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NFIS Development Process
I Gede Putra Arsana
Senior Financial Sector Specialist
FCI Global Practice, World Bank Office Jakarta
2
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
4
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
6
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
8
Source: Intermedia Financial Inclusion insights tracker survey
Physical distance remains the biggest challenge
9
Physical access situation in 2015
1
0
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
1
2
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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4
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
1
9
▪ 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
