Indonesia's Financial Inclusion Success Hides Deep Struggles for Small Businesses

The findings revealed serious financial challenges affecting both business owners and employees, with only 43 per cent of workers receiving wages in at least eight of the ten months observed during the research.

For many small business owners in Indonesia, having a bank account or access to loans does not guarantee enough money to pay workers, manage business expenses or support their families during difficult months. A year-long Small Firm Diaries study, which followed 162 small businesses across four locations, found that nearly two-thirds had financial accounts and more than half had loans, revealing a troubling gap between financial access and everyday financial security. Raunak Kapoor of MicroSave Consulting described most participating businesses as "financially stressed, not healthy," reflecting the difficulties owners continue to face despite their growing connection to formal financial services.

The findings revealed serious financial challenges affecting both business owners and employees, with only 43 per cent of workers receiving wages in at least eight of the ten months observed during the research. Half of the businesses had no alternative income source, leaving their owners particularly vulnerable to falling sales, unexpected expenses and interruptions in daily operations. Financial hardship also reached households, as 44 per cent reported struggling to afford food and other necessities, and 16 per cent said a child had not eaten enough during the previous week.

These concerns became a central topic at the Financial Health Pathways Forum, held in Jakarta on 15 October 2026, where around 300 representatives from government institutions, employers' and workers' organizations, financial institutions, development partners and academia discussed ways to improve financial security. The International Labour Organization's (ILO) organized event Promoting Micro and Small Enterprises through Entrepreneurs' Access to Financial Services Phase 2 project, funded by the Swiss State Secretariat for Economic Affairs (SECO). Discussions focused on helping Indonesia move beyond providing financial services to creating conditions that allow workers, families and businesses to manage financial pressures, prepare for emergencies and build more secure futures.

Financial Inclusion Growth Leaves Many Families Financially Vulnerable

Indonesia has made considerable progress in expanding financial inclusion, with more than 93 per cent of the population now having access to formal financial services, though financial literacy remains around 67 to 70 per cent. Nancy Widjaja, Senior Advisor at the Office of the UN Secretary-General's Special Advocate for Financial Health, explained that using QRIS digital payments regularly or maintaining several bank accounts does not necessarily mean someone has enough savings to handle an emergency. Many individuals remain dependent on expensive borrowing when unexpected expenses arise, making financial resilience a growing concern despite improvements in access to banking and digital payment services.

Widjaja emphasised measuring financial well-being through practical indicators such as emergency savings, responsible debt management and the ability to meet regular financial obligations without falling into hardship. A financially healthy household should have the resources and confidence to manage everyday expenses, recover from unexpected financial shocks and make plans for future needs without constantly worrying about running out of money. Her message encouraged policymakers and financial institutions to look beyond account ownership statistics and examine whether available services improve people's financial security and control over their lives.

Reliable Wages and Flexible Loans Are Essential for Small Businesses

Yousra Hamed, ILO Senior Financial Inclusion Specialist, highlighted that financial security begins with decent employment conditions, including adequate wages paid fully and on time, rather than simply access to financial products. Workers need dependable earnings and social protection to meet household expenses, build savings and avoid harmful borrowing practices during periods of financial difficulty. For families depending on irregular wages or unpredictable business income, these protections provide an essential foundation for financial stability and make it easier to benefit from savings accounts, loans and other financial services.

The Small Firm Diaries research also found that many businesses faced cash shortages because fixed loan repayment schedules did not match their inventory purchases, supplier payment arrangements and sales cycles. These mismatches created additional pressure on business owners already struggling to maintain sufficient working capital, making financial products designed around actual business needs increasingly important. Around 70 per cent of participating businesses identified stability rather than growth as their main priority, showing that many entrepreneurs were more concerned about keeping their operations running and paying employees than expanding into new markets.

Indonesia Strengthens Efforts to Build Financial Resilience

Erdiriyo of Indonesia's Coordinating Ministry for Economic Affairs outlined an emerging financial well-being approach built around four priorities: meeting daily financial needs, recovering from unexpected shocks, preparing for long-term goals and using financial services safely and confidently. The Financial Services Authority (OJK) is piloting a financial well-being baseline assessment among poor and extremely poor communities in three villages to better understand their financial challenges and identify areas requiring greater support. Bank Indonesia has developed financial education approaches for low-income communities, recognizing the importance of helping people understand financial products, manage borrowing and make informed financial decisions.

Rosita Dewi of Bank Indonesia emphasized that improving financial well-being requires coordinated action from government agencies, financial regulators, businesses, workers' organizations and financial service providers rather than depending on one institution. Greater cooperation can strengthen financial literacy, consumer protection, access to suitable financial products and social protection systems that help workers and small enterprises withstand economic pressures. Indonesia's next measure of financial progress will depend on whether families can afford essential needs without harmful debt, workers can rely on regular wages, and small businesses can survive unexpected setbacks without putting their livelihoods at risk.