Dutch Queen Máxima Meets Jokowi, Talks Inclusive Finance

Jakarta Globe, Eko Prasetyo, September 01, 2016

President Joko Widodo and first lady Iriana welcome Queen Máxima of the
Netherlands to Jakarta's State Palace on Thursday (01/09). (State Palace Press Photo)

Jakarta. President Joko "Jokowi" Widodo and first lady Iriana welcomed Queen Máxima of the Netherlands at the State Palace in Jakarta on Thursday (01/09), who came as an inclusive finance special envoy of the United Nations Secretary General.

President Jokowi and Queen Máxima discussed financial inclusion plans for Indonesia which the Queen will coordinate with the UN, World Bank and other major institutions.

The president said during her visit to Indonesia Queen Máxima had inspected the implementation of student bank accounts and e-warung cooperatives selling staple foods.

The president and the queen also discussed measures to provide banking access to small businesses, farmers and fishermen.

Targeting Indonesian youth

Queen Máxima said the UN is committed to assist in fintech, or financial technology, innovations initiated by young Indonesians.

"The queen met with young entrepreneurs who have produced many fintech applications and software. She selected two of them to participate in financial development [projects] to accelerate fintech in Indonesia," Jokowi said.

The government has also instructed Indonesian financial institutions to support micro businesses development to encourage economic growth.

"I applaud the Indonesian government's decision to put financial inclusion as one of the Nawa Cita [Jokowi's seven development goals]," the queen said.

Queen Máxima's visit was a follow-up to Jokowi's earlier visit to the Netherlands on Apr. 22.

Related Article:

Queen Máxima praises Indonesia’s financial inclusion efforts

Queen Máxima of the Netherlands speaks at the signing of a memorandum of 

understanding between Financial Services Authority (OJK) chairman Muliaman

 Hadad and the UN Development Programme's Indonesia director Christophe Bahuet 

during the Indonesia Fintech Festival and Conference in Serpong, Tangerang, 

on Aug, 30.(JP/Anton Hermansyah)

Government Plans to Cut KUR Interest Rate to 12 Percent

Jakarta Globe, Arientha Primanita, Jun 18, 2015

The government has focused on local small businesses to boost employment.
(JG Photo/ Yudhi Sukma Wijaya)

Jakarta. Small businesses that take out a micro loans, or KUR, will be offered a subsidy that will effectively mean interest rates will be cut to 12 percent, a minister announced Wednesday.

Sofyan Djalil, coordinating minister for the economy, said during a limited cabinet meeting led by President Joko Widodo on Wednesday that the government sees the current KUR interest rate — 22 percent — as far too high.

“The government will give a subsidy … so that KUR can only be given 12 percent interest and the gap will be subsidized,” he said.

The plan will be implemented later this year, with the subsidy funds to be drawn from money saved by the cut to fuel subsidies earlier this year.

AA Gede Ngurah Puspayoga, Minister of cooperatives and small and medium enterprises, said the new rate would start in July.

“We are waiting on the technical regulations at the Ministry of Finance,” he said.

In the 2015 State Budget the government allocated Rp 30 trillion ($2.2 billion) for KUR with state-controlled Bank Rakyat Indonesia assigned to distribute them.

The government is focusing on small businesses as a means to boost employment and eradicate poverty.

GlobeASia

Allianz Enjoys Solid Growth in Indonesia Microinsurance Business

Jakarta Globe, Arientha Primanita, Apr 17, 2015

Jakarta. German insurance company Allianz saw the number of its Indonesian micro-insurance clients surge by nearly half last year  as it expands its reach in Southeast Asia’s largest economy.

The Munich-based insurer provides insurance with premiums that start from as low as 1 euro ($1.08) a year for 3.8 million people in Indonesia, up 46 percent from a year earlier, according to the Allianz Group Sustainability Report 2014 published on Friday.

Allianz micro-insurance performance in Indonesia trails India, its biggest growth market with 39.8 million people insured, expanding 75 percent in 2014.

The two countries constitute almost all of Allianz’s $114 million micro-insurance business globally.

The company said that low incomes in developing country are the most vulnerable to risks associated with natural disasters, accidents and illness.

“The review in Indonesia showed that the beneficiaries of credit life insurance payouts were better off than the families of borrowers who left their debt behind uninsured,” Allianz said in the report.

“It also showed that when insuring female microloan borrowers, there was greater social impact when their husbands were also insured, especially since men are still the main breadwinners in Indonesia.”

In a separate statement, head of Emerging Consumers for Allianz Life Indonesia added: “In Indonesia, the high potential of micro-insurance needs  to be managed in a correct, innovative and efficient way.

