Source : Coordinator Minister of Economy, BI, BSM & ABSINDO
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Transcript of Source : Coordinator Minister of Economy, BI, BSM & ABSINDO
Seminar on Islamic Finance:MICRO FINANCE
Is Islamic MicroFinance a Promising Solution to Lift People Out of Poverty?
Source : Coordinator Minister of Economy, BI, BSM & ABSINDO
LAKSMI MUSTIKA NINGRATSENIOR ADVISOR INDONESIAN ISLAMIC MICROFINANCE
Jakarta, 27 NOVEMBER 2012
LAKSMI MUSTIKA NINGRATSENIOR ADVISOR INDONESIAN ISLAMIC MICROFINANCE
Jakarta, 27 NOVEMBER 2012
OUTLINE
Part I : Back Ground Part II : Micronomics (Financial Inclusion =
Islamic Micro Finance) What is Financial Inclusion How does it contribute to economic
growth and poverty reduction? Part III : What We Should Do Part IV : Expectations
Fact and Figures Some key facts of Indonesia:
– Population of Indonesia: 237 million– GDP per capita: USD 3,508– Banking industry holds more than 80% of financial sector assets– 97.4% of banks accounts are less than IDR100 million (less than USD10,000)– Number of commercial banks: 120– Number of rural banks: +1.667– Number of cooperatives: +71.000– Number of islamic microfinance institutions: +5.500
Category Quantity Percentage on Total Population
Population 237.641.326 Number of Loan Account 37.929.527 15,96%Number of Insured life Insurance 34.564.028 14,54%Number of pension fund participant 2.817.997 1,19%
Public access on financial services is relatively low that is reflected by (a) the number of loan accounts which reach only 15.96% of the population, (b) the number of insured life insurance which reach only 14.54% and (c) the number of pension fund participants which is only 1.19 %
BACK GROUNDBACK GROUND
SOURCE : BI
No Indicator Indonesia Malaysia Thai Phil Brazil
1 Financial Services Utilization*) (Percentage of Total Population)
Account at Formal Financial Institution 20% 66% 73% 27% 56%
Adults saving in the past year (using Formal Account) 15% 35% 43% 15% 10%
Adults Originating a new loan in the past year (Formal Financial Institution)
9% 11% 19% 11% 6%
Adults With Mortgage 1% 13% 5% 4% 1%
Adults paying personally for health insurance 1% 16% 24% 5% 8%
2 Banking Services Access**)
Number of Bank Branch per 1.000 km2 7,71 6,18 11,59 15,69 2,33
Number of Bank’s Branch per 100.000 adult population
8,32 10,48 11,16 7,69 13,76
Number of ATM per 1.000 km2 12,39 33,12 80,68 30,35 20,46
Number of ATM’s per 100.000 adult population 13,37 56,18 77,69 14,88 120,62Source : *) WorldBank Policy Research Working Paper, April 2012**)IMF & WorldBank, 2010
Financial Services : Comparison
BACK GROUNDBACK GROUND
ACCESS TO FINANCE IN INDONESIA
Below Poverty
Line
Living in Rural Area
13.33% 64.25%
Without access to bank
60%
% MSME compare to total business
unit
99.91%
MSMEs that have not been linked to bank
60-70%
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BACK GROUNDBACK GROUND
SOURCE : BI
The purpose of Islamic Economic is the wealth creation and distribution
Al Muwafaqat Fi Ushul Al-Syariah, 2:8
Acoording Imam Al-Syatibi:
God say:
“God have been created you from the earth (soil) and asked you to create a prosperity on it (earth)” Q.S. Hud: 61
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BACK GROUNDBACK GROUND
SOURCE : BSM
1. Prohibition of interest (riba): Conventional interest on loans or savings, as a fixed return without sharing any risk, is not allowed.
2. Risk sharing: Because interest is prohibited, suppliers of funds become investors instead of creditors. The provider of financial capital and the entrepreneur share business risks in return for shares of the profit.
