Implementation of Activities to Enhance Financial Inclusion in the Financial Services Sector

To:
Directors/Managers of Financial Services Business Actors, whether operating conventionally or Sharia-based, At your location,

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 31/SEOJK.07/2017 CONCERNING IMPLEMENTATION OF ACTIVITIES TO ENHANCE FINANCIAL INCLUSION IN THE FINANCIAL SERVICES SECTOR

In view of the establishment of Financial Services Authority Regulation Number 76/POJK.07/2017 concerning the Enhancement of Financial Literacy and Financial Inclusion in the Financial Services Sector for Consumers and/or the Public (State Gazette of the Republic of Indonesia Year 2016 Number 315 and Supplement to the State Gazette of the Republic of Indonesia Number 6003), it is necessary to regulate the implementation regarding the enhancement of Financial Inclusion in the Financial Services Sector for Consumers and/or the Public in this Financial Services Authority Circular, as follows:

I. GENERAL PROVISIONS
In this Financial Services Authority Circular, the following terms are defined:

1. Financial Services Authority, hereinafter abbreviated as OJK, is an independent institution having the functions, duties, and authorities for regulation, supervision, examination, and investigation as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

2. Financial Services Business Actor, hereinafter abbreviated as PUJK, refers to Commercial Banks, Rural Banks, Securities Brokers, Investment Managers, Institutional Pension Funds, Insurance Companies, Financing Companies, Venture Capital Companies, Pawnshop Companies, and Guarantee Companies, whether operating conventionally or Sharia-based, in accordance with applicable laws and regulations in the financial services sector.

3. Consumer refers to parties who place their funds and/or utilize available services at PUJK, including but not limited to bank customers, capital market investors, insurance policyholders, and pension fund participants, in accordance with applicable laws and regulations in the financial services sector.

4. Financial Inclusion refers to the availability of access to various financial services institutions, products, and services according to the needs and capabilities of the public to enhance public welfare.

5. Business Plan is a written document describing the PUJK's business activity plans, including plans to improve business performance, and strategies to realize these plans in accordance with established targets and timelines, while maintaining prudent regulations and risk management application.

6. Financial Conglomeration refers to PUJKs within the same group or cluster due to ownership and/or control linkages.

II. OBJECTIVES OF FINANCIAL INCLUSION

1. The objectives of Financial Inclusion are:
   a. Increased public access to PUJK financial institutions, products, and services; b. Increased provision of financial products and/or services by PUJK according to the needs and capabilities of the public;
   c. Increased usage of financial products and/or services appropriate to the needs and capabilities of the public; and
   d. Increased quality of utilization of financial products and services according to the needs and capabilities of the public.

2. Achievement of Financial Inclusion objectives:
   a. Nationally, this can be known through surveys and/or reports on the realization of activities to enhance Financial Inclusion. b. Individually, PUJK achievement can be known through:

1. Increased access to financial institutions, products, and/or services is measured by indicators such as:
   a) expansion of office networks; b) expansion of cooperation with other parties; c) preparation of infrastructure in the form of office-less financial service facilities or other forms, which can expand public access to financial products and/or services to be used; and/or d) development of distribution channels (delivery channels) for financial products and/or services.
2. Increased availability of financial products and/or services is measured by indicators such as the addition of types of financial products and/or services available according to the needs and capabilities of the public across various distribution channels.
3. Increased usage of financial products and/or services is measured by indicators such as:
   a) increase in the number of savings/credit/financing/securities/pension fund accounts; b) increase in the number of insurance policies; c) increase in guarantee certificates; d) increase in venture capital business partners and/or debtors; and/or e) increase in the number of pawn transactions.
4. Increased quality of utilization of financial products and services according to the needs and capabilities of the public may include:
   a) increased consumer ability to not only use similar financial products and/or services but also other financial products and/or services; and/or b) increased consumer ability to measure and analyze financial products and/or services that can drive increased frequency of utilization of financial products and/or services appropriate to the desired financial management goals, including the ability to utilize complaint/dispute resolution services when needed.

III. SCOPE OF EFFORTS TO ENHANCE FINANCIAL INCLUSION

The scope of activities to enhance Financial Inclusion includes:

1. Expanding access to financial institutions, products, and/or services for target Consumers who are the subject of such access expansion; and/or
2. Providing financial products and/or services, including creating schemes or developing financial products and/or services appropriate to the needs and capabilities of Consumers and/or the public.

