Microfinance Industry Report: Indonesia - Banking with the Poor ...
Microfinance Industry Report: Indonesia - Banking with the Poor ...
Microfinance Industry Report: Indonesia - Banking with the Poor ...
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8.1 Future prospects<br />
<strong>Indonesia</strong>n microfinance will continue to grow, both<br />
in size and degree of sophistication. It will contribute<br />
to <strong>the</strong> financial inclusion of <strong>the</strong> poor and of o<strong>the</strong>r<br />
unbanked people. This will contribute to poverty<br />
alleviation, both directly and by accelerating <strong>the</strong><br />
process of financial deepening. Among activities<br />
best positioned for growth, and <strong>with</strong> major<br />
welfare benefits for <strong>the</strong> poor and near-poor, is <strong>the</strong><br />
development of affordable financial services for<br />
money transfer. Despite regulatory prohibitions and<br />
technology costs, many microfinance institutions<br />
already have experience providing money transfers<br />
using licensed third parties.<br />
Ano<strong>the</strong>r area of opportunity lies in rapid technical<br />
advance in information and telecommunications<br />
technology. Since most potential micro-borrowers<br />
live in rural and remote areas while MFIs are mostly<br />
located in sub-district towns, <strong>the</strong> transportation<br />
and opportunity costs for both borrowers and field<br />
staff are very high. The opportunity represented by<br />
mobile-phone banking is evident from experience<br />
in <strong>the</strong> Philippines, as elsewhere in <strong>the</strong> region. The<br />
dissemination of cell phones in rural areas lags behind<br />
some regional neighbours, but <strong>the</strong> infrastructure<br />
and consumer demand are developing to <strong>the</strong> point<br />
where <strong>the</strong> mobile banking opportunity can be<br />
grasped.<br />
External challenges faced by <strong>Indonesia</strong>n microfinance<br />
flow from <strong>the</strong> influence of <strong>the</strong> global economy. The<br />
spike in petroleum prices affected <strong>the</strong> viability of<br />
micro-enterprises, quite apart from <strong>the</strong> impact on<br />
<strong>the</strong> formal economy. Plans for expansion of microbanking<br />
announced by major commercial banks are<br />
threatened by developments in <strong>the</strong> macro-economy.<br />
In addition, <strong>the</strong> growing trend for foreign investment<br />
in MFIs has probably rendered <strong>the</strong>m more vulnerable<br />
to external shocks than was <strong>the</strong> case at <strong>the</strong> time of<br />
<strong>the</strong> previous crisis in 1997.<br />
26 microfinance industry report - INDONESIA<br />
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