President Joko Widodo (Jokowi) is encouraging the public, especially young people, to create new digital financial technology (fintech) to be used by banks and other financial institutions to improve financial access and achieve the 2019 target for financial inclusion of 75 percent of the Indonesian population.
“I am very confident that increasing financial inclusion is one of the most important tools to reducing income disparity in our country, or anywhere in the world. I hope that this conference can generate new breakthroughs in the use of digital technology and financial inclusion,” Jokowi said at the opening of the “Indonesia Fintech Festival and Conference” at the Indonesia Convention and Exhibition (ICE) in Tangerang, Tuesday (30/8).
The President believes that fintech development is very important because product sales apps or software will bring producers closer to customers, by shortening the long distribution chain that has been the cause of price disparity: low costs for producers and high prices for customers.
“One example is the Tani Hap (app). A farmer has products, becomes a member of Tani Hap, and wants to sell to consumers. The consumer might be a restaurant, perhaps a hotel. Products that usually have to go through four, five, or even six links in the chain, can now be sold directly to customers so the farmers receive three to four times more because [the app] breaks the chain,” Jokowi said.
On the same occasion, Trade Minister Enggartiasto Lukita said that the government paid special attention to using technology to cut long distribution chains. Otherwise, “Consumers will lose out, inflation will rise, and the farmers stay poor,” he said.
Finance Minister Sri Mulyani said that the government supports technology advancement in the financial sector. Fintech results in lower costs, greater efficiency, and lower risk. However, this remains a challenge for banks and other financial institutions, which are still using outdated business model.
“Financial institutions must approach the issue and view it not as a threat to be ignored, but as an opportunity to make their business more efficient and as a tool to reach out to people,” Sri Mulyani said. (Read: Government Launches E-Warong to Control Social Aid)
Meanwhile, Chief Commissioner of the Financial Services Authority (OJK) Muliaman D. Hadad said that the Financial Services Authority (OJK)hoped that the government would continue to support fintech development because it would shape the future of financial access in Indonesia. “In the near future we will publish a guideline on regulatory reform for financial industries that want to get involved in fintech collaborations to enable the development of fintech in Indonesia,” Muliaman said.
While backing the move, Coordinating Minister for Economic Affairs Darmin Nasution reminded financial regulators – the OJK and Bank Indonesia – to prepare proper regulations. Darmin said that both institutions need to be careful when establishing policies on fintech to ensure that the policies did not favour certain parties. (Read: Five Digital Villages Receive Support from Bank Indonesia)
“The playing field must be level. If it isn’t, the old players will protest,” Darmin said.