IV. PRINCIPLES OF IMPLEMENTATION OF ACTIVITIES TO ENHANCE FINANCIAL INCLUSION

1. Activities to enhance Financial Inclusion are formulated by PUJK as an annual program conducted at least once (1) per year.
2. Activities to enhance Financial Inclusion are conducted based on the following principles:
   a. Measurable: This principle is realized through planning and implementation considering the geographic scope, cost, time, technology system, and having mitigation for potential risks arising from financial products and/or services transactions, so that the provided access and developed products and/or services have characteristics appropriate to the targets of activities to enhance Financial Inclusion; b. Accessible: This principle is realized through activities easily accessible to all groups of society, including through affordable or free costs, expansion of office networks, development of distribution channels (delivery channels), utilization of technology, and simple processes;
   c. Targeted: This principle is realized through activities conducted according to the needs and capabilities of Consumers and/or the public who are the targets; and
   d. Sustainable: This principle is realized through continuous activities to achieve planned targets and having long-term aspects prioritizing the needs and capabilities of Consumers and/or the public.

V. FORMATION AND DUTIES OF THE FINANCIAL INCLUSION FUNCTION OR UNIT

1. Formation of Financial Inclusion Function or Unit
   a. Activities to enhance Financial Inclusion are conducted by PUJK by forming a Financial Inclusion function or unit. b. The Financial Inclusion function or unit referred to in letter a may reside in existing work units, except for risk management, internal audit, legal, and compliance units.
   c. The Financial Inclusion function or unit referred to in letter a must be led by an official at least one (1) level below the Director.
   d. The Financial Inclusion function or unit is responsible to the Directors. e. In forming the function or unit referred to in letter a, including integrated functions or units for Financial Conglomeration, PUJK conducts self-assessment considering:

1. PUJK asset size;
2. number of PUJK offices;
3. number of PUJK financial products and/or services;
4. number of Consumers; and/or
5. number of PUJK human resources.
   f. In cases where the parent company is not a PUJK as referred to in this OJK Circular, the main entity of the Financial Conglomeration is the PUJK designated according to the Financial Conglomeration agreement. An example of the Financial Inclusion function or unit organizational chart is contained in Appendix I, which is an integral part of this OJK Circular.

2. Duties of the Financial Inclusion Function or Unit
   The Financial Inclusion function or unit has the following duties:
   a. Formulating guidelines for implementing activities to enhance Financial Inclusion, containing at least:

1. Fulfillment of the principles of implementing activities to enhance Financial Inclusion, explaining the application of the principles referred to in Section IV;
2. Formulation of plans and reports on plans for activities to enhance Financial Inclusion as referred to in Section VI number 1;
3. Implementation of activities to enhance Financial Inclusion as referred to in Section VII; and
4. Formulation of reports on the realization of activities to enhance Financial Inclusion as referred to in Section VIII number 2.
   b. Planning activities to enhance Financial Inclusion, conducted by:
5. Analyzing various information including financial literacy and inclusion levels, income levels, regional economic growth rates, and/or the number and demographic composition of the target public for activities to enhance Financial Inclusion;
6. Conducting observations of areas to be locations for implementing activities to enhance Financial Inclusion;
7. Analyzing the needs and capabilities of target community groups to access financial products and/or services or to use financial products and/or services;
8. Analyzing the strengths and weaknesses of financial products and/or services used by Consumers to be developed as affordable products and/or services for target Consumer segments and/or specific public segments;
9. Preparing cooperation with other parties (if any);
10. Determining expected achievements from implementing activities to enhance Financial Inclusion;
11. Determining the form of activities to enhance Financial Inclusion based on numbers 1) through 6); and
12. Determining parameters and forms of monitoring and/or evaluation.
    c. Implementing activities to enhance Financial Inclusion while applying the principles referred to in Section IV.
    d. Monitoring and evaluating the implementation of activities to enhance Financial Inclusion already conducted by PUJK, including applying the principles referred to in Section IV, by:
13. Formulating and using monitoring forms that ensure activities to enhance Financial Inclusion are conducted according to plan;
14. Evaluating the process and results of implementing activities to enhance Financial Inclusion;
15. Identifying achievements, obstacles, and challenges in implementing activities to enhance Financial Inclusion and formulating subsequent improvement recommendations; and
16. Formulating monitoring and evaluation reports on activities to enhance Financial Inclusion.
    e. Submitting reports on plans and realizations of activities to enhance Financial Inclusion. f. Providing input to business units conducting research and development of financial products and/or services to develop products and/or services appropriate to the needs and capabilities of Consumers and/or the public, obtainable from the results of monitoring and evaluation of activities to enhance Financial Inclusion. g. Providing input to the Financial Literacy function or unit regarding the formulation of Financial Education materials related to financial products and/or services. In providing input to the Financial Literacy function or unit, the Financial Inclusion function or unit:
17. Provides information regarding the characteristics of financial products and/or services, including benefits, costs, and risks of financial products and/or services, Consumer rights and obligations, methods of access, and transaction mechanism information for developed financial products and/or services as information for formulating Financial Education materials; and
18. Provides information regarding target Consumers and/or the public using developed financial products and/or services.
    h. Other duties related to the implementation of activities to enhance Financial Inclusion.

