Increasing Access to Financial Services, OJK Accelerates Financial Inclusion Program

 
Fathan Qorib, Christina Desy
 
Although the microfinance program was introduced almost two decades, in Indonesia this sector remains underdeveloped. Only limited numbers of small and micro businesses are able to access financial services, not to mention underprivileged citizens.
 
This is evident from the Financial Inclusion Index, a report from the World Bank reflecting account ownership in financial institutions. The Index shows that only 20 percent of Indonesian citizens have access to formal financial institutions. Amongst Asian countries, this figure is considerably low. Malaysia’s percentage, for instance, is 66 percent; while Singapore sits at 98 percent.
 
Aiming to increase this number, Indonesia is preparing to switch from microfinance to a financial inclusion program. Under this program, all services within the financial industry will be connected to each other. The aim is that the financial inclusion program will provide a holistic solution to decreasing the poverty rate. In addition, it also aims to succeed in achieving better income distribution and sustainable economic growth.
 
The Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) is expected to assist with the realization of the financial inclusion program. In the non-bank financial industry (Industri Keuangan Non-Bank – “IKNB”), the OJK will strive to establish better correlation between the insurance sector, pension funds, financing companies, and other financial institutions.
 
To accelerate the program, the OJK has started with the inclusion of financing companies into other financial service sectors. Dumoly F. Pardede, OJK’s Deputy Supervising Commissioner of IKNB II, explained that his institution is currently preparing several regulations for financing companies to connect financing companies’ activities with other sectors.
 
According to Mr. Pardede, there are currently four regulations prepared for financing companies, one each covering licensing and institutions, business implementation, sharia principles for business implementation, and financing company management.
 
As they closely relate to financing companies, the OJK also wants to develop the insurance sector by creating microinsurance products, for example. As for the pension fund sector, the OJK is revising the regulation on pension fund investments.
 
“We are trying to serve options, such as a pension fund company may buy medium term notes, investment grade instruments, corporate investment grade bonds. Hopefully, financing companies agree to issue the bonds. By that, inclusion can be actualized,” said Mr. Pardede.
 
(hot/kc)