3. Money as “potential”‖ capital: Money is treated as “potential”‖ capital, which means that it becomes actual capital only when it joins hands with other resources to undertake a productive activity. Islam recognizes the time value of money only when it acts as capital, not when it is “potential”‖ capital.
4. Prohibition of speculative behavior: An Islamic financial system discourages hoarding and prohibits transactions featuring extreme uncertainties, gambling, and risks.
5. Sanctity of contracts: Islam upholds contractual obligations and the disclosure of information. In sales contracts, the product or service that is bought or sold must be clear to both parties. This feature is intended to reduce the risk of asymmetric information and moral hazard.
6. Sharia-approved activities: Muslims cannot profit from activities considered immoral. Only those business activities that do not violate the rules of the Sharia qualify for investment.
7. “Short selling‖ is not permissible: Muslims are not allowed to sell what they do not own, therefore, “short selling‖ is not allowed.
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Islamic Economic
Source: BSM Research
BACK GROUNDBACK GROUND
Source: CK Prahalad, 2004. The Fortune at The Bottom of The Pyramid
Islamic Economic Institutions should become the locomotive in flipping up the economic pyramidThe flipped economic pyramid once occurred in caliphate of `Umar ibn `Abd al-`Aziz, where it was very difficult to find zakat beneficiary (mustahiqq)
At least, 4 billion people live on less than $2 a day
Poo
r
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Islamic Economic
Source: BSM Research
BACK GROUNDBACK GROUND
OUTLINE
Part I : Back Ground Part II : Micronomics (Financial Inclusion =
Islamic Micro Finance) What is Financial Inclusion How does it contribute to economic
growth and poverty reduction? Part III : What We Should Do Part IV : Expectations
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Poverty Reduction
Financial inclusion (Access
to Finance)
Expand the financial capacity of
the poor
Social inclusion(Access to Basic
Services )Promote
empowerment among the poor
(e.g., Health & Education, Social
mobilization)
Economic inclusion
Increase access to the income generating
opportunities for the poor (e.g., MSME
development)
Without inclusive financial systems, poor individuals and small enterprises will have to rely on their personal wealth or internal resources to invest in their education, become entrepreneurs or take advantage of promising growing
opportunities
MICRONOMICSMICRONOMICS
SOURCE : WORLD BANK
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Poorest(Cluster 1) with limited assetsSocial In
clusion
Poorer(Cluster
2)with sources
of income
Social Inclusio
n
Poor(Cluster
3)almost
graduate (still vulnerable)
Social Inclusio
n
i.e. PNPM Program:• Mandiri Rural-Urban, Revolving Loan Fund (RLF)• PISEW (regional infrastructure development)• P2DTK (enhancing the development of underdeveloped region)
• KUR Program (partial guaranteed credit)• KUBE program (joint business group program for productive poor)
NEEDS:•Asset Building•Entry point for Formal Financial Services (saving)
•Asset Building & business start up•Start Accessing Broader Formal Financial Services ( Saving, Credit, remittance etc)•Financial management & Planning Skills
Escape from
poverty
•Asset & income expansion•Regular Access to Formal Services •Asset/life protection (insurance)
•PKH (CCT program)•Scholarship & school operational assistance
•Jamkesmas (health assistance)•Raskin (rice assistance)
MICRONOMICSMICRONOMICS
SOURCE : WORLD BANK
MICRONOMICSMICRONOMICS
SOURCE : WORLD BANK
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Insurance
Finance Companies
Cooperatives
Pawn Shop
Zakah Fund Institutions
Banking
BUSSINESS PLAYER SERVICES
APEX for BPRS & BMTProduct:
auto/motorcycles financing
Product : microinsurance
