Policy Paper No.

49
Creating Informed Consumers:
Tracking Financial Literacy
Programs in Indonesia
by Ajisatria Suleiman, Thomas Dewaranu & Noor Halimah Anjani
2
With the support of:

This publication was prepared with the support of the “Consumer Protection in
ASEAN” (PROTECT) project, which is implemented by the Deutsche Gesellschaft für
Internationale Zusammenarbeit (GIZ) GmbH and funded by the Federal Ministry for
Economic Cooperation and Development (BMZ) of Germany.

Copy Editor:
Janet Bufton

Cover:
freepik.com/mindandi
 Policy Paper No. 49
Creating Informed Consumers:
Tracking Financial Literacy Programs in Indonesia

Authors:
Ajisatria Suleiman, Thomas Dewaranu & Noor Halimah Anjani
Center for Indonesian Policy Studies (CIPS)

Jakarta, Indonesia
March, 2022

Copyrights © 2022 by Center for Indonesian Policy Studies

4
CONTENT

Glossary............................................................................................................... 7
Executive Sumary............................................................................................... 10
Financial Literacy Landscape in Indonesia......................................................... 11
Regulatory Frameworks.................................................................................... 16
Tracking Financial Literacy and Education Programs Carried Out by
Financial Service Providers.............................................................................. 19
Methods for Delivering Financial Education............................................... 23
Implementation of Financial Education by Units in the Financial
Services Institution........................................................................................ 25
Tracking Financial Literacy and Education Programs Driven by OJK.... 27
Financial Literacy as a Response to Major Consumer Complaints.............. 32
Financial Literacy on Digital Peer-To-Peer Lending................................... 32
Personal data access.............................................................................. 33
Product legality........................................................................................ 34
Interest rates........................................................................................... 34
Case Study: Public Financial Literacy on Unit Link Products.................... 35
Fraudulent Investment Products.................................................................. 36
Conclusion and Policy Recommendations....................................................... 39
References........................................................................................................... 41
Appendix.............................................................................................................. 44

5
 List of Tables
Table 1. List of the Regulatory Framework related to Financial Literacy..... 16
Table 2. Financial Literacy Program by Year.................................................... 20
Table 3. Further Breakdown of Financial Literacy Program by Year............. 21
Table 4. Further Breakdown of Financial Literacy Program by
Target Group........................................................................................................ 22
Table 5. OJK Initiatives for Financial Education and Consumer Protection.. 29
Table 6. List of Unregistered Investments and Not Under OJK
Supervision (2018 – 2020)................................................................................. 37

List of Figures
Figure 1. Comparison of Financial Literacy and Financial Inclusion
in 2016 and 2019 (%).................................................................................. 12
Figure 2. Comparison of Financial Literacy and Inclusion between Urban
and Rural in 2019 (%)......................................................................................... 13
Figure 3. Financial Literacy Indices of Financial Services Sectors in
2016 and 2019 (%).............................................................................................. 13
Figure 4. Example of an Organizational Structure for Implementing
Financial Education and Literacy...................................................................... 26
Figure 5. Illustration of RIPLAY Delivery to Customers.................................. 28
Figure 6. Official Complaints Received by OJK
(January 2015–May 2020)................................................................................ 33

List of Pictures
Picture 1. OJK Gaming Apps Aimed at Children and Students................. 28
Picture 2. OJK’s financial literacy car, Si Mobil Literasi Edukasi
Keuangan.................................................................................................... 30

6
GLOSSARY

ADB:
Asian Development Bank

AFPI:
The Indonesian Joint Funding Fintech Association (Asosiasi Fintech Pendanaan Bersama Indonesia)

AFTECH:
The Indonesian Fintech Association (Asosiasi Fintech Indonesia)

BI:
Central Bank of Indonesia (Bank Indonesia)

BKPM:
Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal)

CMEA:
Coordinating Ministry of Economic Affairs

Data Link:
Financial Literacy and Financial Inclusion Data (Data Literasi Keuangan dan Inklusi Keuangan)

DNKI:
National Council for Inclusive Finance (Dewan Nasional Keuangan Inklusif)

FINRA:
Financial Industry Regulatory Authority

FSI:
Financial Services Institutions (refers to businesses/companies working on the financial services
sector)

HIMPAUDI :
Association of Indonesian Early Childhood Educators and Education Personnel (Himpunan
Pendidik Dan Tenaga Kependidikan Anak Usia Dini Indonesia)

IKD:
Digital Financial Innovation (Inovasi Keuangan Digital)

KSEI:
Indonesian Central Securities Depository (Kustodian Sentral Efek Indonesia)

KSP:
Saving and Loan Cooperative (Koperasi Simpan Pinjam)

7
 MOCI:
Ministry of Communications and Informatics

MOCSME:
Ministry of Cooperatives and Small and Medium Enterprises

MOF:
Ministry of Finance

MORA:
Ministry of Religious Affairs

NPWP:
Taxpayer Identification Number (Nomor Pokok Wajib Pajak)

OECD:
Organization for Economic Co-operation and Development

OJK:
Financial Authority Services (Otoritas Jasa Keuangan)

P2P Lending:
Peer-to-Peer Lending

PMI:
Indonesian Migrant Workers (Pekerja Migran Indonesia)

PT:
Limited Liability Company

PUJK:
Financial Services Business Actors (Pelaku Usaha Jasa Keuangan)

RIPLAY:
Product and Service Information Summary Standard Guidelines (Ringkasan Informasi Produk dan
Layanan Sektor Jasa Keuangan)

SiPEDULI:
Consumer Education and Protection Reporting Information System (Sistem Informasi Pelaporan
Edukasi dan Perlindungan Konsumen)

SIUP:
Business License (Surat Izin Usaha Perdagangan)

SNLKI :
National Strategy for Indonesian Financial Literacy (Strategi Nasional Literasi Keuangan Indonesia)

8
SWI:
Investment Alert Task Force (Satgas Waspada Investasi)

TDP:
Company Registration Certificate (Tanda Daftar Perusahaan)

TOT:
Training of Trainers

TPAKD:
Regional Financial Access Acceleration Team (Tim Percepatan Akses Keuangan Daerah)

YLBHI:
The Indonesian Legal Aid Foundation (Yayasan Lembaga Bantuan Hukum Indonesia)

9
 EXECUTIVE SUMMARY

Not all financial consumers are equipped with the necessary knowledge of the products and
services that they are using. A wide gap exists between the level of financial inclusion (76.19%)
and financial literacy (38.03%) in Indonesia. Low level of financial literacy could lead consumers
to make poorly-informed financial decisions, incur too much debt, or even fall victim to illicit
investment products. In the long run, these problems may damage consumer trust in financial
services, which could hamper growth in the financial sector.

In addition to organizing various financial literacy programs, Indonesia’s Financial Authority

Services (Otoritas Jasa Keuangan, or OJK) has mandated financial services institutions (FSIs)
to run at least one initiative to improve financial literacy and one initiative to improve financial
inclusion every year.1 This has significantly increased the number of literacy programs in
Indonesia.

Programs from both OJK and FSIs have contributed to increasing financial literacy in Indonesia,
but overall levels of financial literacy remain relatively low (OJK, 2019) compared to the level
of financial inclusion. Efforts by FSIs to improve financial literacy through product-related
information, the introduction of new products and services, and reducing barriers to entry for
some financial products are often omitted when discussing about efforts to increase financial
literacy. However, despite the risk, they can positively contribute to increase user’s financial
understanding. Regulators could therefore explore the potentials of this approach, with emphasis
on ensuring that consumers understand the products that they are buying.

Financial literacy gaps, such as those between urban and rural populations, also need further
attention from both OJK and FSIs. In the long run, mandatory reporting and the national repository
of financial education programs maintained by OJK should be treated not as a mere formal
requirement, but as a useful tool to improve the quality and benefits of financial literacy.

OJK and FSIs must create and implement comprehensive and systematic evaluation methods for
their programs and establish which have the largest benefits and are most cost effective as they
seek to address these challenges.

1
This mandate was established by OJK Circular Letter (SEOJK) No. 30/SEOJK.07/2017 on the Implementation of Activities to
Improve Financial Literacy in the Financial Services Sector and SEOJK No. 31/SEOJK.07/2017 on the Implementation of Activities
to Increase Financial Inclusion in the Financial Services Sector.

10
FINANCIAL LITERACY LANDSCAPE IN INDONESIA

Increasing financial inclusion and financial literacy is a top priority for the Indonesian government.
The government believes that financial inclusion and financial literacy will help improve financial
system stability, improve public welfare, and promote inclusive development.

