UNSGSA Queen Máxima highlights the importance of digital innovations for an inclusive and resilient financial system in a pre-recorded video message for the Indonesia Fintech Summit on 12 December 2021.
It is an honor to join you today. The issue of financial inclusion in Indonesia is very close to my heart.
Over the past decade, I visited the country several times in my capacity as the UN Secretary-General’s Special Advocate for Inclusive Finance for Development. I have very fond memories of the inspiring discussions I have had with many of you. And I consider it a privilege to have met so many entrepreneurs and smallholder farmers who welcomed me into their working environment and shared their stories.
All these stories evolved around the same basic needs: the ability to earn, to protect yourself and your family in times of crisis, and to build for the future. These needs have become even more urgent during the COVID-19 crisis.
By launching a National Strategy for Financial Inclusion in 2016, President Widodo showed vision and leadership. Financial inclusion became a priority, with considerable results.
Many contributed to the country’s progress. It has been a pleasure for my partners and I to support Bank Indonesia, OJK, ministries, and other agencies in their efforts to leverage digital technology and include more Indonesians into the formal financial system.
There are so many fine examples.
Combining social assistance with the use of digital technology has nudged many people towards opening and using a bank account. Agent network systems such as Laku Pandai and (Layanan Keuangan Digital) LKD provide access in hard-to-reach areas. And digital finance firms in Indonesia offer solutions that cater to previously underserved customers.
Sometimes the most innovative solutions come from untraditional places, such as an agribusiness, an e-commerce site, or a ride-hailing app. They have helped include many Indonesians into the financial system through digital solutions.
These efforts have proven extremely valuable as Indonesia, along with the rest of the world, weathers the challenges of the ongoing pandemic. Research shows that countries that previously invested in digital financial services respond better to the COVID-19 crisis – both for short-term relief and for recovery efforts.
We have built a solid foundation, but our work is not done yet.
We must now ask ourselves: are the newly included able to benefit from services such as savings and insurance that help them build enduring resilience?
And: how can we remove any obstacles which may prevent small and medium-sized businesses from choosing digital solutions?
A study found out that, prior to the pandemic, 28% of MSME’s in Indonesia had an online presence. This has risen to 44% since. So, the pandemic accelerated the progress but there is still considerable room for improvement.
Micro- and small enterprises are especially reluctant to join online marketplaces. They experience technological barriers. And they are not fully convinced by the benefits of being online and are concerned that fees might deter customers and getting taxed could lower their profit margins.
To stand a fair chance to compete with large players, smaller businesses also need better terms from manufacturers, vendors, and distributors.
Fintechs are particularly well placed to respond to these issues. It is important that fintech firms and digital platforms provide tailored solutions for micro and small businesses. These include back-office support and digital and financial literacy training.
It is also important that these businesses are provided with financial services that truly meet their needs, not only payments and working capital credit, but also equity, long-term loans, savings, and insurance. Their increasing digital data footprint can help with this.
Governments have a strong role to play in developing a vision on the future of the digital world: what the standards should be, and what underlying infrastructure is needed.
Standardizing technology offers small businesses the opportunity to take a giant leap. A good example is the QR Code Indonesian Standard, launched in 2019.
Public investment is needed to build a reliable digital financial infrastructure, such as digital identification systems and mobile connectivity.
And then there is an ever-stronger need for consumer and user protection. The spread of digital currencies and super apps will heighten the risks to data security, privacy, and fair and sustainable credit terms. We must watch for predatory lending, high-risk trading in cryptocurrencies and algorithm biases.
Regulators have a pivotal role here. They should be ahead of the curve in approaching technological advancements while closely monitoring the risks. This could be done in close coordination with strong fintech associations like you have here in Indonesia. And also by engaging with other regulators, be it on data privacy or security, telecommunications, and others.
I am confident that Indonesia will continue making great strides to advance financial and economic inclusion. Fintech innovations can be of great help, if we use them safely and sensibly, always keeping the user interests in mind.
Our common goal is faster economic recovery that improves the lives of all. That is the focus of this summit.
Thank you very much.