VI. PLANNING STAGE OF ACTIVITIES TO ENHANCE FINANCIAL INCLUSION

1. Activity Plans to Enhance Financial Inclusion
   a. Formulation of Activity Plans to Enhance Financial Inclusion

1. Activity plans to enhance Financial Inclusion must contain at least:
   a) Scope of activities to be conducted as referred to in Section III number 1; b) Targets; c) User targets; d) Schedule and implementation areas; e) Parameters and forms of monitoring and/or evaluation; and f) Cooperation with other parties and the role of each party (if any).
2. PUJK Directors assign the Financial Inclusion function or unit to formulate activity plans to enhance Financial Inclusion as referred to in number 1).
3. PUJK Commissioners ensure PUJK Directors have activity plans to enhance Financial Inclusion as referred to in number 1).
4. Determination of activity plans to enhance Financial Inclusion refers to the Financial Inclusion strategy in the Indonesian financial services sector.
   b. Submission of Activity Plan Reports to Enhance Financial Inclusion
5. Directors are responsible for the content of the activity plan report to enhance Financial Inclusion.
6. Directors ensure the activity plan report to enhance Financial Inclusion is submitted to OJK in accordance with applicable regulations.
7. The objectives of the activity plans referred to in number 1) are stated in the submission of activity plan reports, specifically those related to expanding access and/or providing financial products and/or services.
8. In cases where regulations govern PUJK Business Plans, the activity plan report is included in the PUJK Business Plan.
9. Inclusion of the activity plan report as referred to in number 4) is contained in a separate section within the PUJK Business Plan.
10. Activity plan reports are submitted to OJK in accordance with regulations governing Business Plan reporting for each PUJK.
11. In cases where PUJK is part of Financial Conglomeration, activity plan reports must be submitted to OJK by each respective PUJK.
12. In cases where PUJK cooperates with other PUJK, each PUJK formulates and submits activity plan reports to enhance Financial Inclusion according to their respective roles, such as providing human resources, funds, or venues.
13. In cases where no regulations govern PUJK Business Plan reports, activity plan reports must be submitted to OJK no later than November 30 before the year in which activities to enhance Financial Inclusion are implemented.
14. In cases where the deadline for submitting activity plan reports as referred to in number 9) falls on a holiday, the activity plan report must be submitted no later than one (1) working day thereafter.
15. Activity plan reports are submitted to OJK, specifically the work unit in the supervision sector according to the industry of each PUJK, with copies to the work unit in the education and consumer protection sector having the function of coordinating literacy, information, and education activities, as well as enhancing and developing financial inclusion for consumers, the financial services industry, and the public.
16. Submission of copies as referred to in number 11) is conducted through the electronic reporting system provided by OJK.
17. In cases where submission of copies of activity plan reports to enhance Financial Inclusion through the electronic reporting system as referred to in number 12) is unavailable or experiencing disruptions, submission is conducted via letter to the work unit in the education and consumer protection sector having the function of coordinating literacy, information, and education activities, as well as enhancing and developing financial inclusion for consumers, the financial services industry, and the public.
    The report format and filling procedures are in accordance with the format contained in Appendix II, which is an integral part of this OJK Circular.
    c. Adjustment/Modification of Activity Plan Reports to Enhance Financial Inclusion
18. Adjustment/modification of activity plan reports to enhance Financial Inclusion may be conducted based on:
    a) OJK request; and/or b) PUJK initiative.
19. Adjustment of activity plan reports to enhance Financial Inclusion based on OJK request as referred to in number 1) letter a) is submitted at:
    a) Times as regulated in regulations governing PUJK Business Plans; or b) No later than twenty (20) working days after the date of the OJK request letter in cases where no regulations govern PUJK Business Plans.
20. Modification of activity plan reports to enhance Financial Inclusion based on PUJK initiative as referred to in number 1) letter b) considers:
    a) Submission of modifications is conducted:
    (1) In accordance with regulations governing PUJK Business Plans; or (2) In cases where no regulations govern modifications to PUJK Business Plans, modification reports are submitted no later than twenty (20) working days before implementation and do not exceed June 30 of the current year. b) In cases where no regulations govern the number of modifications to PUJK Business Plans, PUJK may modify activity plan reports to enhance Financial Inclusion at most one (1) time for one (1) reporting period.
21. Adjustments/modifications of activity plan reports as referred to in number 1) are submitted to OJK, specifically the work unit in the supervision sector according to the industry of each PUJK, with copies to the work unit in the education and consumer protection sector having the function of coordinating literacy, information, and education activities, as well as enhancing and developing financial inclusion for consumers, the financial services industry, and the public.
22. Submission of copies as referred to in number 4) is conducted through the electronic reporting system provided by OJK.
23. In cases where submission of copies of adjustments/modifications to activity plan reports to enhance Financial Inclusion through the electronic reporting system as referred to in number 5) experiences disruptions, submission is conducted via letter to the work unit in the education and consumer protection sector having the function of coordinating literacy, information, and education activities, as well as enhancing and developing financial inclusion for consumers, the financial services industry, and the public.

