Digitalisation of finance gaining ground: KfW supports Indonesia with EUR 200 million

• Improved access to financial services for Indonesian companies, individuals and rural areas
• Alleviating the effects of the coronavirus pandemic
• Finding innovative solutions: establishing a new innovation lab

On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), KfW is promoting digitalisation in Indonesia’s financial sector with a promotional loan of EUR 200 million. Under the Promoting Innovative Financial Inclusion Program (PIFIP), micro, small and medium-sized enterprises and large parts of the rural population are being given better access to financial services through structural reform measures. Measures include the introduction of an electronic identification system (e-KYC) for opening a bank account, electronic transfers and assessments of creditworthiness, money laundering prevention and consumer protection.

“The support for reforms in the Indonesian financial sector is extremely important to further develop Indonesian solutions for the national challenge of the country’s digitalisation process. It creates the opportunity for small and medium-sized enterprises to access credit more easily and to expand their businesses. This will boost growth, create jobs and thus also alleviate the impact of the COVID-19 pandemic. We are therefore supporting Indonesia in its efforts to further develop its path to digitalisation,” says Dr Günther Bräunig, Chief Executive Officer of KfW Group.

Emphasis will be placed on improving access to financial services for young people and women, with only 2% and 18% respectively having access to loans from the regular financial market. They are also particularly hard hit by the effects of the COVID-19 pandemic. Digitalisation also improves oversight of the banks’ risks and provides more effective consumer protection in terms of preventing household debt.

Furthermore, the establishment of an innovation lab is planned, which is intended to create incentives for fintech start-ups, universities etc. to develop innovative solutions through nationwide competitions. The Asian Development Bank (ADB) is also financing the Indonesian reform approach in this first phase with around USD 500 million and is main financier of PIFIP.

More information on KfW Development Bank is available at: www.kfw-entwicklungsbank.de/en