Recently, the Indonesian authorities have been trying to tackle the problem of financial inclusion in Indonesia through the help of financial technlogies (fintech). An article in 2016 by enterpriseinnovation.net showcases how Indonesia is planning to advance financial inclusion through fintech.
The Indonesian authorities believe that tackling the low financial inclusion rate would help to mitigate problems such as poverty, crime and unemployment. Currently, 22 percent of Indonesians have bank accounts but only 12 percent of those in rural areas have bank accounts compared to 31 percent of those who live in cities. However, financial inclusion is not about having access to bank accounts. It is about giving people the opportunity to participate in the credit market, improving people’s lives and building a mobile socio-economy community.
The problem here is that people are unable to obtain loans from banks or financial institutions as they only need a small short term loan. This results in people being excluded from the credit market as they are unable to prove their creditworthiness as they have no credit record. Hence, banks are unable to assess the risks in lending them money. One solution to this problem however, is microfinancing.
The Ban Perkreditan Rakyat (BPR) is arguably the largest microfinancing system in the country. Microloans in 2014 composed of 4 percent of the total consumer lending market according to a study conducted by the KPMG. IDR30 Trillion (US$2.2 billion) has been set aside by the Indonesian government for the Kredit Usaha Rakyat (KUR) microfinancing program for small business loans with the intent to give the economy a kickstart by decreasing microcredit interest rates.
One such startup is UangTeman. According to the CEO and co-founder of UangTeman, they minimize the risks involved in lending people without credit background money using a smart credit assessment process using machine learning algorithms which are able to detect any indication of risks involved using web and data technologies.
With an estimated 62 percent mobile penetration in Indonesia where 72 percent of urban Indonesians owning a mobile phone and 52 percent for those in the rural areas, the usage of mobile fintech technology is ever more important in providing microcapital and increasing fnancial inclusion in the nation.