2. Parameters and Forms of Monitoring and/or Evaluation of Activity Plans to Enhance Financial Inclusion
   When planning activities to enhance Financial Inclusion, PUJK determines parameters considering indicators that may include increased access, increased availability of financial products and/or services, increased usage of financial products and/or services, and/or increased quality of utilization of financial products and services, as referred to in Section II number 2) letter b). These parameters are used in monitoring and/or evaluation considering:
   a. Monitoring forms

1. Conducted as a means to observe and ensure that activities to enhance Financial Inclusion will proceed according to the formulated plan; and
2. Conducted monthly, quarterly, annually, and/or other periods through direct field monitoring and/or monitoring via reports.
   b. Evaluation
3. Used as a means to determine and assess the level of success of implementation and as part of policy refinement related to financial products and/or services;
4. Activity evaluation may include:
   a) Considering administrative data such as activity reports and implementation documentation; b) Considering data and reports from previous periods to determine trends and patterns; c) Conducting success/achievement analysis through comparison of planning and realization of activities; d) Analyzing information regarding the alignment of activities to enhance Financial Inclusion with established targets; and e) Analyzing other monitoring results (if any);
5. Evaluation of processes and results aims to determine:
   a) Alignment between activity plans and realized activities; b) Obstacles faced and resolution efforts undertaken; c) Effectiveness in implementing financial inclusion activities; d) Alignment of implementation with policy guidelines; e) Overall impact of activities to enhance Financial Inclusion on Consumers and/or the public; and f) Impact of activities on Consumers and/or the public from various community segments.

VII. IMPLEMENTATION STAGE OF ACTIVITIES TO ENHANCE FINANCIAL INCLUSION

1. Activities to enhance Financial Inclusion are conducted in the form of:
   a. Expanding public access to financial institutions, products, and/or services, including providing various facilities for special needs community groups to access financial products and/or services, including but not limited to:

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1. addition of office networks;
2. addition of cooperation with other parties;
3. preparation of infrastructure in the form of non-branch financial service facilities or other forms, which can expand public access to financial products and/or financial services to be used; and/or
4. development of distribution channels for financial products and/or financial services;
   b. providing financial products and/or financial services, including the creation of schemes such as Micro Financial Services (LAKU MIKRO) or the development of financial products and/or financial services that are appropriate to the needs and capabilities of Consumers and/or the public, such as basic financial services (basic saving account), micro insurance, retail mutual funds, gold savings, productive micro financing, student savings or Student Deposits (SimPel/SimPel iB), and the addition of financial service features to existing financial products and/or financial services. The creation of schemes or the development of financial products and/or financial services is carried out in accordance with the characteristics of each financial product and/or financial service as well as the PUJK industry; and/or
   c. maintaining the sustainability of the expansion of access as referred to in letter a and the provision of financial products and/or financial services as referred to in letter b, among others, by managing and/or maintaining existing financial products and/or services through monitoring the number of consumers and the sustainability of the financial products and/or financial services.

2. The implementation of activities to enhance Financial Inclusion for Consumers and/or the public is adjusted to the capabilities of the PUJK.
3. The implementation of activities to enhance Financial Inclusion can be carried out in cooperation with other parties.
4. Other parties as referred to in paragraph 3 include, among others, authorities, other PUJK, government agencies, academics, business entities,
   organizations, individual agents, both from within and outside the country.

