Boosting financial inclusion through social assistance reform: evidence-based approach in selecting a payment system

Hilman Palaon; Sudarso Kaderi Wiryono; Taufik Faturohman

doi:10.3362/1755-1986.20-00013

Boosting financial inclusion through social assistance reform: evidence-based approach in selecting a payment system

Hilman Palaon, Sudarso Kaderi Wiryono, Taufik Faturohman

Digitizing social assistance for the poor has been proven to increase financial inclusion. The Indonesian Government initiated reform for non-cash social assistance disbursement in 2016. Evidence-based policy approach is an effective technique for informing the government on appropriate new regulations. A pilot project involving 4,295 participants was conducted to evaluate the following payment systems: debit card, mobile money, QR code (quick response), and NFC (near field communication). Beneficiaries utilized the funds for cash withdrawals and food purchases at bank agents. Quantitative and qualitative methods were employed in the analysis. The government decided to use debit card with multiple wallet features. A new regulation was made to support the implementation in 2017, and by the end of 2019, the government provided more than 12 million new savings accounts to the poor. Potential future improvements are proposed for the sustainability of the solution, which include a disbursement providers’ revenue model, broader financial services involvement, bank agents’ inventory system, and optimizing the latest innovations.

Aron, J. (2018) ‘Mobile money and the economy: a review of the evidence’, The World Bank Research Observer 33(2): 135–88 <https://doi.org/10.1093/wbro/lky001>.

Barca, V., Hurrell, A., MacAuslan, I., Visram, A. and Willis, J. (2013) ‘Paying attention to detail: how to transfer cash in cash transfers’, Enterprise Development and Microfinance 24(1): 10–27 <https://doi.org/10.3362/1755-1986.2013.003>.

Coordinating Ministry for Human Development and Culture, Indonesia (2017) Guidelines for Implementation of Non-cash Food Assistance [pdf], Coordinating Ministry for Human Development and Culture, Jakarta <http://tnp2k.go.id/download/49661Pedoman%20Pelaksanaan%20BPNT%202017_17012_versi%201.pdf> [accessed 31 May 2020].

Coordinating Ministry of Human Development and Culture, Indonesia (2019) BPNT (non-cash food assistance) distribution consistency, 15 November 2019 [online] <https://www.kemenkopmk.go.id/konsistensi-penyaluran-bpnt> [accessed 31 May 2020].

de Luna, I.R., Liébana-Cabanillas, F., Sánchez-Fernández, J. and Muñoz-Leiva, F. (2019) ‘Mobile payment is not all the same: The adoption of mobile payment systems depending on the technology applied’, Technological Forecasting and Social Change 146: 931–44 <https://doi.org/10.1016/j.techfore.2018.09.018>.

Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S. and Hess, J. (2018) The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution [online], World Bank, Washington, DC <http://documents.worldbank.org/curated/en/332881525873182837/The-Global-Findex-Database-2017-Measuring-Financial-Inclusion-and-the-Fintech-Revolution> [accessed 31 May 2020].

Indonesian Central Bank (2014) Bank Indonesia Regulation Number 16/8 / PBI / 2014 Concerning Amendments to Bank Indonesia Regulation Number 11/12/PBI/2009 Concerning Electronic Money [online] <https://www.bi.go.id/id/peraturan/sistem-pembayaran/pages/pbi_16814.aspx> [accessed 31 May 2020].

Indonesian FSA (2019) 2019 FSA survey on financial literacy and financial inclusion index, 7 November 2019 [press release] <https://www.ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/Siaran-Pers-Survei-OJK-2019-Indeks-Literasi-Dan-Inklusi-Keuangan-Meningkat.aspx> [accessed 31 May 2020].

Ivatury, G. and Mas, I. (2008) The Early Experience with Branchless Banking [online], CGAP Focus Note 46, CGAP, Washington, DC <https://www.cgap.org/research/publication/early-experience-branchless-banking> [accessed 31 May 2020].

Pasti, F. (2019) 2018 State of the Industry Report on Mobile Money [online], GSMA, London <https://www.gsma.com/mobilefordevelopment/resources/2018-state-of-the-industry-report-on-mobile-money/> [accessed 31 May 2020].

Pawson, R. and Tilley, N. (1997) Realistic Evaluation, Sage, London.

Pickens, M., Porteous, D. and Rotman Parker, S. (2009) Banking the Poor via G2P Payments [online], Focus Note 58, CGAP, Washington, DC <https://www.cgap.org/research/publication/banking-poor-g2p-payments> [accessed 31 May 2020].

President of the Republic of Indonesia (2017) Presidential Regulation Number 63 of 2017 Concerning Non-cash Distribution of Social Assistance [pdf] <https://jdih.setkab.go.id/PUUdoc/175301/Perpres%20No%2063%20Tahun%202017.pdf> [accessed 31 May 2020].

Sanderson, I. (2002) ‘Evaluation, policy learning and evidence-based policy making’, Public Administration 80(1): 1–22 <https://doi.org/10.1111/1467-9299.00292>.

Statistics Indonesia (2020) The percentage of Indonesia’s poor population 2007–2019 [website] <https://www.bps.go.id/dynamictable/2016/08/18/1219/persentase-penduduk-miskin-menurut-provinsi-2007---2019.html> [accessed 31 May 2020].

TNP2K (2018) Government Assistance Programs for Disadvantaged Individuals, Families and Groups [online], TNP2K, Jakarta <http://tnp2k.go.id/downloads/program-bantuan-pemerintah-untuk-individu-keluarga-dan-kelompok-tidak-mampu-menuju-bantuan-sosial-terintegrasi> [accessed 31 May 2020].

TNP2K (2019) Report on the Pilot Implementation of Non-Cash Distribution for Social Assistance and Food Assistance in 2016, TNP2K, Jakarta.

Zimmerman, J. and Holmes, J. (2012) ‘The G2P opportunity: Five reasons why now is the time to leverage social protection to enable financial inclusion and savings among the poorest’, Enterprise Development and Microfinance 23(1): 38–53 <https://doi.org/10.3362/1755-1986.2012.005>.