“Government support for developments in micro-insurance must be balanced with regulations on the field, and  also boost insurance awareness among the Indonesian people.”

Business-wise, even though micro-insurance is not as profitable as conventional insurance products, Allianz believes that it is a preliminary step to introducing insurance products to mass market groups.

While still “immature,” the business is estimated to have a premium potential of $40 billion a year, Allianz said.

Micro-insurance customers have large potential as they can be at some point transferred into conventional insurance in line with the growing middle class.

The product can also help expand formal financial services to more customers. Market research conducted in 2013 covering micro-insurance customers on the Ivory Coast, India and Indonesia showed that it was the first insurance for 75 percent of the them.

“We anticipate that demand will continue to grow and so we are expanding our business in this area,” Allianz  said.

GlobeAsia

Microfinance the First Step in Poverty Eradication

Jakarta Globe, Shoeb K. Zainuddin, Sep 15, 2014

Muhammad Yunus. (Antara
Photo/Andika Wahyu)

Jakarta. Financial inclusion has long been viewed as one of the key drivers of poverty reduction. The argument is that if the unbankable segments of society had access to capital, they would be able to pull themselves out of poverty.

At the heart of this argument is the role and critical importance of microfinance; the system of issuing small loans to micro-enterprises to help them expand. Making credit available to the millions of micro-enterprises, it has been thought, would fix the problem. Not so, said Muliaman Hadad, the chairman of the Indonesian Financial Services Authority (OJK), on Sunday.

Speaking at a Leaders’ Breakfast dialogue with professor Muhammad Yunus, the Nobel laureate, on the topic “Building Business for a Better Society,” Muliaman explained that microfinance must expand beyond just providing access to capital.

“From our experience, micro-finance is the starting point of financial inclusion,” he told the audience. “Microfinance over the past 30 years has not achieved its objective,” he added, which is reducing poverty and closing the income gap.

As such, the OJK is now studying changes to the industry and is seriously looking at amending the regulatory environment to ensure that the system works for the poor. He noted that banks were not the right institutions to drive microfinance because of their restrictions and that the government was studying the possibility of getting finance companies to play a bigger role in microfinance.

“The current [avenue of] thinking is that we will divide the regulations between banks and microfinance institutions,” he said. “Maybe regulations should cap interest rates so that we protect the consumer from companies that only seek to exploit the poor.”

Under the plan, which is still in its initial stages, starting a finance company will be made easier if the shareholders are committed to lending to productive sectors and not just financing consumption.

“We want finance companies to provide loans to farmers, fishermen and other micro-entrepreneurs,” he said.

Rather than accepting deposits as the main channel for raising capital, finance companies will be able to issue bonds and other debt paper to raise funds.

“This system will be more flexible than using the banking system, which is restricted by strict regulations.”

In his comments, Muhammad Yunus noted that microfinance is “serious” banking and it would be a serious mistake to consider microfinance institutions as charitable organizations.

“You cannot use regulations designed for the rich and apply them to the poor.”

He added that microfinance institutions should not be funded by the government as often politics gets in the way of rationale decision making.

“It should be a self-reliant system but the regulatory framework is critical and it should be clearly defined.”

That definition should include the point that microfinance institutions should not demand collateral for issuing loans and he agreed with Muliaman that there should be a cap on the interest rates charged.

“[Everyone] is bankable,” he said. “The question is, whether banks and financial institutions are people-oriented or profit oriented.”

The Bangladeshi social entrepreneur, banker, economist and civil society leader was awarded the Nobel Peace price for founding the Grameen Bank and pioneering concepts of micro-finance and micro-credit. He was in Indonesia to speak at the Indonesian Music and Mission Festival, attended by some 10,000 Indonesian youths. The event was co-organized by Sinergi Indonesia and the Goodwater Company.

“We live in two different economies; one for the rich and one for the poor. We therefore need a conceptual framework for measuring growth which is not purely defined by gross domestic product,” Yunus said.

The world will be a completely different place 25 years from now and Indonesia will be a completely different country, he noted, saying: “Change is guaranteed but we have a choice to make sure that the changes benefit all members of society.”

Related Article:

Modi's banking-for-all scheme may boost India's rural economy

Indonesia’s Microfinance Industry Faces Overwhelming Demand

JakartaGlobe, Janice Winata, July 23, 2013

Many roadside stall operators in Indonesia have to resort to loans from mobile
 banks (bank keliling) as they are unable to obtain formal banking services.
(JG Photo/Fajrin Raharjo)

A tattooed man briefly interrupted Wastiri as he ducked into her roadside stall, taking a seat alongside the slow-moving traffic that crawled down the narrow Tanjung Priok street. She flashed him a smile as he greeted her, beaming wide and toothless from her perch atop a worn wooden bench.

