BANDA ACEH (ILO News) – The International Labour Organization (ILO), in collaboration with the Financial Services Authority (OJK), are launching the key findings of their latest study on the mapping digital financial services for rural bank and sharia rural bank (BPR/BPRS) today (10/8) in Banda Aceh. This joint study is part of the acceleration of the digital transformation of BPR/BPRS as one of the four pillars described in the OJK's Roadmap for Development of BPR/BPRS 2021-2025

Using a mixed method research combining desk research, focus group discussions (FDGs) and survey, the study covers a total of 865 BPR and 77 BPRS. The study aims to examine the development trend of digital financial services in banking sector, review the current situation of digitalization in BPR and BPRS, including opportunities, gaps and challenges and identify digital financial services adaptable for BPR/BPRS.

The study reveals two main challenges faced by BPR/BPRS within their internal process to embark on digitalization: the high cost associated with an investment in technology infrastructure and the lack of knowledge on internal human resources in adapting to the technology. However, despite these challenges, the study also finds strong reasons to start formulating a suitable digital transformation strategy for the BPR/BPRS, such as the high opportunity to gain new business and stiffer competition in the banking sector.

In addition, the study highlights inter-institutional cooperation as a potential solution to foster digital transformation for BPR/BRPS through a partnership with technology companies or commercial banks that have already collaborated with BPR in digital payment transactions. Such collaboration will make digital transformation more accessible and efficient and is particularly important as the study shows that the cooperation of BPR/BPRS with technology companies and commercial banks is still below 28 percent.

Djauhari Sitorus, ILO’s Project Manager for Improving Entrepreneurs’ Access to Financial Services (Promise II Impact), stated that BPR and BPRS have a distinct position to contribute to local economic development by providing more accessible, lower cost and easier financial services to their clients, particularly micro and small enterprises (SMEs). "A rapid development of digital technology in recent years provides an opportunity for much easier and broader access to financial services which could benefit the SMEs to have faster approval of credits, more convenient ways in making payments to customers and suppliers and lower financial transactions cost in general. Thus, results of the study are expected to contribute to a formulation of conducive regulatory and policy frameworks," he said.

Sotarduga Napitupulu, Coordinator for Eastern Region at the Deputy Commissioner of Regional OJK Office, said that OJK will continue to support the implementation of digital technology that enhances the performance of BPR/BPRS. “As the regulatory and supervisory body of BPR, OJK appreciates the support given by the ILO through the joint study that would support the acceleration of digital transformation of BPR/BPRS. This is in line with our Digital Transformation Blueprint for Banking and the Roadmap for BPR and BPRS Development 2021-2025,” he stated. In addition, OJK supports if there are follow-up studies and expansion of the ILO’s intervention areas to improve SMEs’ ecosystems in the potential areas in Indonesia.

The launch event is attended by directors of BPR/BPRS in Aceh and North Sumatra provinces, non-bank financial institutions, regional government officials and a representative of Dewan Atrisi Indonesia (Essential Oil Council). In addition to the dissemination of key findings, the event also facilitated dialogues between SMEs, financial institutions and regulators to support and strengthen the value chain ecosystem in the priority economic sector in the Aceh province.

The ILO’s Promise II Impact, funded by the State Secretariat for Economic Affairs (SECO), aims to strengthen an enabling environment for an inclusive financial sector for SMEs that lead to economic growth and improved employment opportunities, particularly in the post-pandemic situation. The project also supports the priority of the Indonesian government to promote the digital economy as well as be aligned with the government's post-pandemic economic recovery policies and programs on fostering digital transformation and increasing financial inclusion, including the financing of SMEs.

For further information, please contact:

Tomas Sugiono
ILO's National Coordinator of Promise II Impact
Email: sugiono@ilo.org