Bank Indonesia,s Deputy Governor Dody Budi Waluyo in closing ceremony of ISEF2018 in Surabaya, East Java (12/15) - Photo by Bank Indonesia

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) is preparing remittance provisions with funds to end up in domestic banks, said one official last week. The main object of this provision is Indonesian migrant workers and their families.

Head at BI Pungky Wibowo said, later all remittance funds must end up in savings accounts and through the National Payment Gate (NPG). This also opens the opportunity for the financial technology (FinTech) industry who run a remittance business to work with banks.

“The main goal is to cut costs of remittances so they will be cheaper and more efficient, we really want to synergize the financial industry inclusion,” he added.

The aim of this FinTech and banking industry collaboration is to reach the 75 percent financial inclusion target by 2019. At the end of 2017, the figure had only reached 49 percent.

According to data from the central bank, Indonesian migrant workers and their families still use remittance fund transfer services in cash. About seven percent of remittances are even entrusted to people who return home.

He acknowledged that the remittance data had not been recorded properly, so the potential could be even greater. Moreover, BI Deputy Governor Sugeng, said that the remittances from Indonesian migrant workers generated large foreign exchange earnings reaching US$8.8 billion, or equivalent to one percent of GDP.

So if it can be increased fourfold, it will significantly affect the current account deficit (CAD).

“Even though 62 percent of the remittance system has been run in non-cash, 30 percent of the remittance funds are still not entered into the account so that it is withdrawn in cash entirely,” He stated.

Indonesia’s remittance costs are also still relatively high compared to other countries, which is around 7.8 percent. However, BI strongly believes banks and FinTech can collaborate to reduce these costs to less than five percent.

The initiative to strengthen remittances has been initiated by the Bank since the beginning of 2017. One way is to optimize Digital Financial Services agents to provide financial services to communities in all parts of Indonesia.

Written by Staff Editor, Email: theinsiderstories@gmail.com