Colorful bags of instant noodles and potato chips lined the walls of Wastiri’s stall — a tiny plastic-covered shop sandwiched between a ramshackle noodle stand and a large commercial bank in North Jakarta’s roughhewn portside neighborhood.

For some 40 years this stall has been the source of Wastiri’s livelihood, she explained. In that time the woman, now more than 80, has become something of an institution. Customers call her “Emak” (Mother) as they stop by to ask what she has in stock, peering into her small store as they walk down the street.

The bank next door hasn’t been as reliable, she said.

“I would like to borrow from banks, as it is cheaper to do so, but their requirements are complicated,” she complained. “They ask me for an identification card [which I have], but I do not have a family card or the deed to my home for collateral. I don’t own the place.”

For Wastiri, and millions of other low-income Indonesians, the nation’s commercial banking system is a closed door. While lenders like Bank Rakyat Indonesia offer low-cost microloans, lending regulations — which require customers to have proof of a permanent job, income and collateral — shut out the majority of Indonesia’s laborers.

It’s a large segment of the domestic market. Despite Indonesia’s rising middle class, nearly half of the country’s households live at, or close to, the government’s $22-a-month poverty line, according to World Bank statistics. Some 92 percent of Indonesia’s workforce is employed in the informal sector. Most hold semi-permanent jobs but lack an employment contract.

Commercial lenders and microfinance cooperatives have tried to meet the demand, but a combination of strict regulations and too-high thresholds have hampered efforts and given rise to a murky black-market of motorcycle-riding lenders and unscrupulous loan sharks.

The lenders offer loans at high interest rates — nearly 20 percent higher than bank rates — and often collect daily payments from customers. The requirements are loose and the lenders are eager to approach customers, said Wastiri.

“Bank keliling [mobile banks] are more suitable for us,” she said. “Thought they ask for daily or weekly payments, it is easier for us to borrow money from them — I personally don’t even have to give them my identification card.”

Experts have struggled to estimate the real size of the informal market, but from their best estimates it appears to be growing.

“We can expect to see an increase in the number of non-bank microfinance institutions because the non-bankable segment is huge and it is very difficult for the poor to access banks,” said Dewi Meisari, an expert in micro-, small- and medium- sized enterprises at the University of Indonesia (UI).

The Ministry of Micro, Small and Middle Enterprises recorded 55 million MSMEs in 2011 and reported a loan-to-GDP ratio of 33.1 percent in a survey a year later. Some two-thirds of the MSMEs in Indonesia have no access to formal banking services, the ministry found, warning that the lack of access was a threat to Indonesia’s economic growth.

“The lower income population has little or no options when they borrow money,” Dewi said.

Growth potential

Indonesia’s microfinance market can be lucrative if properly tapped, experts believe. MSMEs account for  57 percent of the nation’s gross domestic product, Bank Indonesia (BI) Deputy Governor Halim Alamsyah said during a seminar last June. While MSMEs have historically borrowed outside the formal market, the number of micro business owners receiving commercial loans has grown in the last year, Firman Moeis, head of commercial linkage at CIMB Niaga, added.

“The micro finance market in Indonesia has great potential for growth,” he said. Out of the 56 million MSME owners in Indonesia, only 37 percent of them receive micro banking services. [But] as of February 2013, the MSME industry had an outstanding loan value of Rp. 514.5 trillion — a 14.6 percent jump from last year’s numbers.”

Firman believes the nation’s economic growth is anchored by micro businesses like Wastiri’s food stall. During the Asian economic crisis, the owners of small and mirco businesses emerged unscathed, he said.

“The 1998 crisis negatively impacted big companies, but small-medium businesses thrived,” Firman explained. Today, the economic downturn isn’t as drastic; furthermore, the small-medium businesses are fundamentally sound, so I am certain this situation will leave little or no impact on the microfinance industry.”

While large companies saw their balance sheets reverse into the red, the nation’s informal sector — cigarette sellers, stall owners and street food cart operators — continued to earn a living, said Leonardus Kamilius, founder of Koperasi Kasih Indonesia, a microfinance institution operating in Cilincing, North Jakarta.

“In the 1998 crisis, the companies that were battered by the crisis were the big companies who owed US dollars. For small enterprises, their economies are not as related to the global economy and hence, they are more resilient,” he told the Jakarta Globe.

Financial literacy still a problem

For Said Hendro, access to microloans has been both a blessing and a curse. It’s tempting to borrow too much, he said, adding that many of his friends found themselves neck-deep in debt after taking money from both microfinance cooperatives and mobile banks.

