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Eye On Asia | Beyond financial inclusion: Indonesia must next take on the challenge of economic inclusion
- Now Indonesia has reached its target for financial inclusion, it can focus on economic inclusion: distributing more opportunities, more equally, to more people
- This requires banks, fintech players and the government to work more closely than ever before
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For the past few years, government officials and businesses in Indonesia have adopted two main courses of action to stabilise the economy: the twin clarion calls of financial and economic inclusion. Financial inclusion was talked up as a bold step in economic policy. Economic inclusion did not receive the same kind of press but is actually far more important.
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Zoom out for a second. Financial inclusion is a framework aimed at communities towards the bottom of the economic pyramid (locals who earn and live on less than a few dollars per day). The idea is to give them easy access to formal financial products and services – simple things such as keeping money in a bank account, being able to digitally transfer money, borrow and get insurance.
When first introduced, the sexy idea of financial inclusion drew the attention of many businesses, government officials and academic figures.
It took a while for the financial inclusion hype to calm down. A recent report by Indonesia’s Financial Services Authority (OJK) said its target of 75 per cent inclusion had been achieved. The government has also set up 164 teams to accelerate regional financial access – known as the TPAKD teams – aimed at offering financial services on the provincial and district levels. Despite this, OJK surveys show that financial literacy in the nation clocks in at a mere 38 per cent.
So, while important, financial inclusion should be viewed as a stepping stone and not the final stop. It is time to start paying more attention to economic inclusion.
The idea of economic inclusion is simple, yet sweeping: people from all social classes and walks of life should be able to participate in, and take advantage of, the expanding national economy. In return, there is greater financial stability for businesses, and society in the long run. Put even more simply, economic inclusion distributes more opportunities, more equally, to more people.
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