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

Tuesday, August 19, 2014

With the rapid growth of the middle-income population and a better-educated demographic bonus, Indonesia is expected to experience a more sustainable economic growth. One of the ways to achieve this is by increasing people’s involvement in the financial sector, otherwise known as financial inclusion. As seen through comparative studies and from success stories in other countries, financial inclusion can be increased by optimizing the use of mobile money and banking.

Financial inclusion means that more people have access to the banking system, payment services, savings, investments or insurance. Inclusion could reap a great deal of benefit if it reaches the currently underserved group, namely the poor and vulnerable.

Because of Indonesia’s widespread geography and its numerous islands, the biggest issue is how to reach the underserved group using the most cost-efficient and effective methods. Bank Indonesia (BI) and the Financial Services Authority (OJK) have come up with plans and regulations on how to increase financial inclusion through branchless banking schemes and the use of mobile money, so it could significantly cut operational and infrastructure costs.