“Many of my friends around here have gone back to their villages as their businesses have gone bankrupt,” Said shared. “They borrow from all these mobile banks and they can’t repay their debt.

“I understand their predicament completely because these people come by everyday offering loans and it is hard to say no. Even though I have loans from both official cooperatives and the mobile banks, I am still tempted to borrow more.”

Experts warn that the lack of financial literacy among low-income residents could undermine out any gains made by offering poor people access to financial services. Borrowers need access to both commercial loans and education for Indonesia’s microcredit industry to make a positive impact, experts said.

“Most people in the low-income population cannot comprehend the whole notion of interest rates — the way the process of borrowing is explained to them is by telling them how much they need to pay in installments per week,” Dewi explained.

Leonardus echoed Dewi’s sentiment.

“People who can afford loans of 5 million rupiah and above, they generally already know how to manage their money and do not require further financial education,” he said. “However, for smaller loans like 500,000 rupiah loans for a banana fritter [pisang goreng] seller, he does not know how to manage his money and will benefit greatly from financial education.”

Backed by the Net, Infoladies help rural women

Deutsche Welle, 13 June 2013

They bike hundreds of miles to bring advice and medicine to thousands in remote, impoverished villages. DW has honored the work of Bangladesh's 'Infoladies' with the 2013 Bobs online activism award.

Mahfuza Akter would have rather gone to university, but her family couldn't afford the fees. After finishing high school, the country girl had practically no chance of getting a job in her native district of Gaibandha in northern Bangladesh. But luck stroke in 2010 when she managed to get a job as a so-called "Infolady." For this extraordinary profession, the 25-year-old requires a bicycle, some high-tech devices and plenty of organizational skills.

Warm-hearted welcome

Equipped with a laptop, a digital camera and an Internet-connected mobile phone, Akter rides to towns within her community every day and offers a variety of ICT-based services as well as legal advice to villagers at their very doorstep. For instance, she helps people communicate with relatives via Skype, finds solutions to agricultural and development issues, and even assists young villagers in writing job application letters.

She also helps the elderly measure their daily blood sugar levels and visits pregnant women who want to manage their weight. If required, Akter even accompanies them to the local administration office to apply for financial assistance.

 Infoladies provide a variety of
services to people in remote villages

As few doctors ever travel to the regions InfoLadies regularly visit, the women are often the only form of medical advice available and when they get stuck on a case, they can call a team of experts ready to assist them wherever they may be.

For her services, Akter is often "paid more than the standard rate," she says. Sometimes customers even invite her to stay in for lunch. "I enable people to do things they would otherwise find difficult to do," she explains, adding that villagers often hold Infoladies in higher regard than even teachers or doctors.

Reaching out to women

Only about five percent of the South Asian country's population has access to the Internet. The government has set up rural information centers called "Pallitathya Kendra," but they are not used frequently.

"With the help of the Infoladies people living in remote areas now have the same sort of access to information and services as people living elsewhere," says Hossain Mosharrof, deputy director of Dnet, a Bangladeshi company specializing in social projects.

Dnet is the company that launched the InfoLady initiative in 2007. There are currently around 70 Infoladies working mainly with women and girls as well as with disabled and elderly people, connecting them to the rest of the community.

The fact they are all women is not a coincidence. "The project is about women helping one another and leading self-determined lives," adds Mosharrof, stressing the importance of mutual support, particularly in Muslim communities.

For Akter, becoming an Infolady wasn't easy. She had to undergo a strict assessment process to see if she had the skills required to work with different interest groups in the country side such as farmers and the unemployed. But after completing a 30-day training program she was ready to go. "My mother broke out in tears when I handed over my first pay check," she remembers. Today she makes around 140 US dollars a month, enough to put some money aside.

'A revolutionary project'

The Infoladies project won DW's 2013 The Bobs award for the best in online activism in the Global Media Forum category, which focuses on "the future of growth."

"It is a revolutionary project which closes social, cultural and digital gaps," said jury member Shahidul Alam. "Because of the Infoladies, many people now have access to their fundamental rights."

Dnet aims to have 12,000 Infoladies by 2017

The project founders are convinced of the iniative's potential. "The model is both financially and socially sustainable," says Mosharrof. Since the central Bangladesh Bank acknowledged the project as an innovative and viable model, the Infoladies have received "special conditions" for loans at local banks.

Dnet is seeking expand and increase the number of Infoladies to 12,000 by the year 2017. There are also plans to export the model to other countries such as Congo, Rwanda, Burundi and Sri Lanka.

