OPINION
KASPAR SITUMORANG
Accelerating Indonesian microfinance with high tech and high touch
E
conomic inclusion can seem like a faraway goal for many, if not most, countries around the world. Achieving it would mean being able to lift people out of poverty, create equality between genders and socio-economic backgrounds, and build socially inclusive futures for our children. According to the World Economic Forum’s Inclusive Development Index 2018, the top-ranking countries for economic inclusion are Scandinavian, Nordic, and European countries. These are small countries, with populations of 8.57 million people or less—there are only 362,860 people in Iceland. In comparison, countries with far more dense populations find it harder to foster economic inclusion. Indonesia sits at 36th place on the index under ‘Emerging Economies’—below fellow Southeast Asian countries Malaysia, Thailand, and Vietnam, but above the Philippines and Laos. However, this position is nothing to get too wound up about, because despite Indonesia’s incredibly dense population of 264 million and an archipelago terrain, we are still considered a slowly advancing economy. The report notes that Indonesia lacks progress on inclusion indicators such as income and wealth inequality. In order to combat this, the country needs to take big leaps forward in terms of technology and financial inclusion. But to do this, it is imperative that plenty of attention, effort, and investment be paid to developing people, streamlining the training process, and deploying offline assets. MFIs as agents of change Modern microfinance institutions (MFIs) are in the best position to help, and by using the agent network model, they can be highly successful in spreading more financial inclusion and literacy to more Indonesians. In this manner, high-tech and innovative systems must be well-synced with high-touch and welltrained manpower to run like clockwork. Agents established in rural areas are absolutely crucial to creating touch points needed for the local community to get educated and involved. These agents need to foster a strong sense of trust between the banks they represent and the people to whom we are trying to give basic financial service access.
As a case study, Baobab Madagascar (formerly Microcred Banque Madagascar) equipped its agents with a nano-loan product based on automated credit scoring. By 2017, agents accounted for more than half of the bank’s business, leading to a restructuring exercise to make agents its primary consumer channel. Madagascar’s case study proves that focusing on empowering agents with better tools to provide more services is deeply rewarding. But this is not to say that keeping agents up-todate is an easy task. It’s far from easy to keep every agent’s mobile software current, especially those in truly hard-to-reach places. For this reason, modern MFIs should look into using satellites as a way of instantly keeping their agents’ apps relevant, functioning, and up-to-date. In other words, the Goldeneye-like satellite beams wifi access straight down from space—no cellular towers needed. For us, it acts as a practical backbone for network stability. This, in turn, creates a financial ecosystem that connects and unites the entire country. It’s a big reason why we’ve been able to make progress in recent years. In 2019, our agent network known as BRILink produced a transaction volume of approximately $44.8b. Thinking outside the vault Simple, yet innovative thinking is also key for MFIs to meet their target customers wherever they are. Another example from our own bag of tricks is the first-ever ‘floating bank’ initiative, aimed at reaching people in the coastal areas and remote islands in Indonesia (with more than 17,000 islands, there are a lot of these areas afoot). A floating bank is exactly what it sounds like: a Bank BRI-owned ship that acts as a fully functioning bank branch at sea. To date, we have four of them on the water. Starting collaborations and partnerships with companies that are making efforts to improve agent network models can also be a great way to strive for impact. By putting emphasis on creating a system in which high tech and high touch approaches work hand-in-hand, Indonesia can start to make significantly bigger leaps toward economic inclusion through financial literacy. Whilst Indonesia has already reached 75% financial inclusion, OJK surveys show that only 38% of Indonesians are financially literate. This means there is still much work to be done.
KASPAR SITUMORANG Executive Vice President Bank BRI
ASIAN BANKING AND FINANCE | q2 2020 31
