Financial Inclusion: Reaching the Undeserved

IriantoSenior Executive Vice President

Change Management BRI

FINANCIAL INCLUSION PREVIEW

BANKING ROLE

CHALLENGE

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FINANCIAL INCLUSION PREVIEW

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FINANCIAL INCLUSION DEFINITION

Financial inclusion provides access to financial services for undeserved people

“financial inclusion involves providing accessto an adequate range of safe, convenientand affordable financial services todisadvantaged and other vulnerable groups,including low income, rural andundocumented persons, who have beenunderserved or excluded from the formalfinancial sector” (Financial Action TaskForce/FATF).

“state in which all working age adults haveeffective access to credit, savings, payments,and insurance from formal service providers.Effective access involves convenient andresponsible service delivery, at a costaffordable to the customer and sustainablefor the provider, with the result thatfinancially excluded customers use formalfinancial services rather than existinginformal options” (The Consultative Group toAssist the Poor/CGAP).

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UNDESERVED BARRIERS

COST

INFORMATION

DOCUMENTATION

CHANNEL

PRODUCT

EFFECTIVE ACCES

DISTANCE

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India is the first target of Financial Inclusion out of 25 focus countries in the world, China and Indonesia are the second and the third

Universal Financial Access (UFA) Target in 2020

Mexico2.6%

Nigeria2.7%

Egypt2.4%

Pakistan5.2%

China11.6%

India20.6% Indonesia

5.6%

Vietnam

2.4%

Bangladesh

3.7%

Brazil2.4%

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Indonesia is made up of thousands of large and small islands, which are connected by the strait

and sea. Indonesia has 34 Provinces, 416 Regencies, 98 Cities, 7.160 Districts, 8.430 Sub-

districts or urban Community, 74.754 Villages.

Indonesia consist of 17,504 islands, which 7,870 of them have names, while 9,634 do not have a name. (According to data from the Ministry of Interior of the

Republic Indonesia in 2010)

JAVA

SUMATERA

KALIMANTAN

SULAWESI

MALUKU

BALI AND NUSA TENGGARA

PAPUA

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POTENTIALLY RICH BUT POPULOUS, A DOUBLE EDGE SWORD

888

374 327 308 285

Indonesia Thailand Malaysia Singapore Philipines

255.9

100.968.0

30.55.7

Indonesia Philipines Thailand Malaysia Singapore

POPULATION 1H 2015(Milion people), July 2015

REAL GDP 2014(USD Billion)

Source: Indonesian State-owned Enterprises Roadmap 2016 8

Indonesia has potential to accelerate and prosper which is supported by itsproductive population and natural resources. Indonesia is projected to become a

regional economic powerhouse

A REGIONAL ECONOMIC POWERHOUSE ?

T O D A Y

• 16th largest economy in the World

• 45 Million members of consuming

class• 53% of population in cities

producing 74% of GDP• 55 Million workers• $ 0.5 Trillion market opportunity in

consumer services, agriculture and fisheries, resources and education

2 0 3 0

• 7th largest economy in the World• 135 Million members of

consuming class• 71% of population in cities

producing 86% of GDP• 113 Million workers• $ 1.8Trillion market opportunity in

consumer services, agriculture and fisheries, resources and education

Source: McKinsey, BPS, Bloomberg, CEIC, On Roadmap BUMN 2016

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OPORTUNITY TO GROW

Loan to GDP Ratio(%), 2014

Deposit to GDP Ratio(%), 2014

Indonesia’s banking penetration is lower compared to other ASEAN-5, giving opportunity for banking industry to grow

Source: CEIC

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DEMAND FOR INCLUSION AND LITERACY

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“Access to credit is a key link between economic opportunity and economic outcome. It is essential for individual empowerment. Yet currently almost two third of the population in Indonesia does not have access to any banking services, and close to half have no savings accounts. Micro credit program such as those implemented by Bank Rakyat Indonesia have been successful in extending coverage to remote areas.”

Christine LagardeManaging Director IMF

Indonesian Poised for Indonesia’s Economic Potential

Speech at University of Indonesia, Jakarta September 1st, 2015

• Two billion people -- or 38% of adults in the world -- do not use formal financial services, and 73% poor people are unbanked because of costs, travel distances and the often-burdensome requirements involved in opening a financial account. Their ranks include more than half of adults in the poorest 40% of households in developing countries.

• Research shows that access to savings products – and, in particular, to “commitment” savings, in which individuals restrict their right to withdraw funds until they have reached a self-specified goal – can have important benefits beyond simply increasing one’s amount of savings: It can also help empower women, increase productive investment and consumption, raise productivity and incomes, and increase expenditures on preventive health.

• A transaction or deposit account can be the stepping stone to full financial inclusion, providing a pathway to a broader range of responsible financial services provided through stronger and more diverse financial institutions. Emerging evidence indicates that access to financial services through formal accounts can enable individuals and firms to smooth consumption, manage risk, and invest in education, health and enterprises.

WORLD BANKOverview Financial Inclusion

Source: http://www.worldbank.org/en/topic/financialinclusion/overview#1

WHY FINANCIAL INCLUSION?