Kenya's cellphone bank gives loans from just a dollar

Google – AFP, Daniel Wesangula (AFP), 28 April 2013

A woman sells beverages near an advertisement for a new cellphone-based

banking initiative in Nairobi on April 27, 2013 (AFP, Tony Karumba)

NAIROBI — Six months ago, Jane Adhiambo Achieng walked into a local Kenyan bank with the hope of getting a loan for her small grocery business.

After providing all the paperwork and after weeks of back and forth between her and bank officials, she was turned down.

"They just told me I don't qualify. My income was too little," said 42-year-old Achieng, who was asking for some $250 -- about half her monthly turnover -- to expand her fruit and vegetable stall in the Kenyan capital.

But in early March, she applied for the same amount through a different source -- and got the money in a matter of minutes.

She credits the Kenyan mobile telephone money application called M-Shwari that lent her the cash for facilitating the growth of her business.

M-Shwari is a new banking platform that allows subscribers of Kenya's biggest mobile network, Safaricom, to operate savings accounts, earn interest on deposits, and borrow money using their mobile phones.

It expands on Kenya's revolutionary use of sending money by mobile phone -- known as M-Pesa, "mobile money" in Swahili -- launched in 2007 and now widely used across the east African nation, where some 70 percent of people have mobile phones.

With a minimum transfer of cash set at five shillings -- around five US cents -- the application revolutionised day-to-day banking for millions left out of the formal system, and is used for transactions ranging from sending money to far-away relatives to paying utility bills or even school fees.

Now it is hoped the new M-Shwari application -- meaning "no hassle" -- can do the same for savers and borrowers.

"We have always been thinking of how to move M-Pesa forward. We knew there was a boundary to be broken and the next frontier was to be reached," said Nzioka Muita, communications manager at Safaricom, which owns both the M-Pesa and M-Shwari systems.

Through this platform, Safaricom says clients can open a bank account, move money in and out of their savings accounts, and access instant micro-credit of a minimum of 100 Kenyan shillings -- slightly more than a dollar -- at any time, all through the mobile phone application.

While loans must be repaid within a month, a single fee of 7.5 percent is charged, a far lower interest rate than high-street banks. Maximum loans depend on how much clients have in their M-Shwari accounts.

The mobile banking application has been so successful that on its first day of operations late last year, more than 70,000 new accounts were opened.

"Up to this point in time, no one in the formal banking sector had thought of implementing such an idea," said Tiberius Barasa, an economic expert with Kenya's Institute of Policy Research and Analysis.

"I am sure that a few bank managers are looking at M-Shwari steadily to see if it is a potential threat to their business."

People wait for a bus near an advertisement for a new cellphone-based

banking initiative in Nairobi on April 27, 2013 (AFP, Tony Karumba)

At least 12 million Kenyans remain outside the formal banking system, according to central bank estimates.

Safaricom controls about 70 percent of the Kenya mobile-phone market, translating to some 19 million subscribers. Of those, some 15 million are already M-Pesa users, a customer base rivalling any banking institution.

On its own, M-Pesa transactions account for more than $50 million (38 million euros) every day in Kenya.

"This is a huge head start for the company," Barasa said.

M-Shwari was launched in partnership with one of Kenya's privately owned banks, the Commercial Bank of Africa (CBA), a deal that could see it boost its slice of the banking sector of east Africa's largest economy.

The family of newly elected President Uhuru Kenyatta hold the major stake in CBA, which provides the banking infrastructure for M-Shwari.

Currently, even with its slightly over $1 billion asset base, it is still some distance away from east Africa's largest banks, such as Equity Bank, Cooperative Bank and the Kenya Commercial Bank.

"In a matter of years, through the sheer volume of transactions that they will be handling on a daily basis, CBA may become a banking powerhouse in the region," Barasa said.

Policy analysts believe that the biggest winners from the M-Shwari service will be those in the market previously thought unbankable, due to its meagre savings and individuals located in remote, inaccessible parts of the country.

"This will greatly change our lives. You can access credit from any part of the country," Abbas Godana, a school teacher in Kenya's remote eastern Tana River district, told AFP.

"You do not have to travel for miles to your bank just to complete some paperwork and wait for the manager to approve the loan."

Godana's village, Cha Mwana Muma, is some 30 kilometres (20 miles) from the nearest shopping centre in which his bank operates a branch -- which, in the impoverished coastal area, where roads are virtually nonexistent, can take a whole day to travel.

In February this year, three months after its launch, transactions on M-Shwari crossed the $35-million mark, with 1.6 million customers having used the service for deposits or loans.

