Section 8: Public-Private Partnerships and Financial Inclusion Workshop on Enhancing Access to Formal Financial Services in Indonesia Eugene Keith Galbraith President Commissioner PT Bank Central Asia Tbk
Major Initiatives in Promoting Financial Inclusion Increase reach of financial system to the excluded population Payment system and capital access (micro finance) Make the excluded population visible to financial system Identify low-income segment Simplify the procedures for excluded population to access financial system Simplify the standard for opening accounts below certain amount Simplify micro credit procedures without diluting prudent lending focus Improve education to the excluded population Promote financial literacy and credit counseling Education is a key success factor in financial exclusion initiatives Promote the importance of financial inclusion to benefit society Slide 2
Government Provides Framework. Private Sector Takes the Lead Government or donor sponsored subsidized or directed lending programs have now proven to limit growth and encourage dependency since they induce price distortions that defer effective competition Private sector should take lead if results are to be sustainable. Government should provide supportive regulatory environment BIS Review #35 (2008) Slide 3
Allow Market to Drive the Program Price restrictions, whether in the form of interest rate caps or limits on fees, often impede the scaling of financial inclusion. Regulators should allow players to cover their costs of funding and operations. The costs associated with lending to the very poor can be high this cost, combined with characteristically small loan sizes, largely explains the high rates required for microcredit to be economically sustainable. A 2004 study by a leading microfinance consortium looked at the penetration of microcredit in 23 countries with interest rate ceilings and seven countries without these restrictions. The study found that financial penetration rates were four to five times higher in countries without caps. In Indonesia, BRI reported that growth of its microcredit program was severely constrained until the government lifted interest rate caps in the early 1980s. Slide 4
Branch and ATM penetration (2001) Geographic branch (ATM) penetration: number of branches (ATMs) per 1,000 square kilometers Geographic branch penetration Geographic ATM penetration 636.1 2,642.6 436.9 1.8 7.4 8.7 10.0 21.4 22.6 65.0-5.3 5.7 12.4 14.5 20.7 China Malaysia Thailand Indonesia Philippines India Korea Singapore India China Indonesia Malaysia Philippines Thailand Korea Singapore Demographic branch (ATM) penetration: number of branches (ATMs) per 100,000 people Demographic branch penetration Demographic ATM penetration 13.4 90.0 6.3 7.2 7.8 8.4 9.1 9.8 37.9 1.3 0.0 3.8 4.8 5.3 16.4 17.1 China India Thailand Philippines Indonesia Singapore Malaysia Korea Source: BIS India China Indonesia Philippines Malaysia Thailand Singapore Korea Slide 5
Indonesian GDP per Capita Indonesian GDP per capita (in USD) 791 CAGR 2001 2008 = 16.3% 944 1,116 1,167 1,321 1,663 1,947 2,271 Growth rate assumption for 2010 2015 : 6% p.a 2,362 2,504 2,654 Growth rate assumption for 2009: 4% 2,813 2,982 3,161 3,351 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Central Bureau of Statistics (BPS) Slide 6
Deposit Accounts in Indonesia Number of deposit accounts Deposit value < Rp 100 million 97.7% < Rp 100 million 18.8% Rp 100 million - Rp 1 billion 26.9% Rp 100 million - Rp 1 billion 2.1% > Rp 1 billion 0.2% > Rp 1 billion 54.3% 86 million accounts Total value Rp 1,877 trillion number of accounts value (Rp trillion) average value /account (Rp million) < Rp million 84,044,406 353.2 4.2 Rp 100 million - Rp 1 billion 1,768,010 504.3 285.3 Rp 1 billion - Rp 2 billion 112,848 156.9 1,390.4 Rp 2 billion - Rp 5 billion 55,972 175.6 3,137.5 > Rp 5 billion 30,637 687.5 22,439.9 Total 86,011,873 1,877.6 21.8 As of October 2009 Source: Indonesian Deposit Insurance Corporation (LPS) Slide 7
BCA: Delivery Channels Extensive network and electronic delivery channels to provide convenience to over 8 million account holders nationwide Electronic banking continues to grow and is becoming the transaction channel of choice Branches are the entry point for customer relationship banking Number of ATMs (unit) 5,997 5,654 5,042 4,173 3,218 6,275 Dec-04. Dec-05. Dec-06. Dec-07. Dec-08. Sep-09. Number of Branches (unit) 844 864 Number of EDCs (unit) 81,750 103,880 760 774 791 809 32,885 41,233 53,807 65,645 Dec-04. Dec-05. Dec-06. Dec-07. Dec-08. Sep-09. Dec-04. Dec-05. Dec-06. Dec-07. Dec-08. Sep-09. Slide 8
BCA: Branch Transactions Number of Transaction (million) Transaction Value (Rp trillion) 6.813,2 6.590,2 5.238,2 3.969,2 4.301,8 130,9 129,1 119,2 118,3 122,6 Slide 9
BCA: Daily Branch Transactions Number of transactions per branch per day Transaction value per branch per day (Rp million) 46,216 888 42,375 857 841 856 830 36,559 28,527 30,561 Slide 10
BCA: ATM Transactions Number of Transaction (million) Transaction Value (Rp trillion) 409.6 329.9 485.6 612.0 633.7 372.9 462.1 518.7 595.8 629.7 Slide 11
BCA: Daily ATM Transactions Number of transactions per ATM per day Transaction value per ATM per day (Rp million) 366 363 350 386 372 397 374 324 322 328 Slide 12
BCA: Internet Banking Transactions Number of Transaction (million) Transaction Value (Rp trillion) 722.6 956.4 423.6 158.9 112.9 26.5 219.5 37.1 60.1 95.8 Slide 13
BCA: Mobile Banking Transactions Number of Transaction (million) Transaction Value (Rp trillion) 94.4 70.0 8.7 16.3 35.6 85.8 61.9 11.7 19.0 34.1 Slide 14
BCA: Average Value/Transaction by Channel Branch Banking in Rupiah 52,048,892 51,047,250 ATM in Rupiah 1,027,190 1,006,352 33,289,127 36,355,028 42,725,938 884,688 886,388 936,187 4,260,377 Internet Banking in Rupiah 7,542,797 7,048,253 5,916,442 6,018,880 743,590 857,895 Mobile Banking in Rupiah 1,043,988 1,130,856 1,100,233 Slide 15
Thank You Slide 16
Biography Eugene Keith Galbraith President Commissioner Eugene Keith Galbraith has been the President Commissioner of BCA since May 20, 2002. Prior to joining BCA, he served as Vice President Commissioner of PT Bank NISP Tbk from 2000 to 2006, Chairman of Asiawise.com from 1999 to 2001, Managing Director of ABN AMRO Asia Securities from 1996 to 1998, and President Director of HG Asia Indonesia from 1990 until 1996. He has also served as an advisor to the Indonesian Ministry of Finance from 1988 to 1990, and as an economic planning advisor in East Nusa Tenggara Province, Indonesia, from 1984 to 1988. He graduated in Philosophy in 1974, holds an M. Phil in Economic History (1978), and a PhD in Anthropology (1983) from Johns Hopkins University, USA. Slide 17