Inclusive access to financial services is essential for economic growth and poverty reduction
(Chao et al., 2021). Financial inclusion refers to the ability to access financial institutions,
products, and services that meet the needs and capabilities of a community in order to improve
its welfare (OJK, 2019). Full financial inclusion is when all segments of the population are able
to use the products and services of formal financial institutions for saving, investing, insurance,
and other benefits.

The focus of financial literacy content varies across countries and regions. The Financial Industry
Regulatory Authority in the United States focuses financial literacy on areas such as retirement
planning. In Indonesia, concerns are different—for example, addressing over-indebtedness and
predatory lending that has caused social unrest.

The Organization for Economic Co-operation and Development (OECD, 2018) defines financial
literacy as “a combination of awareness, knowledge, skill, attitude and behaviour necessary to
make sound financial decisions and ultimately achieve individual financial wellbeing.” With a
wide range of products and services available, financial literacy ensures the public can determine
the products and services suitable for their needs by understanding the benefits and risks.
Individuals with a low level of financial literacy cannot appropriately assess available products
and services and tend to have unclear financial planning (Lestari, 2015).

Against this backdrop, the Financial Service Authority (Otoritas Jasa Keuangan or OJK), launched
the National Strategy for Indonesian Financial Literacy (Strategi Nasional Literasi Keuangan
Indonesia or SNLKI) in 2013. In 2016, President Joko Widodo instructed the establishment of the
National Council for Inclusive Finance (Dewan Nasional Keuangan Inklusif or DNKI)2 to implement
SNLKI. Since 2013, OJK has regularly released a national survey to monitor and track financial
inclusion and literacy.

2
The National Council for Inclusive Finance (DNKI) is chaired by the President and consists of ministers and relevant heads of
institutions such as OJK, the Central Bank of Indonesia (Bank Indonesia or BI), the Coordinating Ministry of Economic Affairs (CMEA),
and the Ministry of Finance (MOF).

11
 The government renewed the SNLKI in 2017 and again when it published the SNLKI 2021–2025
to accelerate the improvement of public financial literacy and inclusion index. To implement the
SNLKI, the government has been working with Financial Service Institutions (FSIs)3 to provide
education and training to improve public financial inclusion and literacy. President Joko Widodo
has set a target of 90% financial inclusion in Indonesia by 2024, as stated in Presidential
Regulation No. 14/2020 on Financial Inclusion National Strategy.

Based on a 2019 survey by OJK (2020), Indonesian financial inclusion was at 76.19% on a national
level and financial literacy was at 38.03%.4 The gap between financial inclusion and financial
literacy suggests that some consumers do not have adequate knowledge about the products
or services they are using. The survey shows a similar gap in rural and urban areas (Figures 1
and 2). A sectoral breakdown shows that the highest financial literacy exists about the banking
sector, while the lowest is about the capital market sector and microfinance institutions (Figure
3).

Indonesian financial inclusion was at 76.19% on a national level

and financial literacy was at 38.03%. The gap between financial
inclusion and financial literacy suggests that some consumers
do not have adequate knowledge about the products or services
they are using.

Figure 1.
Comparison of Financial Literacy and Financial Inclusion in 2016 and 2019 (%)

80 76.19
67.80
70

60

50
38.03
40
29.70
30

20

10

0
Financial Literacy Financial Inclusion

2016 2019

Source: OJK, 2020a.

3
Financial Service Institutions are businesses that provide financial products and services to customers. They include banks,
insurance companies, and credit unions.
4
To measure financial inclusion, OJK measures financial products or services usage in the past year. For financial literacy, the

12
 indicators are knowledge, skills, beliefs, attitudes, and behaviors towards financial products or services.
Figure 2.
Comparison of Financial Literacy and Inclusion between Urban and Rural in 2019 (%)

90 83.60
80
68.49
70

60

50
41.41
40 34.53

30

20

10

0
Financial Literacy Financial Inclusion

Urban Rural

Source: Source: OJK, 2020.

Figure 3.
Financial Literacy Indices of Financial Services Sectors in 2016 and 2019 (%)

80 73.88
70 63.60
60

50

40

30

20 13.15 14.56
12.10 11.80 10.50 12.38
10 4.70 6.18
1.30 1.55 0.00 0.72
0
Banking Insurance Capital Financing Pawnshop
Market Institutions

2016 2019
Source: Source: OJK, 2020.

For financial inclusion, the percentage shows that in every 100 Indonesians, 76 individuals have access to a financial service. For
financial literacy, the percentage shows that in every 100 Indonesians, only 38 individuals are categorized as well-literate – have
knowledge and confidence about financial service institutions and financial service products, including features, benefits and risks,
rights and obligations related to financial products and services, and have skills in using financial products and services.

13
 Increased access to financial services and products is the result of specific efforts to increase
financial inclusion. In recent years, the government has encouraged financial institutions to grant
micro and small loans. A report from PAKINDO (2016) from 241 respondents shows that 54% had
received at least three loans. The loans were used for business capital (87%), to top up existing
loans (59%), and to cover household expenses (31%).

Technological innovation and expanded internet access have also helped to improve access
to financial products and services. Digital finance services, or financial technology (fintech),
ease day-to-day transactions and improve the accessibility of financial services. For example,
peer-to-peer (P2P) lending5 emerged as a solution to provide financing for the unbanked and
underbanked population in Indonesia. A report from PWC Indonesia (2019) shows that 71% of
186 million middle- to lower-income populations and 74% out of 63 million businesses do not
have access to formal credit. OJK (2020) found that P2P lending reached a cumulative value of
IDR 106 trillion, an increase of 186.54% year-on-year. At the same time, the number of borrowers
increased by 218.75% to 24.70 million accounts (OJK, 2020a).

Financial literacy is also important given the emergence of fintech. Fintech

Users must be equipped with
provides services such as e-payment, fundraising, investment management,
knowledge about providers,
insuretech, and online loans. Users must be equipped with knowledge about
services and products offered,
providers, services and products offered, and their rights and obligations as
and their rights and obligations
consumers. Without this knowledge, consumers may find themselves deeply
as consumers. Without this
in debt or vulnerable to scams and frauds, data misuse, and aggressive
knowledge, consumers may
collection methods.
find themselves deeply in
debt or vulnerable to scams Aidha et al. (2019) analyzed a small sample of financial loan cases with input
and frauds, data misuse, and from FSIs, business associations, regulators, and consumers. Two-thirds (20
aggressive collection methods. out of 30) of cases have over-extended their credit, of which 14 cases were
borrowing through online loans and six through a credit card. A majority of
the respondents with over-extended credit had taken out both legal and illegal loans and used
them to cover existing debts rather than to meet basic needs. There is asymmetric information
regarding service charges and loan interest, especially when taking out illegal loans. Borrowers
often have incomplete understanding on the product, payment terms, and interest and some
lenders take advantage of this. Affected borrowers experience difficulty paying their debts
due to high interest rates and short repayment periods. Unethical collection practices included
intimidation through calls and texts, illegal distribution of borrower data, and messages sent
to borrowers’ contact lists, relatives, and co-workers aiming to discredit the borrower or chase
contacts for payment.

2
The Harmonized Commodity Description and Coding System—commonly known as the Harmonized System or HS—is an
internationally standardized nomenclature for the description, classification, and coding of goods (Yu, 2008).
3
The rationale and procedures for products subject to import licensing are included in the appendix (based on WTO Indonesia TPR,
Secretariat Report Table A3.4).

14
A recent increase in public awareness along with the emergence of a digital investment platform
have increased the demand for investments in Indonesia. According to data from the Indonesian
Central Securities Depository (Kustodian Sentral Efek Indonesia or KSEI), there were 4.9 million
mutual fund investors in June 2021, an increase of 55.27% compared to 2020 (Bareksa, 2021).
Poor financial literacy regarding investment products, especially realistic returns forecasts,
legalities, and risk, puts consumers at risk of investment scams.

Online investment fraud was the second-largest category of police reports in Indonesia between
January and December 2020, with a total of 649 cases (Patrolisiber, 2020). Investment Alert Task
Force (Satgas Waspada Investasi or SWI) closed over 425 illegal investment agents and 1,500
illegals P2P lenders from January 2020 to July 2021.

15
 REGULATORY FRAMEWORKS

Based on article 28 of Law No. 21/2011 on the Financial Services Authority (UU OJK), OJK has the
authority to provide information and education to the public on the characteristics of the financial
services sector, services, and products. In addition, article 1 of OJK Regulation (POJK) No. 1/P
OJK.07/2013 on Consumer Protection in the Financial Service Sector, FSIs must provide education
to increase financial literacy of consumers and/or the general public. A similar requirement is
detailed in POJK No. 76/POJK.07/2016 on Increasing Financial Literacy and Inclusion in the
Financial Service Sector to Consumers and/or the General Public. Likewise, digital financial
innovation (Inovasi Keuangan Digital or IKD) providers,6 which include many digital financial
services, must carry out initiatives to increase financial literacy and inclusion according to article
34 of POJK No. 13/POJK.02/2018 on Digital Financial Innovation in the Financial Services Sector.
The relevant regulatory frameworks are outlined further in Table 1.