M-Shwari was not the first: telecommunications company Bharti Airtel, an Indian-owned firm, launched a similar product last year known as Kopa Chapaa -- Swahili for "borrow money" -- but the product has not had as much impact.

Smaller micro-credit loan companies have also set up similar schemes.

But "Safaricom has the numbers," Barasa said. "All they need to do is ensure that whatever they come up with resonates with the majority of their subscribers."

RI`s finance to be leading if managed well : Princess Maxima

Antara News, Fri, April 6 2012

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Jakarta (ANTARA News) - Indonesian inclusive finance will be leading in the ASEAN region if all economic players and the government of this country can really work together on account of big potentials of its people and natural resources, Princess Maxima says.

Speaking in a special interview with four journalists at the Kimpinsky Hotel here on Thursday afternoon, Princess Maxima of the Netherlands who is also the UN Secretary General`s Special Advocate for Inclusive Finance for Development said Indonesia`s big population and its richness in natural resources were seen as the brightest prospect for the country.

After having a series of meetings with private sector representatives and development partners about the use of financial services by people and companies during her first visit to Indonesia, the Princess said this country had adopted a better approach on how to develop micro, small and medium-sized businesses which are also the backbone of the country`s economy.

During the 1998 economic crisis engulfing Indonesia and some other ASEAN countries, the small-and medium-scale businesses proved capable of surviving the burden of the crisis. Therefore, the step taken by the government of Indonesia to develop micro-, small-and medium-scale businesses was already on the good track, she said.

The princess also touched on the programmes of Malaysia which focus on deepening and expanding services, including to reach 20 percent of its population that has no access to financial services, and on financial education, consumer protection and improving the quality of loans to individuals and small businesses.

However, each country has its own policy on how to improve its inclusive finance depending on its geographical condition. Such policy applied by a country in a continental area will be different from that of archipelagic country like Indonesia.

In her capacity as Special Advocate for Inclusive Finance for Development for UN Secretary-General Ban Ki-moon, she advised him about access to financial services, working at global level to ensure access to financial services for everyone. These efforts contribute particularly to the development of low income groups and small-and medium-sized enterprises.

In many countries it is no simple matter to open a savings or other bank account, borrow money or buy insurance. Since June 2011 Princess Maxima has also been Honorary Patron of the G20 Global Partnership for Financial Inclusion (GPFI).

Hence, financial inclusion would be on the agenda of the G20 Summit in Mexico in July 2012, she said.

During her stay, the Princess had a courtesy call on Indonesian President Susilo Bambang Yudhoyono and a series of meetings with Coordinating Minister for Economic Affairs M. Hatta Rajasa, Finance Minister Agus Martowardojo, Minister of National Development Planning Armida Alisjahbana, and Governor of Bank Indonesia Darmin Nasution.

Editor: B Kunto Wibisono

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Govt allocates Rp30 trillion for micro-credit loans in 2012

Ministry channels Rp 12t to micro businesses

The Jakarta Post, Jakarta, Tue, 06/28/2011

The Cooperatives and Small and Medium Enterprises Ministry claims it has channeled Rp 12 trillion (approximately US$1.39 billion) in micro loans for 5 million micro businesses across the country under the credit support (KUR) scheme.

“That is reaching nearly 55 percent of the target,” Cooperatives and Small and Medium Enterprises Minister Syarifuddin Hasan said Tuesday in Surakarta, Central Java.

He said the ministry was targeting to channel Rp 20 trillion in KUR loans this year.

Syarifuddin said KUR loans were expected to support micro business developments, citing there were currently up to 52.1 million micro businesses in Indonesia.

He said, as quoted by tempointeraktif.com, that such businesses could curb unemployment with each micro business employing three people on average.

40m Indonesians have no access to financial industry: BI

The Jakarta Post, Jakarta | Mon, 06/27/2011

At least 40 million Indonesians do not have access to the financial industry, particularly the banking industry, a central bank official has said.

"There are 40 million Indonesians, or 17 percent of our population, mostly low-income people, who still have no access to micro activities at banks," Bank Indonesia (BI) deputy governor for banking research and regulation Muliaman D. Hadad said in Jakarta on Monday.

He was speaking at a seminar titled “Financial Literacy: Toward a National Strategy on Financial Education”, organized jointly by BI and the Organization for Economic Cooperation and Development (OECD).

Muliaman said in order to improve the access to the central bank, in partnership with the OECD, it would push for a financial inclusion policy.

"The global community has spoken of the need for financial inclusion. Financial inclusion is believed to play an important role in improving people's welfare," he said.

Muliaman cited financial education as one program that would be carried out to improve people's awareness on the financial industry.

