Escalating Financial Inclusion Through Branchless Banking as a Solution to Poverty Eradication

Team : Omotesando

Increasing financial inclusion can reduce poverty rate

Source: Worldbank

IDN

LAO

PHL

KHM

GBR USA

JPN

Financial inclusion in ASEAN Countries is still low

0% 50% 100%

Cambodia

Indonesia

Vietnam

Myanmar

Lao PDR

Philippines

Percentage of unbanked per ASEAN Countries

Source: Mckinsey Report, Worldbank

People do not demand financial service

Low Income Level Low Education Level Cash Based Culture

0

20

40

60

80

100

120

140

160

180

Lowest 40% Highest 60%

Account at financial institution based on income (in cumulative % for Indonesia, Cambodia, Lao PDR, Myanmar, Philippines, Vietnam)

0

20

40

60

80

100

120

140

160

180

Primary or less Secondary ormore

Account at financial institution based on education level (in cumulative % for Indonesia, Cambodia, Lao PDR, Myanmar, Philippines, Vietnam)

0

350

700

1050

1400

1750

2100

2450

2800

Non Cash Cash

Receivedwages

Receivedpayment fromagri

Received govttransfer

Receivedremittance

Paid utility Bills

Pay for schoolfees

Payment using cash vs. non-cash (in cumulative % for Indonesia, Cambodia, Lao PDR, Myanmar, Philippines, Vietnam)

Source: Worldbank

Financial infrastructure supply is inadequate

5.8710.6

16.79 17.23 19.79

49.35

58.63

128.56

Number of ATM per 100,000 adults

Low ATM Number

2.493.57 4.16

7.858.69

9.96

23.7

33.9

Commercial bank branches per 100,000 adults

Few Bank Branches

US$ 400,000

US$ 9,000

Costly infrastructure obstruct the deployment of financial inclusion

Average cost of building physical bank office in Indonesia

Average cost of initial installment and maintenance of ATM in Indonesia

Source: Worldbank, Kompas News, Republika News

MSMEs is crucial but MSMEs can’t get loans

6%2%

86%

5%1%

Bank LoansEquity or Stock SalesInternal FundsOthersSupplier Credit

MSMEs source of funding in ASEAN

Only 38% of MSMEs claim, they can get access to proper financing

MSME Non MSME

MSMEs contribution to employment

MSMEs contribution to GDP

MSMEs is the backbone of ASEAN They rely on internal fund

97.2%57.8%

Source: Worldbank, ADB

Solution: Increasing access to financial service by branchless banking

Benefit for Customers

- No longer need to use scarce time and financial resources to travel- More flexible deposit, transaction, and loan amount- Affordable transaction cost

Benefit for Banks and Agents

- For banks: control risk, manage cost, enable growth- For agents: new source of income, get financial knowledge

With Simplified Due Diligence

- Full name- Residential address- Place and date of birth- Work details

Source: CGAP, Bank Indonesia

Implementation Roadmap

Phase 1 Phase 2 Phase 3

Preparation & Development Enhancement Expansion Tech Integration

- Business process,

organization design, and

change management

- Risk management

- Distribution channel

management

- Training system

- Audit

- Technology

- Related legal license

Legal permission from

government, central bank

- Implementing Pilot

Project in several

areas with detail KPI

- Evaluation

- Improvement from

the Pilot Project

Commercial roll out by:

- Creating partnership

with telco company

and technology

startups

- Branding and

marketing

- Reaching out

customers

- Evaluating area of

improvement

- Integrating more

advance technology

to enhance business

process, such as

blockchain

Growth will be slow if branchless banking is not implemented

0

5000

10000

15000

20000

Postbank PostOffice

Bank ATM M-PesaAgent

Financial Infrastructure withbranchless banking

0%

20%

40%

60%

80%

100%

2006 2009 2013 2016

Financial access without branchless banking

Formal Prudential Formal Non-Prudential Formal Registered Informal Excluded

0%

20%

40%

60%

80%

100%

2006 2009 2013 2016

Financial access with branchless banking

Formal Prudential Formal Non-Prudential Formal Registered Informal Excluded

0

5000

10000

15000

20000

Postbank Post Office Bank ATM

Financial Infrastructure without

branchless banking

Growth: 80-90%

Growth: 10-20%

19.500

Total: 3.590

Source: UN

Total: 3.590

Q&A

Appendix 2: Mobile penetration in ASEAN

-

20

40

60

80

100

120

140

160

2009 2010 2011 2012 2013 2014 2015

Mobile subscription per 100 people

Cambodia Indonesia Philippines

62%24%

Own a MobileHave AccessDo Not Have Access

Mobile phone access withinlow income society

Source: Worldbank

Appendix 3: Related stakeholders for branchless banking

Source: EY

Appendix 4: Original SAP Charts

Appendix 5: Original SAP Charts (cont.)

Appendix 6: Original SAP Charts (cont.)

Appendix 7: Original SAP Charts (cont.)

Appendix 8: Original SAP Charts (cont.)

Appendix 9: Original SAP Charts (cont.)

Thailand Myanmar Indonesia

Appendix 10: SDG 8 Focus Objectives

- Promote development-oriented policies that support creativity and

innovation, and encourage the formalization and growth of micro-, small-

and medium-sized enterprises, including through access to financial

services

- Strengthen the capacity of financial institutions to expand access to

banking, insurance and financial services for all

- Sustain per capita economic growth in accordance with national

circumstances and, in particular, at least 7 per cent gross domestic

product growth per annum in the least developed countries

Appendix 11: Data set

Other Reference : Mckinsey Report, Kompas News, Republika News, CGAP Report, KPMG Report