BANKING - Bank Indonesia’s Savings Product for the Poor Fails to Catch On

Jakarta. An initiative by the central bank encouraging poor Indonesians to open bank accounts has attracted little interest from the tens of millions of low-income citizens who don’t have accounts already.

Hoping to bring more people into the baking system, Bank Indonesia has been pushing about 70 commercial lenders to promote a product called Tabunganku, or My Savings, which requires only a small initial deposit and charges no administrative fees.

But Adang Saputra, a senior researcher at the central bank’s financial stability bureau, said on Wednesday that Tabunganku had attracted only 420,000 customers since its February introduction.

BI had been expecting at least one million accounts to be opened this year. A 2009 survey by the bank found that some 43 million Indonesians did not use banks.



The central bank blames difficult access to bank branches, a non-saving culture and a lack of aggression from lenders for the product’s slow penetration.

“Many Indonesians, particularly in rural areas, live far away from bank branches. That discourage them from having a bank account,” Adang said.

A 2008 BI survey found that 82 percent of rural Indonesians did not have bank accounts.

“Indonesians tend to be consumptive, buying goods like motorcycles, televisions, etc., before saving,” Adang added.

According to a study conducted this year by the World Bank’s Consultative Group to Assist the Poor, there are only 504.74 savings accounts for every 1,000 Indonesian adults, and only 196.86 loan accounts.

Alyson Slater, director of network and outreach for the Alliance for Financial Inclusion, said if more people used Indonesia’s banking system it would inject more money into the financial system and lead to faster growth.

“Formal financial services can help the poor generate income, build assets, manage cash flow, strengthen resilience,” Slater said.

“Moreover, by [using] formal institutions, poor people can be more protected and [can receive] fair interest, compared to [borrowing] from loan sharks.”

Slater said AFI helped developing countries come up with novel approaches for improving banking penetration.

“Brazil has been successful in enabling non-bank agents, such as shops and small retailers, to provide financial services. This approach allowed bank services to reach out to costumers in remote areas or even in the middle of the jungle,” she said.

But for Indonesia, her prescription was simple: “We want banks to be more aggressive in offering Tabunganku.”

Source : http://www.thejakartaglobe.com/business/bank-indonesias-savings-product-for-the-poor-fails-to-catch-on/397548 - Sept 21, 2010