Abstract
Branchless Banking is one of the programs of Indonesia's financial inclusion strategy. The programs' name is "Financial Service Without Office in the Framework of Inclusive Financial" which called “Laku Pandai.” This study aims to portrait the implementation of the Branchless Banking program concerning the obstacles that occurred to achieve program objectives. The research conducted using qualitative methods. The existence of Branchless Banking agents close to the community has fulfilled the program objective, to make an easy way for society to do financial transactions without having to go to the bank office. Therefore, the implementation of the Branchless Banking program met the criteria for eliminating non-price barriers in financial services in remote areas. However, delegation authority to the agent as an extension of the bank to provide limited financial services has encouraged agents to engage in moral hazard behaviors by charging the tariff that greater than the official rate set by the managing bank. It showed that the agent has taken the consumer surplus provided by the Branchless Banking technology. Although accepted by society since considerably cheaper than the fee to go to the nearest bank office, that condition becomes a price barrier for the future development of Branchless Banking.
Highlights
1.1 Financial Inclusion and Branchless BankingFinancial inclusion is a process that encourages ownership of bank accounts by each household and offers their participation in the banking system
This study aims to portrait the implementation of the Branchless Banking program concerning the obstacles that occurred to achieve program objectives
The implementation of the Branchless Banking program met the criteria for eliminating non-price barriers in financial services in remote areas
Summary
1.1 Financial Inclusion and Branchless BankingFinancial inclusion is a process that encourages ownership of bank accounts by each household and offers their participation in the banking system. Its vision is to create a financial system accessible to all levels of society to promote economic growth, poverty alleviation, equity distribution, and the creation of financial stability. SNKI has six pillars: 1) Financial Education, 2) Public Financial Facilities, 3) Mapping Financial Information, 4) Supporting Policies/Regulations, 5) Intermediary and Distribution Facilities, and 6) Protection Consumer (Bank Indonesia [BI], 2019). Branchless banking is a program included in the fifth pillar, Intermediary, and Distribution Facilities. It aims to increase awareness of financial institutions about the existence of potential segments in society and expand the reach of financial services using alternative distribution methods. The Consultative Group to Assist the Poor (CGAP), a global partnership with 34 world-leading organizations striving to improve Financial Inclusion define Branchless Banking as financial services outside conventional bank branches using communication and information technology, agents, and card-based networks or by using cell phones (Pickens et al, 2009)
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