Table 1.
List of the Regulatory Framework related to Financial Literacy

OJK Regulations (POJK) Implementing Rules

POJK No. 1/POJK.07/2013 on Consumer Circular Letter of the Financial Services Authority (SEOJK) No.12/
Protection in the Financial Services Sector SEOJK.07/2014 on the Submission of Information in the context of
Product Marketing and/or Financial Services Institutions
SEOJK No.13/SEOJK.07/2014 on the Standard Agreement
SEOJK No.14/SEOJK.07/2014 on the Data Confidentiality and Data
Security and/or Consumer’s Personal Information

POJK No. 1/POJK.07/2014 on the SEOJK No.7/SEOJK.07/2015 on the Assessment Guidelines of

Alternative Dispute Resolution Institutions the Alternative Institutions for Dispute Resolution in the Financial
in the Financial Services Sector Services Sector
SEOJK No.54/SEOJK.07/2016 on the Alternative Institutions for
Dispute Resolution in the Financial Services Sector

POJK No.18/POJK.07/2018 on the SEOJK No. 17/SEOJK.07/2018 on the Guidelines for the
Consumer Complaint Services in the Implementation of Consumer Complaint Services in the Financial
Financial Services Sector Services Sector

POJK No. 76/POJK.07/2016 about SEOJK NO.30/SEOJK.07/2017 on the Implementation of Activities

Increasing Financial Literacy and Inclusion to Improve Financial Literacy in the Financial Services Sector
in the Financial Services Sector for SEOJK NO.31/SEOJK.07/2017 on the Implementation of Activities
Consumers and/or the Community to Increase Financial Inclusion in the Financial Services Sector

Source: Authors’ compilation

6
OJK defines IKD as an activity to update business processes, business models, and financial instruments that provide new added
value in the financial services sector by involving the digital ecosystem.

16
 OJK distinguishes between “financial literacy”, “financial inclusion”, and “financial education”.

• Financial literacy is defined as “the knowledge, skills, and beliefs which influence attitudes
and behaviour of an individual to improve the quality of decision making and financial
management in order to achieve well-being.”7
• Financial inclusion is defined as “the availability of access to various financial institutions,
products and services according to the needs and capabilities of the community in order to
improve the welfare of society.”8
• Financial education is defined as “a series of processes or activities to improve Financial
Literacy.”9

Under the Indonesian regulatory framework, financial literacy education must aim at “improving
the quality of individual financial decision-making, bringing about changes in individual attitudes
and behaviour in financial management for the better, so that they are able to determine and
utilize financial institutions, products and services that are in accordance with the needs and
abilities of consumers and/or the community in order to achieve prosperity.”10

POJK No. 76/POJK.07/2016 further specifies the purpose and structure of financial literacy
programs and imposes a centralized system for all FSIs to report their financial literacy
programs to OJK regularly. This makes financial literacy and education programs easier to
identify, categorize, and monitor.

OJK considers both financial education and the development of infrastructure that can support
financial literacy for consumers and/or the public activities that improve financial literacy.
Financial education covers education materials about:

a. financial management;
b. different types of financial services industry;
c. financial products and services including their characteristics, which consist of:
• benefits, costs, and risks of financial products and services;
• consumer rights and obligations;
• how to access financial products and services; and
• transaction mechanism for financial products and/or services;
d. taxation related to financial products and/or services.

7
Art 1 (6) of POJK 76/POJK.07/2016.
8
Art 1 (7) of POJK 76/POJK.07/2016.
9
Art 1 (8) of POJK 76/POJK.07/2016.
10
Art 3 of POJK 76/POJK.07/2016.

17
 FSIs can also provide financial education that caters to the needs of consumers that own micro
or small businesses. In this case, FSIs must ensure that the consumers leverage products to
assist in business activities and provide support to access financial services. This means that
FSIs must carry out more hands-on assistance (pendampingan) to micro and small business
owners during their financial education initiatives.

Finally, as an alternative to financial education, FSIs can perform “infrastructure development”

to increase financial literacy“ by building and developing facilities that can support financial
literacy.”11 These include creating databases of financial education materials, providing human
resources, and developing facilities and media for accessing financial education materials,
including the use of information and communication technology.

11
Art 9 (1) of POJK 76/POJK.07/2016.

18
TRACKING FINANCIAL LITERACY AND EDUCATION
PROGRAMS CARRIED OUT BY FINANCIAL SERVICE
PROVIDERS

A significant milestone in the effort to trace and monitor financial

These SEOJKs require FSIs to
literacy programs was the introduction of OJK Circular Letter (SEOJK)
No. 30/SEOJK.07/2017 on the Implementation of Activities to Improve
perform at least one initiative
Financial Literacy in the Financial Services Sector and SEOJK No. to improve financial literacy
31/SEOJK.07/2017 on the Implementation of Activities to Increase and one to improve financial
Financial Inclusion in the Financial Services Sector. These SEOJKs inclusion each year and
require FSIs to perform at least one initiative to improve financial
detail obligations set forth
literacy and one to improve financial inclusion each year and detail
obligations set forth in the 2013 and 2016 OJK Regulations. They also
in the 2013 and 2016 OJK
create checklists that FSIs must complete. Regulations. They also create
checklists that FSIs must
The SEOJKs also created OJK’s Consumer Education and Protection complete.
Reporting Information System (Sistem Aplikasi Pelaporan Edukasi
dan Perlindungan Konsumen or SiPEDULI).12 SiPEDULI OJK is accessible to all FSIs including
commercial banks, rural banks, securities brokerages and fund managers, pension funds,
insurance companies, and non-bank financial institutions (financing companies, venture capitals,
pawnshops, guarantee companies, and peer-to-peer lending).

SiPEDULI provides one-stop access to submit reports on plans and accomplishments for financial
literacy and inclusion activities carried out by FSIs. The report is submitted with the FSI business
plan.13 Under SiPEDULI, OJK maintains a database of consumer protection and literacy programs.
Based on this database and OJK internal records, 4,574 educational activities were conducted
during 2020, 513 of which were carried out in partnership with OJK, while 4,061 activities were
independent FSI programs.

The SEOJKs break down activities into “financial education” and “infrastructure development”
when they are submitted in SiPEDULI. Financial education can be in the form of:

a. dissemination (sosialiasi),
b. workshops,
c. consultations,
d. mentoring,
e. outreach programs,
f. simulations, and
g. training of community.

12
The online reporting system can be accessed at https://peduli.ojk.go.id.
13
A business plan is a written document that describes the business activity plan of the FSIs, including plans to improve business
performance and strategies to realize the plan in accordance with the targets and timelines set, while still taking into account the
fulfilment of prudential provisions and the implementation of risk management.

19
 Meanwhile, activities that fall into “infrastructure development” cover:

a. financial human resources, such as training of trainers or training of facilitators, and

b. non-financial human resources, which covers:
• E-learning development,
• Website development,
• Mobile app development, and
• Education module/material development.

A national report on the plan for and realization of financial inclusion and financial literacy
activities was submitted for the first time in 2018. The report is compiled into data (Tables 2,
3 and 4) on the realization of financial literacy and inclusion programs implemented by FSIs,
including:

• the number of activities by province,

• target participants,
• form of activity, and
• scope of activity implementation.

Table 2.
Financial Literacy Program by Year

2018 2019 2020

Financial Education 4,302 4,595 3,898

HR Infrastructure 80 103 107

Non-HR Infrastructure 26 24 31

Source: OJK, 2020b.

20
 Table 3.
Further Breakdown of Financial Literacy Program by Year

Type of Activities 2018 2019 2020

Financial Education

Dissemination (sosialiasi) 3,170 3,446 2,837

Workshop 449 414 328

Consultation 36 70 47

Assistance (pendampingan) 32 42 36

Simulation 25 38 36

Training of community 72 91 57

Outreach program 41 27 8

Others 477 467 549

HR infrastructure

Training of trainers 33 42 52

Training of facilitators 19 18 24

Others 28 43 31

Non-HR Infrastructure

E-learning development 2 0 2

Website development 9 4 8

Mobile app development 0 4 4

Financial education module development 3 8 2

Others 12 8 15

Source: OJK, 2020b.

