Princess Máxima of the Netherlands visited Indonesia and Malaysia last week to discuss the issue of financial inclusion ahead of the next G20 summit.
Dipo Alam, Cabinet Secretary of the Second United Cabinet of the Republic of Indonesia, reports from Jakarta for RNW's Indonesia desk. The opinions expressed are his own.
Indonesian President Susilo Bambang Yudhoyono received a courtesy call from Princess Máxima of the Netherlands last week, in her capacity as the UN Special Advocate for Inclusive Finance for Development and also Honorary Patron of the G20 Global Partnership for Financial Inclusion. She had been asked to look at microcredit schemes in Indonesia and the success and further potential in empowering the poor with financial accessibility.
This was her first visit to Jakarta and, prior to meeting the president, she had met with many economic actors and relevant economic ministers, including a dinner dialogue with economic and financial stakeholders at the residence of the Dutch ambassador.
Princess Máxima noted the leadership role of Indonesia in promoting microfinance and fostering equality of growth, particularly the KUR (Peoples Business Credit) that has reached $7.4 billion since 2007 and disbursed more than 5.56 million SMEs. She congratulated the president for his leadership in promoting financial inclusion for the poor at the national and provincial level as well as at the regional and global level.
Reports from the Ministry of Cooperatives and Small Medium Enterprises indicate that the number of small medium enterprises (SMEs) in Indonesia reached 53.2 million units in 2011, creating 91 million jobs. During the economic crisis in 1998, when many major creditors defaulted, Indonesian micro, small and medium enterprises survived and served as the backbone of the Indonesian economy at that time. Today, the MSMEs continue to thrive with only 2% unable to pay off their loans.
Although the government was hailed for being prudent, the UN Special Advocate was of the opinion that Indonesia, like many developing countries, could further boost financial literacy and accessibility. More efforts could be considered in empowering 50% of the population to be financially more literate and providing increased access to financial services. This could include more widespread mobile banking, given that Indonesians are more exposed to mobile phones and the country would be more accessible by such communications infrastructure. President Yudhoyono was in agreement about the importance of greater financial literacy and participation. Many Indonesians prefer to keep their money underneath their pillows, a habit still practiced in many places worldwide.
Princess Máxima welcomed the finalisation of Indonesia's National Strategy for Financial Inclusion, which is expected to be launched late this year. Its goals are to increase public access to financial services for all layers of the population, identifying best practices in providing access to people's business credit and micro loans.
Last year, as chair of ASEAN, Indonesia promoted a regional economic framework that reflects the G20 principles for Innovative Financial Inclusion. With the adoption of an ASEAN Framework on Equitable Economic Development, member countries can foster regional economic integration to help alleviate poverty and narrow the development gap. Princess Máxima applauded Indonesia's role in this field through other forums such as the Developing-8 and the UN.
Despite continued emphasis by the emerging economies of G20, the global instability caused by subprime mortgages in 2008 and now the Eurozone crisis has continued to dominate G20 discussions. President Yudhoyono, however, emphasized that the issue of financial inclusion is just as important as financial regulatory reform. Indonesia has been a strong proponent of addressing the practical needs of the developing world and the poor at both the Toronto and Seoul Summits.
Lessons of the crisis
More entrepreneurs need to be fostered to contribute to economic recovery and our experience during the 1998 crisis demonstrates that all economic actors can play an equally important role in safeguarding national economies from global shocks. Indonesia's significant market and strong domestic consumption has not only promoted the growth of the domestic economy but also buffered the country from external shocks, maintaining growth of 6-7% even since the onset of global crisis in 2008.
In the meantime, both the president and Princess Máxima remain committed to continue working together to promote financial inclusion and microfinancing at the domestic level and the international level. Both have agreed to continue to promote the issue at the upcoming G20 Summit in Los Cabos, Mexico in June 2012. Indonesia is committed to continue this momentum by promoting inclusive growth and financial inclusion during its chairmanship of APEC in 2013, in Bali.
Wherever the global economy turns, we should remind all policy makers that everyone, even the poor, can contribute to growth and prosperity. This is something Indonesia, under any administration, will continue to do.