Indonesia launches Guiding Principles for Branchless Banking

It's been apparent for many years that Indonesia is a market well suited to use Branchless Banking and Mobile Money to extend financial services. It has difficult geography, an enormous population and relatively low levels of financial inclusion, but a thriving mobile sector. Until today, mobile money or branchless banking services have seen only limited uptake, in large part because of regulatory obstacles. In recent months, the Central Bank (Bank Indonesia) removed some requirements regarding cash-out for mobile money, but this week it took a further step by releasing Guiding Principles for Branchless Banking.

These Principles are not a full authorisation for banks to use agents to extend services; instead Bank Indonesia will authorise a limited number of banks to conduct services through agents in pilot areas during 2013.  These agents will be known as "UPLK"s (Unit Perantara Layanan Keuangan) or Financial Intermediary Service Units.  The guidelines will allow certain activities to take place in Bank-Led, Telco-Led and "Hybrid" models and will allow pilots in eight provinces (South Sumatra, North Sumatra, West Java, Central Java, East Java, Bali, East Kalimantan and South Sulawesi).

Compared to many markets where Branchless Banking has taken off, Bank Indonesia is a more cautious and active regulator, and so intends to use these pilots to better understand regulatory and implementation issues in Indonesia before fully authorising any pilot activity. While widespread roll-out of branchless banking or mobile money is still some way off, this is still a significant step towards providing financial services for some 100 million people who are currently excluded.

You can download the official release from the BI Website (in Bahasa).
An unofficial translation is available here. Note that this translation has been updated on 16 May 2013.

Michael Joyce is a policy advisor working with the Government of Indonesia on mobile money and financial inclusion. He has been working on mobile money in Asia for five years, specialising in risk, regulation and operations. The views on this blog are his own and do not represent the views of the Government of Indonesia or constitute legal advice.