It is delightful to see that there are more
institutions paying attention to the issue of financial inclusion nowadays. The
importance of financial inclusion to a more equal and prosperous world is now a
part of conventional wisdom worldwide. In the G20 Toronto Summit held in June
2010, global leaders pledged to support financial inclusion to empower about
one-third of the world’s population still living in poverty.
Financial inclusion has also been included in the
ASEAN Economic Community 2015 blueprint. Here in Indonesia, Bank Indonesia (BI)
also launched its National Strategy of Financial Inclusion in December 2010.
Several high-level discussions held by the
government or authorities, such as BI and the Financial Services Authority
(OJK) on financial inclusion, have tended to focus on how to provide better
access to banking services. The dynamic of discussions acknowledge that the
challenge lies in asymmetric information between the supply (banks) and demand
side (people at the bottom of pyramid).
Also, the depth of the asymmetrical information is
seen as so severe that the banking industry should work to design a product
that properly fits the needs and wants of the people at the bottom of the
pyramid, specifically the economically active poor and micro entrepreneurs.
However, there are already some alternatives
discussed as potential solutions in providing better access to finance, namely
mobile money and branchless banking. Unfortunately, the success rate of mobile
money programs around the world is only about 10 percent. Still, success
stories have occurred in countries that are less developed than Indonesia, such
as Kenya, Bangladesh, and the Philippines.
BI, in a June 2011 newsletter, defined financial
inclusion as comprehensive activities aiming to abolish any form of barriers —
including price and non-price barriers — that might deter people from obtaining
financial services.
This puts the emphasis on access to finance. While
in practice, financial inclusion is generally defined as activities that
provide savings, loan and financial education and other financial services that
enable people at the bottom of pyramid to start or expand their productive
activities, to save and accumulate assets, to smooth their consumption and to
mitigate the risk of dealing with bad coping strategies due to external shocks,
that altogether will increase their well-being.
This is similar to what Muhammad Yunus has taught
regarding microfinance as a way to help the poor help themselves. So the
practical definition does not only put emphasis on the access to finance per
se, but also on the access to financial education and the empowerment process.
Note that the financial education here is not merely about product knowledge,
but more about financial literacy in general, also on household or business
basic financial management.
The explanation above shows that there is a gap in
the financial education concept on the policy and practical level. At the
policy level, the emphasis is on the means, namely access to finance.
Meanwhile, at the practical level, the emphasis is on the end, namely to provide
opportunities to start or expand productive activities, and to increase
people’s well-being; thus, access to finance is seen as a necessary condition
and, at the same time, financial education is seen as the sufficient condition.
The question is, should that access to finance be
provided only through the banking sector?
Indonesia launched the Microfinance Institution
(MFI) Act in 2013. Before the enactment of the law, many MFIs had operated in
Indonesia in a distinctive way, not like banks but also not like savings and
loan cooperatives.
Some of those MFIs already had a formal legal entity
such as a limited-liability company status (PT) or a cooperative, and also had
legal operating license as non-bank financial institutions. Nonetheless, they
were still regarded as semi-formal entities.
BI Governor Agus Martowardojo, the former finance
minister, once said that there were about 600,000 microfinance institutions in
Indonesia, but the exact number is still being ascertained by the OJK, which is
now fully in charge of licensing and supervising all financial service
institutions.
Nevertheless, those MFIs have proven to be effective
in providing financial services to the so-called excluded or un-banked segment,
such as peasants, micro entrepreneurs, women and other economically active poor
who mostly work in the informal sector, do not have assets that are valuable
enough to act as collateral or probably have valuable assets but do not have
legal documents protecting their assets.
Those MFIs have offered many innovative approaches —
including nourishing social capital and local wisdom to make social sanctions
work effectively in replacing the function of physical collateral.
The MFIs have passionate human resources that are
ready to work hard serving their communities, but may have limited capacity in
managing their funds efficiently and organizing the institution, if compared to
bankers. Nevertheless, they might be better skilled and have more experience in
approaching, communicating and building trust with the people at the bottom of
pyramid.
To conclude, just as there are many roads to reach
Rome, there are also many ways to realize financial inclusion. Expanding
banking services via mobile money and branchless banking is one way. Promoting
linkage between banks and MFIs via improving the MFI database, rating system
and capacity building for the management is another way.
Which is the better approach for us to focus on? Do
we really have to choose?
Maybe we can take both ways. But for a shorter term
goal, promoting linkage between banks and MFIs is more relevant and effective.
Meanwhile, branchless banking or mobile money can be promoted as part of a
longer term agenda. At least for now, we should provide a more balanced
opportunity for both alternatives, especially because we have millions of micro
entrepreneurs waiting for us to save them from loan sharks — who can charge up
to 10 percent interest per day
Dewi
Meisari Haryanti,
A lecturer at UI
JAKARTA POST, 12 Februari 2014
More about
No comments:
Post a Comment