Expanding the benefits of a growing digital economy in Indonesia and India

Two new companies join Mastercard and Accion to leverage digital transformation to unlock economic opportunities for small and medium enterprises

The world’s largest archipelago, Indonesia is an extraordinarily diverse and culturally rich country that spans across 17,000 islands in the Asia-Pacific region. The country is one of the fastest growing economies today — in part, because of digitization. Its digital economy is predicted to more than triple to US $133 billion by 2025.

Yet, despite the rapid growth, half of Indonesia’s adult population is still unbanked, and the majority of its 64 million micro-enterprises, like rice mill owner Ibu Oom, have been financially excluded. This has forced many micro-enterprises to borrow from family and friends or via informal money lenders, which often results in high interest rates and potential overindebtedness. Several large state-owned banks, private banks, microfinance companies, and more recently, fintechs, have begun addressing the needs of this market.

As part of Mastercard and Accion’s partnership, we’re excited to partner with Bina Artha Ventura (BAV), a leading financial service provider determined to bridge the gap between Indonesia’s formal and informal financial sectors. Established in 2011, BAV serves more than 300,000 clients through an extensive network of 330 branches across peri-urban and rural regions of Java and Sulawesi. BAV supports micro-entrepreneurs, the majority of whom are women, with affordable group and individual lending products to empower them with the economic means to grow their businesses and improve their financial well-being.

Ibu Oom owns a rice mill with her family in the village of Majalaya, West Java. She joined BAV’s Joint Liability Group in 2017 to access working capital to purchase more unhusked rice to be milled. She told us, “I managed to increase the amount of unhusked rice to be milled every week and witnessed a positive growth in my family’s rice milling business.” In the future, she hopes that her loan amount will increase and that she will have more information about the market so that she can expand her business.
Ibu Oom owns a rice mill with her family in the village of Majalaya, West Java. She joined BAV’s Joint Liability Group in 2017 to access working capital to purchase more unhusked rice to be milled. She told us, “I managed to increase the amount of unhusked rice to be milled every week and witnessed a positive growth in my family’s rice milling business.” In the future, she hopes that her loan amount will increase and that she will have more information about the market so that she can expand her business.

Through its digital transformation initiatives, BAV aims to better serve its customers by lowering costs, delivering credit faster, and reaching even more clients across the country — all while ensuring the right balance between technology and human touch. Accion will support BAV to develop responsibly designed financial products and business management services to help Ibu Oom and other microentrepreneurs across Indonesia run better, buy better, and sell better.

PT Bina Artha Ventura is proud of its history bringing much needed financial services across Indonesia. As the landscape in Indonesia is changing and digital tools are more accessible to all, we have embarked upon a digital transformation, with the support of Accion under the Mastercard/Accion partnership, to serve our clients more efficiently and help them succeed in their own businesses.
Raghavender Anand, CEO, BAV

Like Indonesia, India has a vibrant digital economy, driven by an increase in the accessibility and affordability of smartphones and high-speed internet connectivity. India ranks among the highest in the world in digital adoption. The government’s effort to ramp up Aadhaar, the national biometric digital identity program, has played a significant role. India is second only to China in app downloads, wireless subscriptions, and smartphone device ownership. And 80 percent of Indian adults have at least one digital financial account, compared to just 40 percent in 2011.

Even with significant advances in building a digital financial ecosystem, India still has room to grow. Despite high digital account ownership, more than 90 percent of all retail transactions are done in cash. Relying on cash leaves small business owners without the financial records they need to apply for credit and manage their business, limiting their ability to grow. Some entrepreneurs, such as Mohammad Ishaque, a clothing vendor in Odisha, have started to experiment with digital payment solutions, but still rely extensively on cash for day-to-day transactions.

Since 2005, Accion has been supporting partners in India, including BASIX Sub-K, another partner in our work with Mastercard. Given the scale of the opportunity in India, we’re excited to partner with Annapurna Finance Pvt. Ltd. Headquartered in Bhubaneswar, the capital of the East Indian state of Odisha, Annapurna Finance was established to serve clients in eastern India who would otherwise lack access to high-quality financial services. Through its products and outreach, Annapurna Finance also provides financial and technical support to their clients to strengthen their entrepreneurial skills.

Mohammed Ishaqe and his brother run five clothing stores in the busy market area of Khurda. To know which products to stock, he follows the latest trends in the market. He currently has two loans from Annapurna Finance and another bank, which he used for purchasing items for his businesses from Kolkata. He accepts digital payments and uses a handwritten book for sales and purchase records. He is satisfied with the growth he and his family have achieved with the business and hopes to expand his businesses further in the future.
Mohammed Ishaqe and his brother run five clothing stores in the busy market area of Khurda. To know which products to stock, he follows the latest trends in the market. He currently has two loans from Annapurna Finance and another bank, which he used for purchasing items for his businesses from Kolkata. He accepts digital payments and uses a handwritten book for sales and purchase records. He is satisfied with the growth he and his family have achieved with the business and hopes to expand his businesses further in the future.
Annapurna Finance has been associated with Accion since its early transformation into an NBFC-MFI. At this juncture, we have partnered once again with an objective to bring a digital transformation in the company’s services and in the lives of our clients. We are hopeful that this association will strengthen our efforts towards the vision of serving underprivileged people in joining the digital journey of the financial inclusion landscape.
Dibyajyoti Pattanaik, Director, Annapurna Finance

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