21
 Table 4.
Further Breakdown of Financial Literacy Program by Target Group

Target Group 2018 2019 2020

Informal workers 360 279 213

Farmers 98 90 70

Fishermen 5 16 9

Teachers 86 104 102

Lecturers 34 62 40

Community organizers 0 10 1

Professionals 285 181 239

Employees 334 292 270

Merchants 104 125 94

SMEs 437 394 352

Women 88 108 89

Students 944 997 609

College students 281 337 230

Youth groups 18 24 17

Retiree 121 112 59

Armed forces 3 9 1

Migrant worker candidates 6 0 5

Families of migrant workers 0 7 1

People with disabilities 7 5 6

People with social welfare issues 4 7 1

Community in remote areas 7 5 4

Targeted community 101 110 55

General public 628 780 952

Others 457 668 617

Source: OJK, 2020b.

22
Although activities declined in 2020 due to Covid-19, Table 3 shows that FSIs have contributed
to financial literacy programs in Indonesia. The lack of systematic monitoring and evaluation of
these programs makes it challenging to determine which method works best to improve financial
literacy. Consequently, channeling resources toward the most effective programs is difficult.

FSIs have contributed to financial literacy programs in Indonesia. The

lack of systematic monitoring and evaluation of these programs makes it
challenging to determine which method works best to improve financial
literacy. Consequently, channeling resources toward the most effective
programs is difficult.

Methods for Delivering Financial Education

One of the principles set out by OJK for FSIs providing financial education is that educational
activities should not be combined with marketing activities for financial products or services.
SEOJK No. 1/SEOJK.07/2014 on the Implementation of Education to Improve Financial Literacy
of Consumers and/or the Community mentions that “the implementation of education does
not include the marketing of financial products and/or services offered by Financial Services
Business Actors (Pelaku Usaha Jasa Keuangan or PUJK). Education focuses on informing the basic
features of financial products and/or services including providing knowledge and skills related
to benefits, costs and risks.” Interviews 1, 2, and 3 confirm that industry actors share this belief.

On the other hand, some FSIs believe that financial lessons can be effectively delivered if the
consumers can directly engage with the financial products and services according to their needs.
Education and financial literacy are seen as an integrated process of increasing knowledge, skill,
and confidence. This “requires intention, determination, patience, effort and of course capital”
(Raizinvest, 2021). Knowing how to use the products and services is therefore part of the learning
process. In this case, products and services must be designed so that customers are educated,
not exploited when using them.

Box 1.
Educating consumers through product and service engagement

Financial learning by doing

Interviews with financial services providers by the authors finds that some FSIs believe
that allowing consumers to engage with and have access to the financial products and
services help increase consumers understanding on financial products. A financial product
comparison platform, for example, argues features in its platform has automatically
educated its users in assessing financial products (Interview 1). This is because the
consumers are trained to compare features, interest, fees, and facilities between credit
cards and other loan products. The platform provides product parameters that consumers
can use to weigh the features of each available product. The consumers can use the
parameters to see if a credit card product charges a low-interest rate, but imposes a high
annual fee, or vice versa, and consider one that suits their profile the most. Information

23
 like this can be known when more than one product is compared against each other.

Another example is financial planning platforms, which can provide education for users
to manage finances, while at the same time linking them with the products suitable to
user’s needs. One financial planner is of the view that “In financial planning, it is not only
literacy that is needed, but practice. The application accommodates these needs because
it is equipped with complete tools” (DailySocial, 2021).

For platforms, to ensure the educational element is well connected with product marketing,
there are several things that need to be considered. For example, Raizinvest, a mutual
fund investment marketplace stated that the product needs to be “designed in such a way
that you can start building financial literacy” (Interview 2). The application needs to have a
simple design and presents complete and transparent information.

Despite its potential, the ‘learning by doing’ approach presents challenges when drawing
a line between financial literacy efforts and marketing activities.

Product affordability Product affordability matters too, and so products like stocks and mutual
matters too, and so fund investments are often offered with a low account deposit. Companies
products like stocks and like Bareksa have started to introduce mutual fund investments with a
minimum amount of IDR 100,000 in 2017, lowered to IDR 50,000 in the
mutual fund investments
following years (Interview 3). Some platforms even lowered the minimum
are often offered with a deposit for mutual fund investments to IDR 10,000. Low participation fees
low account deposit. improve access to even entry level investors. Low participation costs
are also used in microinsurance products integrated with travel and
e-commerce platforms, including travel insurance and goods damage insurance. In addition to
the low fee, users have the option to purchase an insurance (opt-in) at an additional affordable
cost.

Another example of integration between financial literacy and product performance is when the
financial product is specifically designed to cater less financially literate consumers. Amartha,
an online loan platform that targets SMEs in rural areas, requires borrowers to undergo a series
of financial education programs prior to disbursing the loan. Typically, it is the first time their
customers, rural SMEs, have interacted with a formal financial system (Interview 6). Financial
education programs are expected to improve both customer financial literacy and loan repayment
performance.

Finally, financial education might be better delivered if integrated with products if the features
enable a product introduction to consumers that leads to habits that improve financial literacy.
Financial applications offer products such as recurring (investment instalments) or roundup
(rounding of transactions) payments that automate the product purchase process and familiarize
users with financial products “without having to drastically change the customer’s lifestyle”
(Interview 2). Investment instalments are automatic allocations to products such as mutual
funds or gold in small amounts but are carried out regularly, regardless of price fluctuations.
Investment instalments aim to build habits while also introducing customers to investment

24
benefits (when prices rise) and risks (when prices fall). Roundup is a feature that is often linked
with the purchase or e-payment of other products, where the change can be allocated to purchase
financial products, including stocks, mutual funds, gold, or insurance. Some marketplace
platforms in Indonesia offer roundups at the checkout counter in return for products like mutual
funds or gold. This can help introduce buyers to other financial products with a relatively low
amount and low risk.

Determining which financial education approach works best—independent of or linked to

products and services— is beyond the scope of this study. However, it is worth noting that data
collected and presented by OJK only include educational and literacy activities separate from
products as mandated by SEOJK.

Implementation of Financial Education by Units in the

Financial Services Institution
FSIs run programs with different formats appropriate to their capacity, business size, and
organizational structure in order to comply with financial literacy obligations. Data from OJK
shows that seminars (including talk shows) on the basics of financial products is the most
common format. This method is relatively simple to run, easy to replicate at different places or
in different contexts, and relatively measurable in quantitative terms (e.g., the number of events,
the number of participants, and the number of resource persons involved).

Seminars can also be held in collaboration between several companies, making them viable for
small FSIs with limited resources. In the fintech sector with a large pool of newly established
digital financial service providers,14 startups unfamiliar with the Indonesian financial education
culture and landscape can organize joint events with more established and more experienced
FSIs. Fintech associations play an important role in coordinating educational activities by
providing opportunities through seminar events where member companies can act as speakers
or resource persons.

Two fintech associations in Indonesia, the Indonesian Fintech Association (Asosiasi Fintech
Indonesia or AFTECH) and the Indonesian Joint Funding Fintech Association (Asosiasi Fintech
Pendanaan Indonesia or AFPI), regularly hold seminars in various cities in Indonesia for which
the costs are shared. In return, companies prepare materials and resource persons for each
activity. OJK also plays a role in suggesting the location of the events, especially outside of Java
and Sumatra where FSIs typically have limited outreach (Interview 4 and 5).

For P2P lending companies, OJK required financial education activities to also take place outside
Java and Sumatra to encourage wider fintech product adoption. This approach has changed both
because of the Covid-19 pandemic and because in-person seminars are challenging to run. As
an alternative, some seminars outside of Java and Sumatra are held in collaboration with local
universities.

14
A study from the Indonesian Fintech Association shows that the growth of fintech in Indonesia has ballooned since 2016, when
there were 24 fintech companies operating in Indonesia. In 2020, there were approximately 360 fintech companies, representing
more than 20 business models (AFTECH, 2021).

25
 Seminars are typically coordinated by the public relations and/or communication departments
of each FSI. AFTECH and AFPI have a special network and coordination team consisting of the
public relations department of each member company which regularly organizes events.

For mature FSIs whose business that have the internal resources (e.g., market research, customer
service, business development, sufficient employees), financial education initiatives may involve
various departments within their organization to have better integration between the education
programs and business activities, as illustrated in Figure 4. Financial education programs can
involve units that engage with customers, such as customer service (to ensure customers
understand the offered product), business development (to explore new business potentials
from customer preferences and understanding), research division (as market research material
that can be utilized by the company), and business units directly related to the marketing and use
of products.