Product : funds for start-up/existing micro business
BUS/UUS Product :
microfinancing
Microfinance Institutions: BPRS
Microfinance Institutions:
BMTs
Empowerment Programs
Micro-Small Enterprises
Poorest of the Poor
Islamic Life Insurance 3Islamic Non Life Insurance 2
Sharia Unit of Life Insurance
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Sharia Unit of Non Life Insurance
18
Sharia Unit of Reinsurance 3TOTAL 43
Islamic Finance Co. 2Sharia Unit of Finance Co. 12Finance Co. Offer Islamic
Prod 2
TOTAL 16
Islamic Com Bank 11Islamic Windows 24Islamic Rural Bank 155Offices 2.380
Islamic Cooperatives (BMT) > 5,500
Conventional Cooperatives (Financial Sector) 71,365
Conventional Cooperatives (Total) 187.598
Zakat Fund Institutions >500
MICRONOMICSMICRONOMICS
SOURCE : BI
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Cooperatives
Banking
BUS/UUS Products:
microfinancing
Microfinance Institutions: Islamic Rural Banks (BPRS)
Microfinance
Institutions: BMTs
Banking ProfilesNumber of institutions: 11 Islamic Commercial Banks, 24 Islamic Banking Units, 155 Islamic Rural Banks (1,820 total Rural Banks)Assets ICB: IDR 149 tr (USD 17 bio) or 4% Market shareAssets IRB: IDR 3.6 tr (USD 400 mio) or 6% market shareAnnuall Growth: 45–50% (ICB); 25–30% (IRB)Total Customers: 9 mio (ICB); 684,167 (IRB)
BMT ProfilesNumber of Institutions: More than 5500 BMTs (Conventional Cooperatives 71.365 units)Assets: IDR 3,5 tr (USD 389 mio)Annuall Growth: 30 – 40%Number of Employee: 5 – 10 (average)Total members: 10 mioNon-Performing Financing/Loan: 4-5 % (Modus)Mostly initiated by group of people in particular community; Islamic Mass Organization, Mosque Comm.
Number of IRB Asset Volume
3 < 1 Billion
24 1 up to 5 Billion
39 >5 up to 10 Billion
89 > 10 Billion
155 Total
MICRONOMICSMICRONOMICS
SOURCE : BI
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Social Activitiesas Baitul Mal
Commercial Activitiesas Baitul Tamwil
BMT OperationsSource of Funds Beneficiaries/Customers
Zakah, Infaq, Sadaqa, Awqaf Grant, Endowment, Non Commercial Fund, etc
EQUITY
MEMBERS
DONORS
APEX
Needy People
MICRO-SMALL ENTREPRENUERS
(MEMBERS)
Funding;Wadiah, Mudharabah, Musyarakah
Financing;Murabahah, Ijarah, Mudharabah,
Musyarakah, etc
MICRONOMICSMICRONOMICS
SOURCE : BI
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Ministry of Cooperatives &Small Medium Enterprises
Cooperatives Offices of Regional Government
TA, advocacy & Participation in Policy Dialogue
Apex for Financing
MSMEs Projects
Regulations: supervision Regulations:
licensing
Capicity Building & Other Supporting
Programs
PUSKOPSYAH Regional Associations
The Lender of the Last Resort
PT Permodalan BMT Ventura
MICRONOMICSMICRONOMICS
SOURCE : BI
PC, Only 5 % penetrationNumber of PC in Indonesia 12 Million Unitsa
b
Mobile Phone no 5 in the world. Mobile Phone 165,000,000 Mobile Phonesc
Face Book no 2 in the world. FB Users 35,174,940 usersd
How About Digital Economic ?
Size of ICT Market in 2011 IDR 220 trilionsSize of ICT Market in 2014 IDR 440 trilionse
Internet, Only18,5% penetrationInternet Users 45,000,000 people
17SOURCE : ASOCIO ICT SUMMIT 2011, YOGYAKARTA - INDONESIA
MICRONOMICSMICRONOMICS
Outlet BMT Channel compared with Bank
The Future of BMT (Low Cost Banking)
Community Channel (BMT) Face Book BMT ATM EDC CDM BMT Click Mobile Money KYC (Biometric – eKTP)
MICRONOMICSMICRONOMICS
SOURCE : ABSINDO
ABSINDO Member StrengthCoverage
Nationwide
MemberAproximately 5.500 BMT’s
OutletsOver 22.000 outlets
Account HoldersPotentially over 22 million
MICRONOMICSMICRONOMICS
SOURCE : ABSINDO
OUTLINE
Part I : Back Ground Part II : Micronomics (Financial Inclusion =
Islamic Micro Finance) What is Financial Inclusion How does it contribute to economic
growth and poverty reduction? Part III : What We Should Do Part IV : Expectations
National Strategy on Financial Inclusion
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Mission
Vision
WHAT WE SHOULD DO ?
