundless since in the long term, economic growth has enabled Indonesia to join lower middle-income countries, with 2013 income recorded at around US$3,500 per capita. Economic growth has also brought down the number of people living below the poverty line. In 2000, right after the Asian financial crisis, there were about 38.7 million people living below the poverty line. In March 2014, more than 10 million people moved up above the poverty line, leaving about 28.3 million people below the line.

However, 48 percent of Indonesian people do not have access to financial services. From the 52 percent of Indonesian people that have access to financial services, only 50 percent save in banks and 17 percent borrow from banks. The penetration of bank branches and ATMs is still very low in Indonesia. On average there are only 9.24 bank branches per 1,000 square kilometers, compared to 9.76 in Singapore, 11.77 in Thailand and 19.91 in Malaysia.