Figure 4.
Example of an Organizational Structure for Implementing Financial Education and Literacy

Main Organs
Directors

Supporting Organs
Company Secretaries

Business Development Customer Service Research Online Trading

Branch Office

Guidelines and Reporting

OJK’s Regulations and Corporate Governance Education Guidelines in the

Circular Letter Guidelines context of Financial Literacy

Report of Plans and Changes Education

Annual Report
of Education Plans Implementation Report

26
TRACKING FINANCIAL LITERACY AND EDUCATION
PROGRAMS DRIVEN BY OJK

OJK has a legislative mandate to improve financial education and financial literacy in order
to better protect financial consumers. Every year, OJK launches an overarching theme that
serves as the basis for an annual campaign and program. In 2020, the theme was “Wise Money
Management and Smart Investment towards Financial Freedom”, and a separate theme for
Islamic finance . Initiatives of OJK can be classified into the following projects.

1. Annual Financial Inclusion Month. Since 2018, OJK has administered its flagship annual
national “Financial Inclusion Month”, which covers a series of activities organized by OJK in
conjunction with relevant government ministries and agencies as well as financial services
institutions15 in October. In 2020, 269 booths from government agencies and FSIs participated
at the virtual expo. During the event, 789,025 new bank accounts were opened with a nominal
value of IDR 35.51 trillion. In addition, 825,272 student accounts were opened during the
event with a value of IDR 300.67 billion, exceeding the original target of 500,000 accounts.
The event facilitated 44,758 new insurance policies, 41,142 new securities accounts, 92,672
borrowers at finance companies, 10,667 new pawnbroker accounts, and 82,135 fintech
accounts (OJK, 2020d).

2. Product guidance. OJK provides guidance and templates called Product and Service
Information Summary Standard (Ringkasan Informasi Produk dan Layanan or RIPLAY)16 for
FSIs, which are required to provide basic information material about their products pursuant
to POJK No.1/POJK.07/2013 on Consumer Protection in the Financial Services Sector. FSIs
must comply with these guidelines. OJK published the most recent RIPLAY which came into
effect in 2020. According to RIPLAY, FSIs must provide two categories of information, general
and personal. General information includes the main features of the products and services,
costs, benefits, and risks. Personal information is similar except it is personalized based on
the products and services the customer has chosen. Figure 5 illustrates RIPLAY standards.

15
Financial Inclusion Month is an annual event led by OJK and BI. The Coordinating Ministry of Economic Affairs through its National
Council for Financial Inclusion also regularly participated as a co-host. The Council hosts several agencies, in addition to OJK and
BI, namely the MOCI, the Land Agency, the Ministry of Home Affairs, the Ministry of Finance, and the Ministry of Cooperatives and
Small and Medium Enterprises.
16
The newest version of RIPLAY can be accessed at https://sikapiuangmu.ojk.go.id/FrontEnd/images/FileDownload/544_
Booklet%20FAQ%20Pedoman%20RIPLAY_hires.pdf

27
 Figure 5.
Illustration of RIPLAY Delivery to Customers

Brochure, leaflets, General RIPLAY Personal RIPLAY Contract

or pamphlets

Prospective consumers Prospective consumers are Prospective consumers Prospective consumers

receive information on looking for more information decided to use the products signed Product Contracts
product and service offerings about products and services and services (credit contract, policy,
opening application, and/or
other agreements).
Prospective consumers Prospective consumer
are interested in using the understands products and
products and services services

Source: OJK, 2019.

3. Web-based and mobile applications. OJK has developed products in the form of websites,
minisites (a sub site of a main site), and mobile applications—including gaming apps—to
promote financial literacy. One example is the SikapiUangmu program. The SikapiUangmu
minisite is a web-based and mobile-app based information platform,17 while the
SikapiUangmu website hosts the national financial literacy material database as well as
financial inclusion and literacy data. The national financial literacy material database
presents financial literacy and education materials from OJK and other organizations in
different formats, including booklets, videos, and infographics. SikapiUangmu also offers
a mobile application aimed at helping users to control and manage their finances through
spending tracking and product knowledge. The mobile app had been downloaded by more
than 10,000 users as of November 2021. OJK cooperated with social media influencers to
educate and promote OJK’s SikapiUangmu program and 90 articles, 137 social media posts,
and 26 videos have reached more than 2 million users in 2020 (OJK, 2020c). As of November
2021, OJK had also developed three gaming apps about the importance of savings and on the
difference among financial products in the market that target children and students (Picture
1).

Picture 1.
OJK Gaming Apps Aimed at Children and Students

Games: My Saving Games: Let’s Save Games: Identify the Product

Source: OJK, 2021a.

8
Visit the minisite at https://sikapiuangmu.ojk.go.id

28
 4. Community engagement and outreach. OJK implements a range of community financial
education activities, predominantly online, to increase public financial literacy. Community-
based education activities target millennial women, housewives, students, professionals,
MSMEs, Indonesian migrant workers (Pekerja Migran Indonesia or PMI), workers, farmers/
fishermen, and other communities. OJK also implemented Training of Trainers (ToT), which
trains teachers/lecturers to ensure they are capable of effectively teaching the material.
Materials taught during financial education and Training of Trainers included an introduction
to OJK, financial planning, consumer protection, investment alert, and financial products/
services18.

5. Early learning financial education targeting children of 4–6 years old. Recently, OJK launched an
early learning financial literacy book series with the support of the Asian Development Bank.
The material was designed to be read aloud and includes various supporting activities. OJK
has implemented Training of Trainers for members of the Association of Indonesian Early
Childhood Educators and Education Personnel (Himpunan Pendidik Dan Tenaga Kependidikan
Anak Usia Dini Indonesia or HIMPAUDI) in 34 provinces. The early learning financial literacy
book series contains four illustrated storybooks and one companion book targeting teachers
and parents. The overarching theme is saving, sharing, and spending.

In their “one decade of financial consumer protection” press release (OJK, 2021b), the consumer
protection department of OJK highlights several OJK initiatives to boost financial inclusion and
financial literacy. These are detailed in Table 5.

Table 5.
OJK Initiatives for Financial Education and Consumer Protection

Name Descriptions
Student Savings (Simpanan Pelajar or Basic Saving Account offered by partner banks co-branded with
SimPel), introduced in 2015 OJK in order to get joint-marketing campaigns to encourage saving
among students led by OJK.

One Account One Student (Satu Rekening Continuation of SimPel, the program is an OJK-co-branded joint-
Satu Pelajar or Kejar), introduced in 2021 marketing program between banks, OJK, and government bodies
(such as the Ministry of Religious Affairs and local governments) to
encourage savings among students.

Youth and Student Savings (Simpanan OJK-co-branded joint-marketing program between OJK and partner
Pemuda dan Mahasiswa or SiMUDA), FSIs to introduce savings accounts to young adults 18–30 years old,
introduced in 2019 bundled with investment products.

Credit/Financing Against Moneylenders Partnership between OJK and the Regional Financial Access
(Kredit/Pembiayaan Melawan Rentenir or Acceleration Team (Tim Percepatan Akses Keuangan Daerah or
K/P MR), launched in 2020 TPAKD) to develop a “generic model” (or a business plan) whereby
FSIs, especially rural banks or credit providers, can participate to
offer affordable credit in an effort to eliminate village loan sharks
(tengkulak).

Source: OJK, 2021b.

29
 In order to improve the reach of its financial literacy program, in 2015 OJK introduced more
than twenty cars as mobile financial education centers called financial education cars (Si Mobil
Literasi Edukasi Keuangan or SiMOLEK). The cars contain financial education materials and visit
remote towns and villages to distribute the materials mostly to students.

Picture 2.
OJK’s financial literacy car, Si Mobil Literasi Edukasi Keuangan

Source: (OJK, 2016).

In contrast to FSIs, which focus their education efforts based on their customers or operations,
OJK targets broader population for its financial education programs. In SNLKI 2021–2015, OJK
identified 10 priority targets19, including students, women, farmers, and populations in the least
developed regions. Among these groups, OJK has made progress in narrowing some financial
literacy gaps. Financial literacy for women in 2019, for example, is at 36%, only 3 percentage
points lower than for men. Other gaps, such as those affecting remote and least developed
regions, remain large. In Nusa Tenggara Timur, financial literacy is only 27%, 11 percentage
points below the national level, and 31 percentage points lower than DKI Jakarta. The number
of financial education programs also differ significantly. There were 609 programs hosted in
Jakarta during 2020, compared to 19 programs in Nusa Tenggara Timur (OJK, 2021c).

To improve program outreach, OJK often partners with relevant ministries. For example, the Kejar
program, which targets madrasah or pesantren students, was carried out in partnership with the
Ministry of Religious Affairs (MORA, 2021), while a financial education program for fishermen is
carried out alongside maritime financing programs in cooperation with the Ministry of Maritime
and Fisheries Affairs (OJK, 2015).

The financial sector already has a solid foundation for improving financial literacy. Progress is
being made in improving not only overall levels, but also targeted gaps important to OJK and the
government. Tracking of programs is underway and partnerships are both common and useful
to education efforts. Despite these successes, it is unclear how effective each of these programs
or category of programs is, or how much impact they generate per dollar invested.