"Sometimes, lack of access happens because of a lack of understanding. We have worked with the National Education Ministry to improve education on financial issues," he said, adding that the education program also targeted Indonesian migrant workers, housewives and members of religious groups.

Muliaman added BI would call on the banking industry to improve a protection system for its customers to build their trust and loyalty.

OECD deputy secretary-general Richard Boucher said the OECD supported Indonesia's efforts to promote financial inclusion among its people.

"We work together to figure things out; what works, what doesn't work. We have the best people to work together, who can compare and design programs. So, we bring in experience, options and advice, but we don't bring in money," Boucher said. (swd)

Govt needs to facilitate credits for micro businesses

Antara News, by Andi Abdussalam, Sun, June 19 2011 

(ANTARA/Noveradika)

Jakarta (ANTARA News) - Small and medium enterprises (SME) are in real term the main pillars of the people`s economic development as they provide employment for about 90 million or about 97 of the total workforce and contribute 53 percent to the country`s Gross Domestic Product (GNP).

Considering the roles the SMEs play in the country`s economic development, the government should facilitate and encourage banks to provide credits for them whose number reaches 51.26 million units or about 99 percent of the whole businesses in the country.

"They must be given attention and various kinds of assistance such as access to various information, capital sources and other funding facilities. This should be done based on the people`s economic principles," Maritime Affairs and Fisheries Minister Fadel Muhammad said in West Sumatra recently.

The need to provide financial support for SMEs is also voiced by Djemi Suhenda, vice president director of Bank BTPN, in Bandung on Sunday. He said that the number of small businesses in Indonesia now was recorded at 51 million units, of which 36 million were in the poor productive sector.

"The government support is needed to increase small businesses` access to the funding sources, among others by issuing supporting regulations, loan infrastructure, credits, training and researches," he said.

According to Djemi Suhenda, banks so far have only paid attention to micro banking facilities while they still ignored the poor productive sector because they think it would need huge funds while profit they could gain is not significant.

"The micro and poor sectors need fast and easy access to funding sources in order to accelerate and boost their roles in the development of people`s economy," he said.

The banker however acknowledged that it was not easy and cheap for banks to enter into the micro and poor sectors because they would need a huge investment and a business model innovation in order to adjust it to the characters of micro and small people.

But basically, banks have the potentials to enter the micro and poor sectors because they had the ability to produce innovation and huge amount of funds.

Virtually, the government itself has a credit program called "KUR" or a smallholder credit scheme, to help develop small people`s business. Yet it still found difficulties, particularly in the region in carrying out the KUR program.

Minister for Cooperatives and SMEs Affairs Syarief Hasan said the government still needed time to smoothly carry out and distribute the KUR funds through banks because not all banks shared the same system in the distribution of KUR credits.

"We are still coordinating with a number of banks because large banks usually face difficulties to provide funds for micro businesses rather than for large scale firms," the minister said.

Yet, it seems that the provision of KUR this year could be achieved easily.

The ministry of state enterprises (BUMN) has recorded that the amount of KUR credits provided for micro businesses up to May 2011 has reached Rp11.012 trillion with a number of 771,818 customer recipients.

"The provision of KUR credits has reached 55.06 percent of the target set this year at Rp20 trillion," the minister said.

But he said that the government had not yet decided to revise its 2011 KUR target.

"Although the realization of KUR has reached over 50 percent with the number of recipients reaching 771,818, the target this year remains the same as that already set at Rp20 trillion," Minister Mustafa Abubakar said.

The minister said that the quantitative achievements, including the number of credit recipients showed a progress, so that it was just possible to increase the KUR amounts. "We still keep the target at the amount already set earlier, except if the chief economic minister asked that it should be revised," the BUMN minister said.

Up to May, 2011, the biggest KUR amounts were provided by state-owned Bank BRI reaching Rp6.901 trillion which included retail KUR worth Rp1.307 trillion with 7,259 customers and micro KUR valued at Rp5,593 trillion with 721,470 debtors.

The second biggest KUR provider bank was state-owned Bank BNI with a KUR commitment of Rp1.009 trillion and 8,252 customers. The third largest was provided by Bank Mandiri with KUR credits amounting to Rp1.001 trillion and 10,496 customers.

In the meantime, credit provision of the whole banks up to April 2011 increased to Rp350.8 trillion or about 23.8 percent.

Bank Indonesia (BI/the central bank) Deputy Governor Muliaman D Hadad said if compared with that in the same period a year earlier, the banking credits up to early in June this year had grown by 23.5 percent.

He said that the credit growth was still dominated by investment credits which were recorded at 10 percent year-to-date, followed by consumption credits which accounted for 7.5 percent.

