Indonesia has 95 million adults that still do not have a bank account, which is the fourth largest “unbanked” population in the world after China, India, and Pakistan. However, the percentage of adults with a formal financial account leaped from 35% in 2016 to 56% in 2018. This was driven largely by the digitization of a government to person (G2P) social protection program.
Indonesia has made significant progress towards greater financial access through government policies like these, and through the massive state owned banks and telecoms they can influence. However, there are still many impediments to more meaningful financial inclusion. These include the limited functionality of agent networks, and the significantly undeserved medium and small and micro enterprise (MSME) sector. The emerging fintech sector may be able to offer solutions to these issues, but in 2018 only 5% of the population was using any fintech solution, so there is still much work to be done.
I researched contemporary trends in Indonesian financial inclusion including the status of the evolving fintech space, government policy and regulation, MSME finance, gender dynamics, G2P social protection, mobile money, and agent networks. The brief served as a chapter in a market intelligence report for top donors and policymakers in the financial inclusion sector seeking opportunities to accelerate financial system development in Indonesia.