Source: BI
22Financial Inclusion Framework
: On going Programn by BI
: Program will be conducted by BI
: Paralel program with other institutions outside of BI
RemarksInfrastructure
Financial Access to Bank andNon-Bank Financial Institutions
Saving
Credit/ Financing
Insurance related to Credit
Payment System
Other financial Services for MSMEs
Main Products
Fin.Education & Customer Protection
Mapping on Financial
Information
Intermediation Facilitation
Distribution Channel
Supporting Policy &
Regulation
WHAT WE SHOULD DO ?
SOURCE : BI
Strategic Target
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Financial Education
The Improvement of financial literacy on: a. Banking products ;b. Consumer Protection;c. Financial management
Financial Eligibility
Increasing the number of eligible/bankable person or SME’s
Policy and Regulation
Preparing the regulation that support financial access and eliminating the various types of barriers
Intermediation
Increasing the range of formal financial system especially to remote areas community
Distribution Channel
Increasing the financial distribution channel in terms of number and quality
WHAT WE SHOULD DO ?
Source: BI
Challenges Ahead
Problems Identified Pillars Proposed Program
Lack of Customer Protection Framework for MFI Customer
Lower income people is categorized as unbankable since they can not fulfill bank requirement
WHAT WE SHOULD DO ?
Source: BI
Challenges Ahead
Problems Identified Pillars Proposed Program
Accelerating Financial education ProgramBanks and MFI compete in the same segment
Financial services for people in remote are
WHAT WE SHOULD DO ?
SOURCE : BI
Islamic banks
• Islamic banks is supposedly able to take optimally these opportunities thru advancing technology, innovating product scheme, and creating new business models, etc.
Take opportunity optimallyTake opportunity optimally
• Islamic banks should implement its main mission: wealth creation & distribution
Islamic missionIslamic mission
How Islamic banks, Finance & Bussiness Institutions should take the role?
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Source: BSM Research
WHAT WE SHOULD DO ?
OUTLINE
Part I : Back Ground Part II : Micronomics (Financial Inclusion =
Islamic Micro Finance) What is Financial Inclusion How does it contribute to economic
growth and poverty reduction? Part III : What We Should Do Part IV : Expectations
STRATEGY : TRIPLE TRACT STRATEGY
DECREADINGUN EMPLOYMEN
POVERTY ALLEVIATION
GROWTH
EMPLOYMENT CREATION INCOME GENERATION GROWTH ACCELERATION
SAVINGJOB PROFIT
ASSISTANT SYSTEMEQUITY
Sub Apex - BMT
POOR PEOPLE WEALTH PEOPLE
CAPACITY BUILDINGINSTITUTIONAL BUILDINGCHARACTER BUILDINGEQUITY BUILDING
Source : Prof. Gunawan Sumodiningrat modification
EXPECTATIONS
s
APEX PROVIDER/IMPLEMENTOR
Financing Access(Financing & Equity)
Management Standardization
(SOP, ICT, Training)
Apex
Arrangement
Technical Assistance
Financial Assistance
165.000 Cooperatives & 5000 IMF
MICRO & SMALL ENTREPRENEURCOMMUNITY
GOVERNMENT (REGULATION & SUPERVISORY)
BANK-BANK STRATEGIC PARTNER
Technical Assistance
EXPECTATIONS
SOURCE : ABSINDO
“An APEX Institution serves its owner/members (MFI’s) to strengthen their commercial position, viability and future, sound and profitable development” (Cleman Wendland GTZ; 2004).