Although there would be steady demand for credits, yet small scale businesses still face difficulties in gaining credits from big banks.

Economic analyst of the Makassar-based Alauddin State Islamic University (UIN) Prof Dr Natsir Mahmud said businesses faced difficulties to borrow money because the interest rates were high namely ranging from 10 to 15 percent.

"The high rate of banking credits poses a problem for small and new business players so that businesses in Indonesia find it hard to develop. In Singapore interest rates are only about six percent while in the United States are five percent, even once three percent," said Natsir.

According to Minister Syarief Hasan, the government still needed time to provide low interest rates and easy access to founding sources for small businesses because it has to build a common perception in the first place with banks.

Djemi Suhenda shared the minister`s opinion, saying that interest rates should not be lowered too far so that banks would be attracted to enter the small business sector.

"Let them enter this sector first. If the number of large banks entering this sector has increased and competition has begun, the interest rates will automatically go down," he said.

Editor: Priyambodo RH

PNG's Nationwide Microbank Signs Up 100,000th Customer

Asian Development Bank, 31 May 2011

MANILA, PHILIPPINES - Papua New Guinea's (PNG) Nationwide Microbank has signed up its 100,000th customer, highlighting the ongoing demand for quality and accessible banking services in the country.

The landmark bank account was opened by Tommie Seriate, a 49-year-old widow and mother of four from the Unggai Bena District of the Eastern Highlands Province.

"I am so happy and glad that I made the right decision to open an account with Nationwide Microbank," said Ms Seriate. "They made it so simple to open a savings account."

To make a living, Ms Seriate operates a small coffee garden in a remote part of the Eastern Highlands Province, some two hours by road north of Goroka, the provincial capital. She had previously tried to open a bank account with two commercial banks without success.

Nationwide Microbank (formerly Wau Microbank) was established in 2004 as a pilot scheme under the ADB Microfinance and Employment Project. The project was implemented between 2002 and 2010 with a $9.6 million concessional loan from ADB to the Government of PNG and a grant from the Australian Agency for International Development (AusAID). It laid the foundation of a growing microfinance sector in PNG, through extensive training of staff and the development of appropriate products.

"Giving individuals and small firms access to the finance and banking services they need encourages entrepreneurship which ultimately helps boost economic growth for the country as a whole," said Eugenue Zhukov, Regional Director of ADB's office in Australia.

Although no official data exists, ADB estimates that only 15% of the PNG population has access to formal or informal banking facilities, lower still in rural parts of the country. This means that small firms are unable to get the finance they need to expand and individuals are unable to either borrow to meet their financial needs or securely save their earnings.

"Nationwide Microbank continues its efforts to ensure that the people of Papua New Guinea have access to relevant and affordable financial services," said Tony Westaway, Nationwide Microbank's Managing Director. "We are ‘banking the un-banked', an achievement that would not have been possible without the ongoing support from the Asian Development Bank and the Pacific Financial Inclusion Programme (PFIP)."

In order to further expand its reach into rural areas and make its services even more accessible to clients, Nationwide Microbank is developing a "branchless" banking strategy, with support from PFIP and ADB, which will offer financial services through the use of mobile phones and other wireless technology. The aim is to enable clients to use their bank accounts without needing to travel to a bank branch, a journey that can be both costly and time-consuming from remote parts of the country.

PFIP is a Pacific-wide program that is helping to provide sustainable financial services to low income households. It is funded by the UN Capital Development Fund, AusAID, the European Union, and the United Nations Development Programme (UNDP). PFIP operates from the UNDP Pacific Centre in Fiji.

About ADB

BNI announces micro loans for migrant workers

The Jakarta Post, Jakarta | Wed, 01/05/2011

Indonesia’s fourth-largest lender by assets, state-owned bank Bank BNI, is eyeing Indonesian migrant workers overseas as a new market for its micro loan product, KUR.

Such workers employed at oil palm plantations in Malaysia were among the bank’s main targets for the product, BNI’s general manager for micro loans, Slamet Djumantoro, said Wednesday as quoted by kompas.com.

“BNI prefers formal sector workers because they are less vulnerable to the condition of the host countries,” he said.

Slamet said that to be eligible for a KUR loan, the workers needed to have secured a job order from an employer, which was then expected to deposit funds to BNI.

Ronny Venir, deputy manager of the bank’s micro loans division, said so far BNI had disbursed Rp 2 billion (approximately US$222,000) to migrant workers from the East Java town of Kediri.

In mid-December, the government launched the KUR program for Indonesian migrant workers overseas aimed at supporting their foreign employment and empowering them upon their return home.

Local banks are expected to take part in the program.