ADB approves $500m loan to further promote financial inclusion in Indonesia

The second subprogram of the Promoting Innovative Financial Inclusion Program supports and complements the government's efforts to promote financial inclusion under Indonesia Vision 2045.

The Asian Development Bank (ADB) has approved a $500 million loan to further promote financial inclusion in Indonesia through reforms that will enhance access to financial services for vulnerable groups, most notably micro, small, and medium-sized enterprises (MSMEs); women; youth; and those living in rural areas.

The second subprogram of the Promoting Innovative Financial Inclusion Program supports and complements the government's efforts to promote financial inclusion under Indonesia Vision 2045. Reforms promoted under the subprogram are anchored on digital infrastructure, financial technology, and private sector collaboration, along with an enhanced regulatory framework to supervise market conduct and consumer protection. Efforts to build up financial and digital financial literacy will also be intensified to promote responsible financial inclusion.

“The reforms undertaken through the subprogram will help boost living standards of low-income populations, encourage the development of MSMEs, bring in more employment opportunities, and address poverty and social inequality,” said ADB Financial Sector Specialist for Southeast Asia Poornima Jayawardana. “The country’s efforts to achieve climate and disaster resilience and post-COVID-19 economic recovery will also be supported through this subprogram.”

KfW, the German state-owned development bank, will cofinance the subprogram with a loan equivalent of €300 million ($301.3 million).

Indonesia has the fourth-largest unbanked population in the world. Close to half of its adult population does not have a formal financial account, which is considered the basic measure of financial inclusion. Indonesia faces a lack of national and regional financial inclusion data and supporting infrastructure; limited access to finance for MSMEs and other underserved groups; and inadequate financial supervision, consumer protection, and financial literacy. The second subprogram reforms support the Indonesian government’s continued focus on addressing these multi-faceted challenges to financial inclusion.