In this digital age, managing finances has become increasingly important. Financial literacy and inclusion have become key to unlocking the nation's economic progress. In a live interview with Seasia Viewpoint, Dr. Adi Budiarso, Head of the Financial Sector Policy Center at the Ministry of Finance of the Republic of Indonesia, highlighted the critical role of financial literacy and inclusion in driving Indonesia's economic growth.
Dr. Budiarso explained that financial literacy provides individuals with the knowledge and skills necessary to make sound financial decisions. Meanwhile, financial inclusion provides access to financial products and services, helping people achieve financial freedom. These elements are essential to Indonesia's economic growth as they enable people to save more, invest wisely, and make better financial decisions.
The 2024 Milieu Insight study found that 43% of Southeast Asians save only 10% of their income and more than half (54%) do not actively invest their money, indicating a missed opportunity for financial growth and wealth accumulation.
Dr. Budiarso emphasized that financial literacy is the key to financial freedom. He defined financial freedom as having complete control over one's finances and being able to make decisions based on desires and goals rather than financial constraints.
He also highlighted the importance of financial literacy for the growth of small and medium enterprises (SMEs) in Indonesia. Considered the backbone of the economy, SMEs often face challenges in accessing financial services, limited market access, low technology adoption and lack of skills.
This sector contributes over 60% of Indonesia's GDP and 15.6% of non-oil and gas exports. Therefore, improving financial literacy can help SMEs make better financial decisions and secure the financing they need to grow.
The Indonesian government is committed to improving financial literacy, with a goal of reaching 90% of the population with financial education by 2025. Despite challenges such as lack of awareness and access to financial products in remote areas, Indonesia continues to promote financial literacy and inclusion through various initiatives, including the development of a national financial literacy strategy and the establishment of a Financial Inclusion Task Force.
This is a critical step given Indonesia's large young population, many of whom work in the informal sector. Improving financial literacy is expected to drive economic growth and improve social welfare, especially for the younger generation. With good financial literacy, young people can avoid forming a sandwich generation due to a future without savings.
Dr. Budiarso also highlighted the importance of digitalization in promoting financial literacy and inclusion. However, he cautioned that digitalization could create new risks if people are not adequately educated on how to use digital financial products and services. Therefore, digitalization must be accompanied by adequate financial education to ensure that people can use digital financial products and services safely and effectively, avoid misuse, and achieve their financial goals.
At the end of the interview, Dr. Budiarso discussed the importance of sustainable finance and outlined several government initiatives to achieve this goal. These efforts include working with various parties such as government agencies, the private sector, NGOs, and community organizations.
The government has also launched initiatives such as issuing green bonds and developing a green taxonomy, which will serve as a classification system to identify environmentally friendly investments. These efforts are aimed at supporting Indonesia's transition to a low-carbon economy.