19
The full list of 10 targets: students and youths, professionals, employees, farmers and fishermen, PMI and PMI candidates,
MSMEs, people with disability, community in the least developed regions, women or housewives, and general community.

30
As with literacy programs created by FSIs and evaluated as part of their business plans, OJK must
evaluate the effectiveness of its programs. SNLKI 2021–2025 identifies room for improvement in
monitoring and evaluation. At present, most evaluation is limited to pre- and post-event surveys.
More comprehensive and systematic evaluation and monitoring methods are crucial for targeting
resources and improving outcomes.

The lack of comprehensive monitoring and evaluation prevents OJK

from allocating its budget according to insight about which programs
The lack of comprehensive
are the most cost-effective. Especially as OJK aims to expand its monitoring and evaluation
financial literacy programs to remote and least developed regions (a prevents OJK from
target population in SNLKI 2021–2025) where providing programing allocating its budget
may be costly, channeling resources into the most effective programs
according to insight about
will be crucial. In the long run, OJK and the financial industry as a
whole must improve the quality of existing programs in terms of
which programs are the
program diversity, content, and method of delivery. most cost-effective.

31
 FINANCIAL LITERACY AS A RESPONSE TO MAJOR
CONSUMER COMPLAINTS

The lack of comprehensive monitoring and evaluation of the programs makes

From a consumer
difficult to tailor them to address basic consumer concerns on financial
protection perspective, the services. From a consumer protection perspective, the two main issues
two main issues affecting affecting financial services are access and suitability (Lumpkin, 2010).
financial services are Consumer financial literacy is important for both, but especially suitability.
access and suitability Financial education programs by OJK and FSIs have improved overall financial
inclusion and financial literacy, but financial literacy still lags financial
(Lumpkin, 2010). Consumer
inclusion. The wide gap between the two could lead to negative outcomes
financial literacy is such as poor financial decisions or increased investment fraud.
important for both, but
especially suitability. Focus of financial literacy content varies across countries and regions. For
example, Financial Industry Regulatory Authority (FINRA) in the United States
focuses financial literacy on consumers’ knowledge about interest, compounding, inflation,
diversification, and bond prices, in order to answer the “Big Three” of financial literacy: numeracy,
inflation, and risk diversification (Fisch, Hasler, Lusardi, & Mottola, 2019). These key concerns for
financial literacy may result from the need to plan for retirement, which can be a combination of
investment plan, social security, potential health needs and insurance, and payment for housing
mortgage and among many, student debt. Consumers face a variety of savings, credits, and
investment instruments to select from choices of banks, credit unions, brokerage firms, credit
card companies, and more.

In Indonesia, the problems seem to be a lot more basic yet crucial if the financial products and
services are to effectively improve people’s livelihood. Technology-based financial services
increase financial consumer access to financial products but raise suitability concerns. When
financial products are extended to first-time users with insufficient understanding, ill-informed
financial decisions could be the corollary. Some may even take advantage of the low literacy level
and trick consumers into excessive debts or investment scams.

Financial Literacy on Digital Peer-To-Peer Lending

With a total loan disbursement of around IDR 283 trillion (USD 19 billion) since its introduction
and reaching around 71 million borrower accounts (OJK, 2021d), digital lending serves as an
important illustration of how financial literacy is applied.

With a total loan disbursement of around IDR 283 trillion (USD 19 billion)
since its introduction and reaching around 71 million borrower accounts
(OJK, 2021d), digital lending serves as an important illustration of how
financial literacy is applied.

32
Controversies surrounding digital lending products have affected which financial literacy issues
are most relevant in this policy space. One often-cited concern is ultra-high interest rates (1–3%
per day), but OJK data (Figure 6) shows that consumers are more concerned about aggressive
debt collection practices, an inability to pay (and subsequent need to restructure debt), and
discerning whether a product is legal when there are so many illegal digital lenders.

Figure 6.
Official Complaints Received by OJK (January 2015–May 2020)

30000

24,624
25000

20000

15000

10000
6,916
4,503
5000 2,552 2,363

Aggressive debt Credit Product Hidden fees & General

collection restructuring legality penalties Information

Source: UNCOMTRADE, authors’ calculation

Personal data access

A common practice in the early days of digital loans was direct calls by lenders to borrowers’
contact lists or address books to collect repayment, often aggressively and without consent.
This practice represents misuse of personal data. Growing concerns over personal data abuse
led to the issuance of OJK Fintech Lending Department Director Letter No. S72/NB/13/2019 on
12 February 2019, which limits fintech lender access to mobile internet data to: microphone,
camera, and location. The 2019 letter prohibits peer-to-peer (P2P) lending operators from using
call histories, text messages, and address books from borrowers’ mobile phones (Suleiman,
2021).

The letter prohibits lending platforms from accessing data that many relied on to develop
alternative credit scoring models. Indonesia’s credit reporting system is weak, and the country’s
national identity system fails to prevent widespread identity theft. As a result, providing
consumer loans is extremely risky—it’s difficult to figure out who a lender is dealing with and
how creditworthy they are. Fintech lenders developed contact list evaluation as one method for
credit assessment (Suleiman, 2021).

The Indonesian Joint Funding Fintech Association (AFPI) argues that there is good reason for
fintech lenders to question the OJK’s decision, which can be counterproductive. Other jurisdictions

33
 did not prohibit access to phone data so long as it follows key personal data protection principles
such as user consent, usage only for specific-purpose, and limiting access to necessary data or
data minimization (Suleiman, 2021). Better financial literacy regarding digital loan products and
how these products use data is therefore important for the success of digital loan products.

Product legality
Since a license is not required to informally lend money, the number of illegal online loan
operations is staggering. From July 2018 to December 2019, OJK blocked 1,898 mobile apps,
and another 800 apps were blocked annually in 2020 and 2021, bringing the total number of
blocked apps to 3,631 (MOCI, 2021). Nearly all of these apps were operating as fintech payday
lenders. The high number of apps could mask a much smaller number of actual companies—a
single firm may develop multiple lending platforms. One developer, Xinhe, uploaded at least nine
P2P lending apps to the web and the Google Play Store (Suleiman, 2019).

The conduct of these apps has harmed consumers, and OJK data confirms that company legality
is among the top three of financial consumer concerns. The spread of abusive debt collection
practices in fintech started to make national headlines in June 2018. Later, it was discovered
that these practices were largely undertaken by fintech operators not registered with OJK.
Illegal lenders also charge significantly higher rates and fees, with interest rates as high as 3%
per day and late penalty fees reaching 5% per day. In response, OJK regularly publishes a list
of unregistered fintech lenders. From a financial literacy perspective, both OJK and AFPI have
launched campaigns to help consumers distinguish between legal and illegal operators.

Interest rates
From July to December 2018, there were mass protests and rallies throughout Indonesia
attacking fintech lenders for high rates and aggressive lending practices (Suleiman, 2019).20
Ultra-high interest rates have always been a subject of controversy in the digital loan space.
OJK does not regulate interest rates and so far has chosen not to intervene. In March 2018,
the then-newly appointed chairman of OJK raised the issue of regulation to combat ultra-high
interest rates for the first time. In December 2018, the Indonesian Legal Aid Foundation (Yayasan
Lembaga Bantuan Hukum Indonesia or YLBHI), compiled a list of violations committed by fintech
payday lenders. As of February 2019, YLBHI has received over 3,000 complaints about payday
lenders which includes charging interest rates of 1–2 % per day (Heriani, 2019).

In response to public pressure, In March 2021, AFPI self-imposed an interest rate cap at 0.8% per
day, and in October 2021 reduced the cap to 0.4% per day.

Despite the public outcry, OJK data shows that high interest rates are not a top concern of
consumers. Digital financial literacy concerns remain focused on the short-term: ensuring
consumer access to legal and compliant products. Longer-term and abstract issues of increasing
consumer welfare, building a credit profile, managing credit exposure, and longer-term financial
planning have therefore not yet been addressed by OJK or the industry.

20
Although most protests targeted illegal fintech lenders, a handful of registered fintech payday lenders were also targeted.

34
Case Study: Public Financial Literacy on Unit Link Products
Low financial literacy could lead consumers to buy financial products that, while legal, are
inappropriate for them. As more Indonesians purchase investments and more complex financial
services become more accessible through technological innovation, addressing this problem has
become a higher priority.

Many FSIs no longer provide a single financial service or product. Consumers are exposed to
options they may not be familiar with or simply do not understand well. Unless financial literacy
can be improved, poor decisions should be expected. For example, life insurance is sometimes
made available alongside investment products as part of a service known as unit link.

