NFIS Development Processpubdocs.worldbank.org/en/311731553199000115/4bfeff...6 Government of...

NFIS Development Process

I Gede Putra Arsana

Senior Financial Sector Specialist

FCI Global Practice, World Bank Office Jakarta

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The Overall NFIS Development Timeline

Motivation for NFIS

Key Challenges and Opportunities

Key Stakeholders in NFIS Development

Data and Diagnostic to Inform NFIS

The Process to Approve NFIS

Challenges and Lesson Learned

Outline

THE OVERALL NFIS

DEVELOPMENT TIMELINE

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2015 - 20162013 - 20152010 - 2012

1st edition of National Financial

Inclusion Strategy introduced

• Developed by 2 institutions

• No legal basis

• No coordination structure

• Non-committal action plan

Informal Working Group

established, led by

Ministry of Finance

• Proposed by 6

institutions

• Ministerial regulation

drafted

• Coordination structure

drafted

2nd edition of NFIS &

coordination structure

formally introduced

• Presidential regulation

as the legal basis

• With coordination

structure

• With implementing

governance structure

• Annual action plan

The Long Journey

MOTIVATION FOR NFIS

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Government of Indonesia has an ambition to reach an 8

percent of economic growth up to 2019

An inclusive, deeper, and stable financial sector is needed

…but Indonesia had 36% of financial inclusion in 2014

Hence, aimed to reach 75% of financial inclusion in 2019

Motivation for NFIS

KEY CHALLENGES AND

OPPORTUNITIES

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Source: Intermedia Financial Inclusion insights tracker survey

Physical distance remains the biggest challenge

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Physical access situation in 2015

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Limited Access

❖ More than 17,000 islands; number of bank branches per 1000 km² 15.12 (2015)

❖ Limited financial service footprints & ICT infrastructure

❖ Imperfect ID infrastructure

Less Usage

❖ 36% use of accounts, with 27 % high-use

❖ Unsuitable regular financial product & services

❖ Unpopular basic financial services/entry level products

❖ Limited agent presence

Low Quality

❖ Low level of financial literacy; only 22% Indonesians understand their financial products & services in full

❖ Lack of enforcement in consumer protection

Sluggish Financial Sector Response

❖ Dominated by banking sector that lacks competitive push towards small and micro retail market

Unstable foundation:

❖ Missing formal coordination structure

❖ Lack of coherent regulatory framework

Indonesia faces multidimensional challenges in FI

KEY STAKEHOLDERS IN

NFIS DEVELOPMENT

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CMEA (Coordinating Ministry for

Economic Affairs)

• Financial sector coordinator

• KUR (partial credit guarantee

for SMEs)Bank Indonesia

• Payment system regulator

• e-money, mobile money

agent, consumer protection in

payments system, data &

indicators

OJK (Financial Service

Authority)

• Financial sector regulator

• Consumer protection,

financial literacy, credit

reporting, agent banking

Ministry of Finance

• Budget holder

• G2P through electronic

means

Ministry of Planning

• National planning, budget

planning

• Target in Mid-term

development plan

TNP2K (Unit in Vice President

Office for Accelerating Poverty

Alleviation)

• Poverty alleviation coordinator

• Data infrastructure of the poor

Key stakeholders in NFIS development

DATA AND DIAGNOSTICS

TO INFORM NFIS

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Global Findex

(2011, 2014)

Intermedia Financial Inclusion Insight Survey

(2014, 2015, 2016)

BPS annual national socio-economic

household survey data

TNP2K BDT (unified database)

covers bottom 40% of the population (the targeted poor

households)

BI Financial Inclusion Survey and Diagnostic

(2014)

OJK financial literacy & inclusion survey and

diagnostic

(2013, 2016)

Financial consumer protection diagnostic

Credit reporting system assessment

Data and diagnostics to inform NFIS

THE PROCESS TO

APPROVE NFIS

The process to approve NFIS (2014-2015)

Commitment by key stakeholders to formalize NFIS

Updating process – segment, vision and mission, objectives,

strategy, inclusion of updated data

Draft regulation and draft NFIS submitted to Minister of Finance

New government transition, FI was in the political agenda and mid

term development plan, but lacking leadership

March - June 2014January - March 2014

October’14 – December’15June - September 2014

drop due to presidential election

The process to approve NFIS (2016)

Technical working group re-do the

updating process

President tasked CMEA to take lead and complete the

strategy by September

Draft NFIS and Draft Presidential

Regulation were developed and

submitted to CMEA Minister in August

CMEA host inter-ministerial

coordination meeting to get commitment

and approval from all relevant ministries

President issued President Regulation

on NFIS and coordination structure

President officially launched the

strategy in the presidential palace

January - March 2016 March 2016 March - August 2016

August 2016 September 2016 November 2016

CHALLENGES AND LESSON

LEARNED

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▪ Coordination is key…and sometime can only be achieved

through formal legal foundation

▪ NFIS development can be a long and tedious process –

hence integrating it into a national development plan (i.e.

mid term development goal) should be considered to

secure its place

▪ Investment in data and diagnostics work not only help the

development process but also the implementation

▪ Identification of high-level champions within key

institutions (and at working level) is critical to push and

carry the agenda

Challenges and lesson learned

THANK YOU!

CONTACT:

I GEDE PUTRA ARSANA

(iarsana@worldbank.org)