APEX MFI
EXPECTATIONS
SOURCE : ABSINDO
• APEX is a Central for MFI (Micro Finance Institution)
• Integrated system comprising of social network microfinance, mobile payment solution, core switching for finance, groups of MFI which enable distribution of funds to the saving account holder, transaction between account holders, and payment for utilities and other services.
……APEX MFI
EXPECTATIONS
SOURCE : ABSINDO
No Function Institution Explanation Analog1 SRO Apex Internal Regulations for its
MemberBI, LPS, OJK
2 Saving Guarantee MFI-SG IDR 25.000.000,- Maximum LPS3 Mismatch Liquidity Apex SWM from Apex Member LPS, BI4. Settlement Apex Virtual Clearing Systems BI5 Payment Systems eMF Card & Mobile Payment
SystemsBI
6 Wholesaler Apex Donor Funds like World Bank BI7 Linkage Program Apex/creditor Funds from Creditor BI
8 Credit Biro Apex Credit Information Center/Call Center
BI
9 ICT eMF Back Office/ Centralized Data Center
BI
10 Rating Systems eMF System Rating (ICT Base) BI11 Management
ServicesApex SBU Training (Certif), SOP, ISO
etcBI
12 Supervision/MONEVA
Apex, eMF MONEVA to member (exclude FS)
OJK
EXPECTATIONS
SOURCE : ABSINDO
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BMT UGT, Pasuruan – East Java
Asset IDR 287 bio (USD 25.5 mio)
EXPECTATIONS
UU No. 9/1995 ttg Usaha KecilPP No. 32/1989 ttg Pembinaan dan Pengembangan Usaha Kecil
Inpres No. 10/1989 ttg Pemberdayaan Usaha Menengah
MIDDLECOY
SMALLCOMPANY
MICRO ENTERPRISES
BIGBIGCOYCOY
Micro Enterprises :Omzet/pa until IDR 200
M Asset until IDR 50 M
Small Coy :Omzet/pa from IDR 200 M - IDR 1 B
Asset until IDR 200 M
Middle Coy Omzet/ pa from IDR 1 B - IDR 50 BAsset from IDR 200 M - IDR 10 B
Big Coy/Conglomerat : Omzet/pa > IDR 50 B
Asset > IDR 10 B
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± 47,70 mio = 95,70%
± 120,25 thou = 0,24%
± 4,52 thou = 0,01%
± 2,02 mio = 4,05%
SOURCE : MODIFICATION FROM UMKM DATA 2007, BERITA RESMI STATISTIK No. 28 BPS 2008 SOURCE : RUU No. ../2008 ttg UMKM (Kep Sidang Paripurna DPR)Kekayaan Bersih = total nilai kekayaan usaha (asset) – total nilai kewajiban,
tidak termasuk tanah dan bangunan tempat usaha.Hasil Penjualan = hasil penjualan bersih (netto) dari barang dan jasa dlm 1 th buku
MICRO ENT :Net Assets/pa
Maximum IDR 50 M Sales Volume
Maximum IDR 300 M
SMALL COY :Net Assets/pa
> IDR 50 M s.d 500 MSales Volume
> IDR 300 M - 2,5 B
MIDDLE COY :Net Assets/pa
> IDR 500 M s.d 10 BSales Volume
> IDR 2,5 B - 50 B
BIG COY :Net
Assets/pa > 10 B
Sales Volume > 50 B
UU No. 20/2008 ttg UMKM UU No. 20/2008 ttg UMKM
To the Community : Creative MicronomicsIslamic Creative Economics should become the locomotive in flipping up the economic pyramid
MICRO
EXPECTATIONS
INDONESIAN TODAY (2012)RICH COUNTRYPOOR PEOPLEINDONESIANTOMORROW (2045)RICH & SUPER POWER COUNTRYWEALTH ÐICAL