Increasing consumer complaints about unit link products in recent years illustrates how limited
understanding of financial products leads to regrettable financial decisions. Data from OJK’s
Consumer Education and Protection Reporting Information System (SiPEDULI) shows that the
number of unit link complaints increased from around 500 complaints in 2015 to over 2600
complaints in 2017 (OJK, 2017). Most of complaints claim little to no awareness of the risk
associated with the investment products linked to their insurance policy. The lack of a clear
explanation of the products by insurance agents is also suspected.

Similarly, OJK (2017) analysis of unit link products reveals the main reasons given for the
growing number of complaints are non-transparent information about the product; ineffective
communication between providers and customers; incorrect forecasts and estimations;
incompetent insurance agents (especially when providing information of the product to the
customers); and insufficiently detailed progress reports. Most of the insurance firms do not
include past performance in managing customer funds when promoting their products. Some
providers even assume relatively high returns without historical evidence (OJK, 2017).

OJK recognizes that unit link products are riskier than regular insurance policies and has set
standards and protocols for FSIs to market these products. According to article 47 paragraph
(3) POJK No. 23/POJK.05/2015 on Insurance Products and Marketing of Insurance Products
(POJK 23/2015), FSIs must have a face-to-face, in-person meeting with potential buyers to
explain the risk associated with the product. This does not guarantee that consumers can make
fully informed purchases, especially since this requirement was temporarily suspended by
POJK No. S-18/D.05/2020 on Technical Adjustments of Unit Link Marketing
Implementation as a Response to Covid-19 Impact for Life Insurance While individual agents may
Companies and Sharia Life Insurance Companies. To provide a more make more sales by exploiting
comprehensive answer to these problems, OJK is drafting a circular letter poor financial literacy, poor
on unit link products as mandated by article 4 paragraph (2) POJK 23/2015. understanding of risks could
increase default incidence,
Poor financial literacy in financial market does not only harm consumers. harming lenders. It is in
When customers assume inappropriate risks it is also bad for FSIs. While the best interest of FSIs to
individual agents may make more sales by exploiting poor financial literacy, ensure that consumers are
poor understanding of risks could increase default incidence, harming well-informed, with access to
lenders. It is in the best interest of FSIs to ensure that consumers are well- accurate and realistic forecasts
informed, with access to accurate and realistic forecasts and expectations and expectations to base their
to base their decisions on. decisions on.

35
 The unit link case illustrates why the consumer-facing nature of FSI agent work makes those
agents potentially important participants in improving financial literacy. Alternatively, they can
take advantage of low financial literacy to make more sales. In the long run, profiting from ill-
informed customers could damage consumer trust and hurt FSI credibility.

Fraudulent Investment Products

Every year, thousands of Indonesians fall victim to investment scams. In 2016 and 2017, Saving
and Loan Cooperative (Koperasi Simpan Pinjam or KSP) Pandawa Mandiri Group, an Indonesian
cooperative business, ran micro-lending and investment activities to raise funds for the
community and promised 10% profit every month to its members. KSP Pandawa Mandiri Group
obtained a permit from the Ministry of Cooperatives and Small and Medium Enterprises in 2015
that allowed the business to distribute funds but prohibited raising funds. In 2016, members
began to complain that they were no longer receiving the promised benefits and could not
withdraw their funds—the company had defrauded them. An estimated at 39,068 people lost IDR
3.32 trillion as a result of this investment fraud (Peter & Ardison, 2021).

At the end of 2021, investment fraud in medical device investment made the news, leading the
Directorate of Special Economic Crimes of the Criminal Investigation Agency of the Indonesian
National Police to open a complaint desk to handle victims of the fraud. The net loss is predicted
to be IDR 1.2–1.3 trillion with around 3,000 victims.

Such cases are not new to Indonesians. According to the Investment Alert Task Force (SWI), in
the last 10 years, losses due to illegal investments have reached IDR 117.4 trillion. The cost of
investment fraud extends beyond the amount of money lost. Other costs include legal fees, late
fees, and lost wages, and are often not taken into account. Nor are non-financial costs of fraud
such as stress and depression (Kieffer & Mottola, 2016).

Every year, OJK updates a categorized list of unregistered investments on their website for
the public. Illegal fintech and foreign exchange (forex) investment scams are among the most
common. Fraudulent investment continues to occur due to low financial literacy in the capital
market sector—in 2019, financial literacy on the capital market was only 1.55%.

36
 Table 6.
List of Unregistered Investments and Not Under OJK Supervision (2018 – 2020)

2018 2019 2020* 2021*

Forex 336 336 87 8

Money Investment 14 12 12 N/A

Real Sector Investment 13 N/A N/A 4

Stock Investment 5 N/A N/A 8

Cryptocurrency 30 13 3 19

Foreign Stock Investment 2 N/A N/A N/A

Foreign Currency Investment N/A N/A N/A N/A

Online Investment N/A N/A N/A N/A

Other Investments 85 64 4 52

Illegal Multi-Level Marketing 46 21 N/A 2

Illegal Fintech 628 1,494 801 708

*Estimated number.
Source: OJK, (n.d.). Processed by Author.

Activities related to raising and managing public funds are regulated by laws and regulations
such as Law No. 10/1998 on Banking, Law No. 8/1995 on Capital Market, and Law No. 32/1997
on Commodities Futures Trading. These laws and regulations allow only some types of
institutions (e.g., bank, insurance, pension funds, multifinance, and capital markets) to carry
out public fundraising based on specific mechanisms and permits. Any entity that engages in
public fundraising without relevant permits works illegally, even though they might be legally
established and have a legitimate Company Registration Certificate (Tanda Daftar Perusahaan or
TDP) and business license for general trading (Surat Izin Usaha Perdagangan or SIUP).

Ministry of Trade Regulation No. 36/2007 on Issuance of Trading Business Permits stipulates
that companies are prohibited from using SIUP to carry out activities to collect public funds
by offering unrealistic profits (money game). Consumers are sometimes inattentive to these
details and convinced to invest with fraudulent companies with only general licenses that
promise unrealistic investment returns. Some companies have also raised public funds by using
a business license of another company in its operations (Satgas Waspada Investasi, 2016).

The government, particularly OJK, has been working on preventing and uncovering investment
fraud through education and campaigns to the public. OJK works with relevant institutions such
as the National Police, Ministry of Cooperatives and Small and Medium Enterprises (MOCSME),
Ministry of Communication and Informatics (MOCI), and Indonesian Investment Coordinating
Board (BKPM). These agencies regularly coordinate to block access to illegal financial sites or

37
 applications. OJK also regularly updates the list of illegal entities through press releases and
Investment Alert List.

OJK also runs the “2L Check” campaigns, encouraging consumers to apply the “legal and logic”
principles when considering a financial product. The legal principle encourages users to check the
legality of the providers through several official OJK channels.21 The logic principle encourages
customers to understand when profit forecasts are unrealistic. The ability to judge what returns
are realistic depends in some measure on financial literacy, and so improving financial literacy
also serves this goal. The 2L Check message is promoted through various channels such as
online webinars, social media posts, and in the SikapiUangmu website.

Private sector campaigns also aim to combat investment fraud, including the Anti Fake Fintech
Campaign or Kampanye Anti Fintech Palsu started by AFTECH and supported by OJK, the Bank of
Indonesia, and the Ministry of Communications and Informatics. This campaign highlights recent
frauds using the name or logo from legal fintech providers being used to trick victims. As a part
of the campaign, AFTECH released CekFintech.id, a website to check legality of fintech providers,
and CekRekening.id to check bank accounts used by the perpetrators of investment fraud.
Unfortunately, despite government and private sector efforts to prevent and uncover investment
fraud, Indonesia appears to have no shortage of victims.

21
Legal OJK channels include the 157-call line and [email protected]

38
CONCLUSION AND POLICY RECOMMENDATIONS

Financial literacy is tied to consumer protection. Financial education Financial literacy is tied
programs can help consumers when budgeting and managing their to consumer protection.
income, understanding and choosing financial products based on their
Financial education
risk profile, and avoiding investment fraud. As financial products and
services become more sophisticated, consumers also assume greater
programs can help
responsibility in their financial management. Informed consumers are consumers when budgeting
essential not only to helping those consumers achieve their financial and managing their income,
goals but also for facilitating a functioning financial market and economy. understanding and choosing
Financial education programs can be considered a collective investment
financial products based
to address risks in the financial sector such as fraudulent investment
products and unlicensed lenders.
on their risk profile, and
avoiding investment fraud.
OJK and FSIs are committed to improving public financial literacy. This
has been done through incorporating and emphasizing consumer protection as part of the five
pillars of National Strategy for Financial Inclusion (Strategi Nasional Inklusi Keuangan or SNKI)22,
strategic programs under the National Strategy for Indonesian Financial Literacy (SNLKI) 2021–
2025, and through annual campaigns and programs. Both OJK and FSIs are working to provide
better consumer complaints handling and disputes resolution to improve consumer confidence
and loyalty in financial products and services and improve FSI profitability.