VIII. EVALUATION STAGE OF ACTIVITIES TO ENHANCE FINANCIAL INCLUSION

1. Evaluation of the Implementation of Activities to Enhance Financial Inclusion
   a. PUJK conducts an evaluation of the implementation of activities to enhance Financial Inclusion, both regarding the implementation of activities and the processes related to the aforementioned activities as referred to in Roman VI paragraph 2 letter b number 2). b. The results of the evaluation of the implementation of activities to enhance Financial Inclusion are used as a tool to know and assess the progress of the success level of the implementation of activities each year.
   c. The results of the evaluation of the implementation of activities to enhance Financial Inclusion as referred to in letter b contain:

1. results of activity evaluation as referred to in Roman VI paragraph 2 letter b number 2);
2. comparison of the implementation of activities to enhance Financial Inclusion previously with plans and realization each year;
3. achievement of established goals and matters that have not been achieved (if any) including explanations; and
4. obstacles faced and efforts to overcome the aforementioned obstacles and mitigation of similar obstacles in the following year.
   d. The results of the implementation evaluation as referred to in letter c may also include recommendations for improving policies related to financial products and/or financial services.

2. Report on the Realization of Activities to Enhance Financial Inclusion
   a. Preparation of the Report on the Realization of Activities to Enhance Financial Inclusion

1. The report on the realization of activities to enhance Financial Inclusion contains:
   a) the scope of activities implemented as referred to in Roman III paragraph 1; b) targets; c) realization of user targets; d) schedule and area of activity implementation; e) parameters and forms of monitoring and/or evaluation; f) results of monitoring and/or evaluation; and g) participation of other parties (if any). The form of the report and the procedure for filling out the report are in accordance with the format in Appendix III, which is an integral part of this OJK Circular.
2. The Board of Directors of the PUJK assigns the Financial Inclusion function or unit to prepare the report on the realization of activities to enhance Financial Inclusion as referred to in number 1).
3. The Board of Directors is responsible for the content of the report on the realization of activities to enhance Financial Inclusion.
4. The Board of Commissioners of the PUJK ensures that the Board of Directors of the PUJK implements the activity plan to enhance Financial Inclusion as referred to in Roman VI paragraph 1.
   b. Submission of the Report on the Realization of Activities to Enhance Financial Inclusion
5. The Board of Directors ensures that the report on the realization of activities to enhance Financial Inclusion is submitted to the OJK.
6. In the event that there are regulations governing the report on the realization of the PUJK Business Plan, the realization report as referred to in letter a is included in the realization report of the PUJK Business Plan.
7. The inclusion of the realization report of activities as referred to in letter a is contained in a separate section in the realization report of the PUJK Business Plan.
8. The realization report as referred to in letter a is submitted to the OJK in accordance with regulations governing the reporting of the realization of the Business Plan for each PUJK.
9. In the event that the PUJK cooperates with other PUJK, each PUJK prepares and submits a report on the realization of activities to enhance Financial Inclusion in accordance with their respective roles.
10. In the event that there are no regulations governing the report on the realization of the PUJK Business Plan, the realization report as referred to in letter a is submitted to the OJK no later than January 30 of the following year.
11. In the event that the deadline for submission of the realization report of activities as referred to in number 6) falls on a holiday, the realization report is submitted no later than 1 (one) working day thereafter.
12. The realization report of activities as referred to in letter a is submitted to the OJK c.q. the working unit in the field of supervision according to the industry of the respective PUJK, with a copy to the working unit in the field of education and consumer protection that has the function of coordinating literacy, information, and education activities as well as enhancing and developing financial inclusion for consumers, the financial services industry, and the public.
13. The submission of copies as referred to in number 8) is carried out through the electronic reporting system provided by the OJK.
14. In the event that the submission of copies of the realization report of activities to enhance Financial Inclusion through the electronic reporting system as referred to in number 9) is not yet available or experiences disruption, the submission is carried out via letter to the working unit in the field of education and consumer protection that has the function of coordinating literacy, information, and education activities as well as enhancing and developing financial inclusion for consumers, the financial services industry, and the public.

This copy is in accordance with the original
Legal Director 1
Legal Department signed
Yuliana

IX. TRANSITIONAL PROVISIONS
The submission of the activity plan report to enhance Financial Inclusion as referred to in Roman VI paragraph 1 for the first time is no later than 20 (twenty) working days since this OJK Circular takes effect.

X. CLOSING PROVISIONS
The provisions in this OJK Circular take effect on December 28, 2017.

Established in Jakarta on June 20, 2017
MEMBER OF THE BOARD OF COMMISSIONERS
FOR EDUCATION AND CONSUMER PROTECTION
FINANCIAL SERVICES AUTHORITY, signed
KUSUMANINGTUTI S. SOETIONO