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CHALLENGE

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UNBANKED People

Global Findex shows in 3/4 poorestcountries don’t have bank account not onlybecause they are poor but also cost,distance and document

People around the world (except advanced countries) prefer to take loan from friends or

family related

55% Borrower in the

developing countriesprefer informal financialservices

Source : World Bank, 2014

DISTANCE

The archipelago country which has more than 17,000 islands

MAJOR CHALLENGES

COST

Spreading delivery chan-nels and labor intensive mean high overhead cost

DOCUMENTATIONINFORMATION

PRODUCTCHANNEL

Lack of information about financial services

Wider delivery channel to serve more people

Simplicity product & service

Conventional banking services need adminis-tration (documentation)

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UNBANKED DEMOGRAPHY

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BANKING ROLE

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Providing channel to deliver financial services

Communicating financial service product knowledge

Benefiting social environment. By encouraging others to prosper, thebank actually is working to sustain and even increase its performance

Accessibility

Financial Literacy

Social Impact

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Conventional Channel

Electronic Channel

Mobile Banking / Internet Banking

Agent Banking

Physical branch (brick & mortar)

ATM/CDM, EDC, MPOS, etc.

Mobile & Internet Banking

Branchless banking (third party)

ACCESSIBILITY

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• Technology has become backbone for development of banking industry in the future. Improving the quality of banking technology has started by connecting all branches arround the archipelago real time online. Certainly, to support the connection, BRI has to prepare a reliable technology through developing IT infrastructure such as server, communication network, software, human resources, etc.

• In 2014, BRI has started a big movement by procuring its own satellite, called BRI-Sat, BRI will be the first and only bank that owns and operates satellite. BRI has signed MOU with Space Systems/Loral, LLC and Arianespace to build and launch the Satellite. The Satellite has been launched in Kourou Guyana in last June 2016.

ACCESSIBILITY – BRISAT FOR FINANCIAL INCLUSION

Specification:

Weight: +/- 3.500 kgNumber of transponder: 45Coverage: Indonesia, ASEAN, Asia Timur Laut, part of Pacific and West Australia

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ACCESSIBILITY – INNOVATION FOR FINANCIAL INCLUSION

1. Balance Information

2. Transfer

3. Top up Mobile Phone Voucher

4. Payment Points

BRILink Features:

CASH

BRILink Advantages:

Real time online Fast and easy transaction Safe by using customer PIN Variety of transactions (features and facilities) Can be accessed by any other bank ATM card users who are members

of the LINK, ATM Bersama and Prima Network

1. Cash Deposit

2. Payment Loan

3. Cash Withdrawal

1. Balance Info2. Payment and Purchase3. Transfer4. Electronic Access Code

(electronic token)5. Check Agent Validity6. Registration7. Top Up

Banking Services in BRILinkAgents

Cash Deposit & Cash Withdrawal

Payment Point (electricity, phone, loan, etc)

PurchaseTop up mobile phone voucher & electricity voucher, buy goods, etc.

Transfer (to intern al bank & outside the bank)

No need bank saving account to do transaction

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Number of BRILINK Agent(Agent), 2015

Number of BRILINK’s Transaction(Milion), 2015

Volume of BRILINK Transaction(USD Billion), 2015

6.77 13.17

23.60

Jun'15 Sep'15 Dec'15

32,483 35,955 50,259

Jun'15 Sep'15 Dec'15

0.75 1.48

2.60

Jun'15 Sep'15 Dec'15

ACCESSIBILITY – INNOVATION FOR FINANCIAL INCLUSION

Video, looping

• “Teras BRI Keliling” is an innovative moving branch as amicrobanking distribution channel that provides bankingservices with real time online transactions through a four-wheel vehicle (automobile).

• “Teras BRI Keliling”was invented by Bank BRI to embracefinancial inclusion by reaching out deeper community inrural and remote areasacross Indonesia. It serves broadbanking services include account oppening, savings, cashwithdrawal, e-channel dan micro lending. It operatesparticularly on community center such as traditional“wet” market and seasonal market, brings an easybanking access to the buyer and traditional seller/trader.

Kas Keliling

ACCESSIBILITY – INNOVATION FOR FINANCIAL INCLUSION

100

350465

610

693 693

2011 2012 2013 2014 2015 Q1 2016

Number of Teras BRI Keliling

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Banking Hall

The Boat is equipped with: Banking hall

1 Unit ATM

Total passengers : 11 people (1 teller, 1 customer

service, 2 micro account officers, 2 securities,

and 5 crews).

ATM Customer Service

SERVING FISHERMEN AND COASTAL COMMUNITY

The newest BRI’s Innovation to support financial inclusion and financial literacy in costal & remote islands. Teras Kapal could reach more unbanked

people in Archipelago of Kepulauan Seribu to help the local economy to grow faster and to maintain Rupiah

Sovereignty

ACCESSIBILITY – INNOVATION FOR FINANCIAL INCLUSION

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OPERATION AREA of BRI BOAT BANK

THE FIRST INDONESIA’S BOAT BANK

To provide financial services for broader community throughout Indonesia, particularly for the fisherman and coastal communities. BRI Boat Bank is a banking outlet that provides banking services

to coastal communities on a boat

ACCESSIBILITY – INNOVATION FOR FINANCIAL INCLUSION

Archipelago of Thousands IslandArea: ± 10,8 km2 land and ± 7000 km2 watersPopulation : ±21.554 people (BPS, 2011)Main industry: fishing & tourism

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Bank organizes local event to educate banking product for rural people

FINANCIAL LITERACY

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SOCIAL IMPACT

Asset Increase 20x Sales Increase 2,2x In average each debtor

creates job opportunity for

1,17 – 2 workers

Source: University of Indonesia Research

1.21

24.72

38.4

84.84

2009 2012

Asset Sales (IDR Million)

Micro Credit Impact(Rp Juta)

2.2x

20.4x

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THANK YOU

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