Since the establishment of OJK in 2012, financial literacy has been at the center of Indonesia’s
financial policy. In 2013, OJK first released the SNLKI, which was updated in 2017 and 2021.
The 2021 strategy is an implementation of the overall OJK 2021–2025 Financial Service Sector
Master Plan, in which financial literacy is a main component. Since 2013, OJK has regularly
released a national survey to monitor and track financial inclusion and literacy.

Financial institutions are required to conduct financial literacy programs, which OJK tracks
through a national repository of financial literacy programs, begun in 2018. In 2016, the
President issued a National Strategy on Financial Inclusion and since then OJK, ministerial, and
local government agencies have acted as independent regulators to promote financial inclusion
and literacy. All of these, along with other initiatives such as OJK consumer complaint handling
mechanism and consumer dispute resolution, have contributed to the improvement of financial
literacy and consumer protection. But more work remains to be done.

22
The five pillars of the National Strategy for Financial Inclusion are: financial education, financial eligibility, supportive regulation,
facilitating intermediation, and distribution channels.

39
 One area that is often highlighted under the national financial literacy and inclusion survey is
the gap between financial inclusion and financial literacy. Surveys consistently score financial
literacy lower than financial inclusion, including the latest OJK survey, which found that the
financial inclusion index in 2019 was at 76.19% while financial literacy was 38.03%. The result
of this gap is that consumers may have the access, capacity, and demand to purchase financial
products, but not the necessary knowledge, skill, and attitude to use that product to improve their
welfare.

OJK and FSIs regularly organize and manage financial literacy programs, often collaborating on
events facilitated by industry associations. OJK’s repository shows that dissemination seminars
and workshops are consistently the most common literacy programs. Burden sharing with
OJK also incentivizes FSIs to collaborate and run joint programs. Despite their popularity, the
effectiveness of these seminars to promote financial literacy has yet to be properly evaluated.

FSIs will likely continue to focus their financial literacy programs on their potential customers,
while OJK will target wider audiences. FSIs have a stronger incentive to ensure that their programs
provide the intended education, since it affects their product performance through higher loan
repayment rates and higher or more appropriate investment deposits. Nonetheless, both OJK
and FSIs need to conduct comprehensive and systematic evaluations of each program in order
to ensure resources are directed toward the most efficient and effective financial education,
especially when reaching the most at-need population groups, such as rural communities in the
least developed regions, identified in the SNLKI 2021–2025.

Financial education content and delivery also require proper evaluation. Financial literacy
programs in Indonesia mostly revolve around product knowledge. But there is a debate regarding
whether program delivery should be conducted as combined with or separate from product
marketing. Separation simplifies tracking and monitoring of literacy program, but may not be the
best way to educate consumers about the concrete financial decisions they are likely to make.
Product-driven financial education programs offer better guidance on specific decision-making
but may fail to address the longer-term financial needs of consumers. These programs should
also be appropriately evaluated. The centralized reporting system can be improved to allow for
program monitoring and evaluation.

The financial sector already has a solid foundation for improving financial literacy. However,
in the long run, OJK and the financial industry as a whole must improve the quality of existing
programs in terms of program diversity, content, and method of delivery.

The financial sector already has a solid foundation for improving

financial literacy. However, in the long run, OJK and the financial
industry as a whole must improve the quality of existing programs
in terms of program diversity, content, and method of delivery.

40
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Suleiman, A. (2019). Chinese Investments in Indonesia’s Fintech Sector: Their Interaction with Indonesia’s Evolving
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investments-in-indonesias-fintech-sector-their-interaction-with-indonesi

Suleiman, A. (2021). Improving Consumer Protection for Low-Income Customers in P2P Lending. CIPS Policy
Paper (34). Retrieved from CIPS: https://c95e5d29-0df6-4d6f-8801-1d6926c32107.usrfiles.com/ugd/
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program-satu-rekening-satu-pelajar

Interview
Interview 1: A chief executive officer of an online portal to compare financial products and services (2021,
December). Personal communication.

Interview 2: A director at a mutual fund marketplace Raiz invest. (2022, January). Personal communication.

Interview 3: A chief marketing officer at a mutual fund marketplace Bareksa. (2022, January). Personal
communication.

Interview 4: The Indonesian Fintech Association. (2022, January). Personal communication

Interview 5: The Indonesian Joint Funding Fintech Association. (2021, December). Personal communication

Interview 6: A Chief Risk and Sustainability Officer at Amartha (2022, January). Personal communication

43
 APPENDIX 1.
Summary and Comparison of SNLKI 2013, 2017,
and 2021–2025.
Indicators SNLKI 2013 SNLKI 2017 SNLKI 2021-2025
Targets • Housewives Same but include new targets: Same as 2017
• SMSEs • People with disability
• Student • Migrant workers and
• Professionals future migrant workers
• Employees • Farmers and fishermen
• Retired • Disadvantaged,
Remote and Outermost
Communities

Principles N/A General Principles of Financial Same as 2017

Literacy
• Planned and Structured
• Target oriented
• Sustainable
• Collaboration

General Principles of Financial

Inclusion
• Measurable
• Affordable
• Right on target
• Sustainable

Programs Education and National Financially Literate Financially Literate

Campaign Increase public awareness • Developing a Strategy for
• Develop educational and understanding of financial the Implementation of
programs and national institutions, products and Age-appropriate Financial
financial literacy services. Literacy and Education
campaigns Activities
• Implement financial Wise Financial Attitude and • Developing Financial
literacy education Behavior Literacy and Education
programs and national Building a community with infrastructure based on
campaigns strong financial resilience in MOOC
Strengthening Financial the face of various financial • Improving financial
Literacy Infrastructure conditions including financial literacy in Sharia sector
• Develop a material shocks. • Developing financial
database and financial education through
literacy information Financial Access religious leaders
system Increasing the number of people • Affirmative action
• Prepare other financial using financial products and intensification
literacy supporting services
infrastructure Wise Financial Attitude and
Behavior
Financial Product and Service • Encouraging education
Development and literacy based on
risk-based consumer
Develop and market financial protection
products and services in • Develop tools and
accordance with the needs of materials to strengthen
the community in the fields of wise financial attitudes
Banking, Insurance, Financing and behavior
Institutions, Pension Funds, • Strengthening wise
Capital Markets and Pawnshops financial behavior through
outreach activities and the
development of financial
literacy data agents

44
Roadmaps N/A N/A 2021
• LMS development
• Curriculum Development
• Improving Islamic
Financial Literacy
• Improving Capital Market
Financial Literacy

2022
• Implement the National
Survey on Financial
Literacy and Inclusion
Indonesia (SNLIK)
• Curriculum Intensification
• Implementation of
Affirmative Action on 3T
Financial Literacy and
Education and Disabilities

2023
• Intensifying the Use of
LMS through Inter-Agency
Strategic Alliances

2024
• Expanding the Scope of
Financial Literacy and
Education Activities as
well as Public Financial
Access, Especially Generic
Financial Inclusion
Products

2025
• Enhancement of Digital
Financial Literacy and
Education Activities
(Dashboard Applications
and Smartphone-Based
Tools) and Evaluation
of the Effectiveness
of the 2021 SNLKI
Implementation

45
 ABOUT THE AUTHORS
Ajisatria Suleiman is a regulatory affairs practitioner specializing in the digital economy and
digital finance. He has assisted regional and national internet as well as digital finance industry
associations, international development agencies, global tech companies, and local startups. His
research interests cover personal data protection, digital sovereignty, and digital finance. He is
trained as a lawyer with a bachelor’s degree from the University of Indonesia, and a master’s
degree from Erasmus University of Rotterdam and University of Hamburg.

Thomas Dewaranu is a Researcher at CIPS. He holds a master’s degree in public policy from the
Australian National University and a bachelor’s degree in law from Universitas Indonesia. His
research interests cover rural development and poverty reduction. Prior to joining CIPS, he
worked in a commercial law firm in Jakarta, providing legal services to local and multinational
companies.

Noor Halimah Anjani specializes on the topics of agriculture and the digital economy in CIPS.
Prior to joining CIPS, she worked as a research assistant at Universitas Katolik Parahyangan on
women migrant workers and their financial remittances for poverty alleviation. She has published
articles on international affairs, such as the Belt and Road Initiative of the Chinese government.
She graduated with a Bachelor’s degree in International Relations at Universitas Katolik
Parahyangan and she is an alumnus of the CIPS Emerging Policy Leaders Program (EPLP) 2020.

46
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