2014/SMEWG39/015 Agenda Item: 11.2.2 Improving Financial Literacy of SMEs Through National Movement for Financial Transaction Records Purpose: Information Submitted by: Indonesia 39 th Small and Medium Enterprises Working Group Meeting Nanjing, China 3-4 September 2014
IMPROVING FINANCIAL LITERACY OF SME THROUGH NATIONAL MOVEMENT FOR FINANCIAL TRANSACTION RECORDS THE 39 th SME WORKING GROUP MEETING AND RELATED MEETINGS NANJING, PEOPLE S REPUBLIC OF CHINA SEPTEMBER 3-4, 2014
OUTLINE I. Indonesia at Glance II. The SMEs Snapshot : 1. The Role of SMEs in Indonesia Economy 2. The SMEs Credit Growth 3. The SMEs Challenges III. The Policy Direction of Bank Indonesia to Support SMEs Development IV. Bank Indonesia s Program to Increase Financial Literacy Through National Movement for Financial Transaction Records V. Conclusions 2
I. INDONESIA AT GLANCE Indonesia has a huge economic potential and large market for financial services. More than 13,000 islands Population: + 237.6 million 1) GDP of USD878.043billion in 2013, the 16 th largest economy with estimated 6.23% GDP growth rate 2) GDP per capita 2012: USD 3.606 3) Banking industry covers ± 75.8% of assets in financial sector Market Share of Indonesia Financial System by Total Assets 9.9% 2.6% 1.2% 1) 2013, BPS 2) World Bank 3) BPS 6.7% 0.1% 0.5% 0.1% 0.1% 78.8% Source : Bank Indonesia and FSA (2013) Commercial Banks Rural Banks Pension Funds Insurance Companies Multifinance Companies Credit Guarantee Company Pawn Broker NUMBER OF FINANCIAL INSTITUTION Commercial Banks 120 Rural Banks 1,637 Insurance Companies 141 Pension Funds 267 Multifinance Companies 202 Venture Capital 89 Investment Manager 73 Credit Guarantee Company 7 Pawn Broker 1 3 3
II. 1. THE ROLE OF SME IN INDONESIA ECONOMY (2) 99.9% of 55 million business units absorb around 97,2% of total labor force. Economic Conditions contribution around 57,48% to the GDP Source : Ministry of Cooperatives and SMEs 4
II.2. THE SMES CREDIT GROWTH Triliun Rp (%) 700 600 500 22.5 21.6 21.0 21.5 21.2 19.9 20.4 20.1 20.7 19.6 19.4 19.6 19.7 21.20 25.0 20.0 400 300 200 100 17.0 11.5 14.9 15.5 15.3 15.65 16.98 11.56 15.0 10.0 5.0 0 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 0.0 Medium Enterprise Credit Small Enterprise Credit Micro Enterprise Credit Growth of MSME Credit 7 Share of MSME Credit Source: Bank Indonesia, June 2014 SME credit : Currently SMEs loans constitute 19,7% of the total banks outstanding loans SMEs Lending portfolio :20,1% to Micro, 29,9% to Small, 50,0% to Medium scale enterprises The growth of SME Credit in June 2014 around 11,6% (yoy), relatively lower compared to growth of banking credit 17,0%. 5
II.3. INDONESIAN SMES CHALLENGES 6 Wage of Labour 1% Transportation 3% Skill 1% Materials 11% Others 10% Financing 35% Fuel/Enegry 4% Marketing 35% Financing and Marketing aspects are the main challenges of the SMEs Source : National Economic Census 2006 6
III. THE POLICY DIRECTION OF BANK INDONESIA TO SUPPORT SMES DEVELOPMENT Final Objective Short Term Objective The Growth of SMEs & Real Sector and Inflation Control Supporting food security and creation of new economic centers in the regions Strategy Capacity Building for SMEs Increasing Access to Finance Minimize the Asymmetric Information Coordination & Strategic Partnership Program Cluster (Value Chain) Development Entrepreneurship Development National Movement for financial Transaction Recording Strengthening Financial Infrastructure Facilitation of Government Credit Program Provision of study/research Dissemination of Information Development of SMEs Microsite in the website of Bank Indonesia Coordination with local government, central government and international institutions Methods Research Training Provision of Information Facilitation 7
IV. Bank Indonesia s Program to Increase Financial Literacy Through National Movement for Financial Transaction Records 8 Backgound Financial recording has not become a habit SME focus on business and production activities There is no separation for personal and business financial transaction Knowledge of financial recording and accounting principles Small scale of business Information about financial performance Information gap for creditors Skills gap for SME Source: Study of Standards Financial Statements and Business Plan For SMEs, BI 2009
NATIONAL MOVEMENT FOR FINANCIAL RECORDS Logical Framework Main Strategies Expected Result Benefits 1. Improve SME S Awareness to have Financial Recording 2. Capacity Building 1. Increase awareness for financial transaction records 2. Changing habits to have financial transaction records 3. Increase knowledge to make financial transaction records 1.SME knows their business condition through financial records statement 2.Help creditors/banks in analyze SME financing needs
MOVEMENT FOR FINANCIAL RECORDS STATEMENT 10 FACILITATION TRAINING MOVEMENT FOR FINANCIAL RECORDS STATEMENT SOCIALIZATION & EDUCATION Importance of Financial Records Increase awareness & habit Financial Education & Planning Savings, Credits Etc Financial Transaction Records integrated with ICT Profit, Cost Struture, Efficiency Business Planning Financing needs, investments, etc Enrichment of Data Data of SME and their financial information Facilitation of Acces to Finance Focus Group Discussion with creditors/banks, financing expo, etc
ROAD MAP 2014 2015 Phases Training modul preparation Pilot Project Socialization Training monitoring Activities Coordination w/ stakeholders Soft Launching Training Facilitation monitoring Commitments Facilitate access to finance Program Evaluation Milestones Coordination with ministries, banks, universty, IAI etc. Training Need Analysis Group targeting Training Evaluation of Training modul Modul & software procurement Socialization Facilitate SME to finance TOT Reporting Evaluation of Program and recomendtaions 11
IV. CONCLUSIONS Lesson Learnt: a) Financial records and education can be useful for both of SME and creditors/banks: - SME is able to understand more about their business can know their business and choose financial product suitable to their needs - Helps creditors/banks reveal SME financial feasibility b) Financial records increase SME level of competitiveness Challenges : a) Changing the mindset of SME to have financial transaction records b) Absence of rules that requires SME to have financial transaction records c) Integrating the financial transaction records with Information and Communication Technology (ICT) 12