Policy Advocacy Across Indonesia: A Promising Beginning for Women Ultra-Micro Entrepreneurs

February 24, 2023

By Vitasari Anggraeni, Elwyn Panggabean, Freya Nadira

Women’s World Banking identifies regulations, mandates, or country level priorities such as presidential mandates or G20 recommendations that can be the driving force for women’s financial inclusion and engagement. During the 2022 G20 Presidency, held by Indonesia, women’s entrepreneurship served as one of the three key topics covered at the Ministerial Conference on Women Empowerment, where a collective effort was presented in support of women’s empowerment and gender equality. Women’s World Banking was invited to be involved in multiple G20 workstreams and ministerial conferences, integrating evidence from our research and advisory solutions work. Near the close of the Presidency, the Leaders’ Declaration endorsed the G20 Financial Inclusion Framework on “Harnessing Digitalization to Increase Productivity and Foster a Sustainable and Inclusive Economy for Women, Youth and MSMEs.” To further the work after the Presidency wrapped and ensure women’s financial inclusion played a central role, we contributed to the development of the National Strategy for Women’s Financial Inclusion, Women’s Digital Transformation Guideline, and Gender-lens Entrepreneurial Guideline.

Policy in Action

Women’s World Banking latest research on ultra-micro businesses, in partnership with Government Investment Unit, Pusat Investasi Pemerintah (PIP), defines three different categories of ultra-micro entrepreneurs distinct by characteristics, needs and behavior towards financial products: entrepreneur by necessity, stable entrepreneurs, and growth-oriented entrepreneurs.

Read The Report

After focusing on clarifying the definition of this ultra-micro segment in the Job Creation Law to prevent the exclusion of beneficiaries from relevant government programs, this research led Women’s World Banking to begin developing a turnkey solution in partnership with PT. Bank Rakyat Indonesia (BRI) to increase access to and usage of savings and loans for ultra-micro entrepreneurs. Leveraging insights from both our initial research and project with BRI, Women’s World Banking identified three crucial policy recommendations to PIP to further amplify financial inclusion for the women ultra-micro entrepreneurs across Indonesia.

  1. Use gender-disaggregated data to inform policymaking

The ultra-micro borrowers under PIP distribution channel are 94% women, which presents an incredible opportunity. Collecting gender disaggregated data to analyze borrowers’ different needs and behavior can inform better program and product designs. It can also demonstrate nuances in the different characteristics within the ultra-micro borrowers.

  1. Design women-centered digital financial capability strategy 

If PIP developed, and/or encouraged financial services providers to design, specific educational strategies tailored to the three different segments of ultra-micro entrepreneurs, financial inclusion and engagement would increase. The nuanced needs and behaviors between the three ultra-micro entrepreneur segments tell us that there is a need for more accessible technical support (e.g. educational communication strategy) tailored to the segments’ stage of entrepreneurship. There is also a large product usage gap, where a women-centered digital financial capability strategy could help increase adoption of products creating greater product/program relevancy and enabling customers to reap the full benefits of the product/program. Women’s World Banking has seen across several markets that designing with women in mind leads to greater adoption for men and women, whereas designing with men in mind leaves women behind.

  1. Expand ultra-micro loans beyond Java Island

Java Island is the densest population in Indonesia and home to 61% of Indonesia’s micro entrepreneurs1. According to the UMi distribution data in 2020, 70% of Indonesia’s ultra-micro loan portfolio is concentrated in Java Island, discouraging equal economic opportunity to those beyond the island where the rural-poverty rate is higher. Since most ultra-micro entrepreneurs are part of the “necessity driven” segment, it is important that this vulnerable group has access to subsidized loans regardless of their geographical location. Our research also shows that broadening distribution of the loan will reach more women entrepreneurs. The President of Indonesia has mandated that ultra-micro loans must be equally distributed to people living outside of Java Island to ensure social justice.

We are pleased to report that PIP is leveraging the three different characteristics of ultra-micro entrepreneurs to design a policy pathway to support these customers on their journey to becoming financially independent. In July 2022, PIP mandated PT Pegadaian to channel 40% of its loan portfolio to outside Java Island, so far impacting a total of 57,700 women. And since collective action is crucial to scale women’s economic empowerment and to lead to greater policy change, in August 2022, Women’s World Banking and PIP recommended these policies to other ministries, including the Ministry of Cooperatives and SME, and the Ministry of Social Affairs. PIP is also championing our findings to the Ministry of Finance, as the regulator of ultra-micro loan, for the policy actions to be mandated to other subsidized loan grand-design.

It is early in the journey of our policy advocacy work in Southeast Asia, but we are confident that great impact is on the horizon with the right partners and gender intentional policies in place.

The above-mentioned work cannot be solely attributed to Women’s World Banking as a variety of stakeholders had also played a significant role in shaping the policy agenda. It is impervious for us to map out key stakeholders that that carry a similar message from the early stages of our work, which is why we were partnering with PIP. Advocating for low-income women entrepreneurs is very much align with PIP agenda as they manage the fund to ultra-micro entrepreneurs which consist of 95% women. Key findings that we address in the research and policy brief are done in close coordination with PIP as the decision maker to ensure the sustainability of the implementation.