The Asian Development Bank (ADB) said on Wednesday that it has approved $500 million in policy-based loans to support Indonesia's efforts to expand the financial access for micro-, small, and medium-sized enterprises and marginalized groups such as women and youth.

The Manila-based bank said the Promoting Innovative Financial Inclusion Program will help the Indonesian government better target and track financial inclusion, improve the payments infrastructure, and strengthen the regulatory framework for digital financial services, data privacy, consumer protection, and financial literacy.

"The program's reforms support policy and technology enablers to foster innovations and boost financial inclusion by providing access to formal financial products and services, improving their quality, and increasing their use by financially underserved populations," said ADB Financial Sector Specialist for Southeast Asia Poornima Jayawardana. 

"Financial inclusion will play an important role in Indonesia's recovery from the coronavirus disease (COVID-19) pandemic. More equitable, efficient access to financial products and services will support government measures to mitigate the pandemic's economic and social impacts, rebuild livelihoods, and prepare for future economic shocks," she added.

Indonesia's official data showed the percentage of Indonesian adults with a bank account rose from 35 percent in 2016 to 56 percent in 2018. However, in this regard, Indonesia still lags behind neighbors such as Malaysia and Thailand.

The ADB said providing financial services to all is challenging in a country as geographically and culturally diverse as Indonesia, and significant disparities remain in access to a range of financial products among regions and population groups.

Further, financial vulnerabilities are worsened by the COVID-19 pandemic, as those without access to financial services also tend to lack savings or credit to weather the economic downturn, said the bank. 

The ADB said its program supports the Indonesian government's goal of increasing the number of Indonesians using financial products or services offered by formal financial institutions to 90 percent by 2022, up from 76 percent in 2019.

The bank has been supporting financial inclusion in Indonesia through lending and technical assistance since 2002. Established in 1966, it is owned by 68 members – 49 from Asia and the Pacific, committing to achieve a prosperous, inclusive, resilient, and sustainable region.

(With input from Xinhua)

(Cover via CFP)