How to Serve Indonesia’s Unbanked Population

If you have read financial news in the past couple of years, you've probably come across some people using the word "unbanked". But few of these articles clearly define who exactly the term refers to.

Those classified as "unbanked", tend to include people and businesses who don't have access to bank accounts or other similar facilities, such as the ability to take out loans and manage their money. In most cases, people who are classified as unbanked are those who have lower levels of educations, or work in sectors with limited access to banks. This could be virtually anyone, from street vendors selling knock-off football jerseys or the warung down the street selling the city’s best nasi goreng.  

Many financial analysts and others in the sector believe unbanked users could be the next big thing in banking and financial tech. A report from global consultancy firm Accenture claims that "bringing unbanked adults and businesses into the formal banking sector could generate about US$380 billion in new revenue for banks".

In a report titled "Financial Inclusion in Asia", the Asian Development Bank found that 78 percent of the Indonesian population — around 199 million people — are considered unbanked, making Indonesia one of the largest unbanked countries in Asia.

A micro-business, a term for businesses so small that are not considered a Small to Medium Business, such as street vendors, make up around 90 percent of Indonesia’s workforce. The businesses, while making a large contribution to the economy, are largely unbanked. The inability to put up collateral or provide banks with other assurances prevents them from entering the market.

This puts unbanked microbusiness in a unique position; in a market in which traditional banks and providers are clearly not catering to demand or delivering creative solutions, it has become an underserved market. These businesses experience significant problems which could be solved by appropriate technology and innovation, but are ignored in favor of more ‘consumer friendly’ markets and products. So, are there any startups attending to the needs of these underserved businesses?


Just what the market needs: fintech and wealth of knowledge

Pinjam is an online platform providing services for individuals and micro-businesses ignored by bigger banks and institutions. In addition to providing loans, Pinjam provides a service connecting users to online pawnbrokers and refinancers, where they can use an appraisal feature to estimate the value of belongings which could be used as collateral.

“With easy requirements and affordable rates, prospective borrowers can receive their loans within 3 hours after the file submissions. If needed, Pinjam team can directly come to the borrowers and finish the entire process on the spot,” says Pinjam chief executive and co-founder Teguh Ariwibowo, who was recently featured on Forbes Asia’s 30 under 30 list.

“We have served over 2,500 individual borrowers, with average loan size of Rp 3 million (US$225). We have also served more than 250 SMEs, providing them an average loan of Rp 35 million (US$2,600),” explains Ariwibowo.

By providing loans of small denominations, Pinjam gives opportunities to individuals and businesses who may well have been laughed out of a bank.

Pinjam operates both online and offline. It has three outlets and 20 partners in Jakarta. The startup uses its industry partnership and collaboration with Pos Indonesia, Indonesia's national postal service, to reach users who would have never been given the opportunity to reach out to refinancers before.

Having experienced first-hand the troubles and difficulties of gaining access to financing, Ariwibowo is determined to fight the injustice and provide services to those who wouldn’t have access to it otherwise.

Pinjam makes up just a percentage of the innovative startups providing for the underserved, with 8Villages focusing on agribusiness. 

As of 2017, over 1 billion farmers reside in Southeast Asia, China and India, according to the United Nations FAO (Food and Agriculture Organization). 8Villages, a startup aiming to connect farmers and agribusinesses, estimates that 77 percent of these farmers own mobile phones, but 68 percent have difficulties in accessing accurate and timely information.

“Information and education are power. The more farmers can receive information easily, the more powerful and smarter they become,” says Sanny Gaddafi, CEO of 8Villages. He continues, “8Villages is an education and communication app to help farmers stay updated with the latest information, which will help them increase their overall productivity and income.”

Through its services, 8Villages not only brings forward a more transparent flow of information within the agriculture value chain, but also provides farmers and agriculturists with market intelligence information such as crop pricing, details regarding the harvest seasons and local offers on seeds, crops and harvests.

By providing farmers with important and timely information that they wouldn’t have had access to before and by connecting them with others in the field, 8Villages is contributing to the nation by fostering the sharing of information and best practices, leading to a more standardized and sustainable agriculture sector.  

Currently, over 80,000 of farmers in Indonesia are connected via 8Villages, and are sharing knowledge and learning new things daily. Those are farmers that before 8Villages, were underserved and had no method of connecting with each other and who have all been given the opportunity to learn new things and take their business to the next level.

We still have a long way to go and the number of individuals and businesses in Indonesia that are unbanked and underserved remain high, but with the help of startups such as Pinjam and 8Villages — who work tirelessly to provide for those who have spent so long being ignored — it can be said that there is a much brighter future ahead of us.


Pinjam and 8villages are both startup tenants at BLOCK71 Jakarta, a community centre for tech startups in Jakarta, a partnership between NUS Enterprise and Salim Group.