Speaking at his inauguration ceremony on Saturday with a speech titled Banking and Social Finance: Sustainable Aspects for Welfare, Rofikoh highlighted the importance of financial institutions implementing sustainability, especially banks.

One way is by channeling funds to MSMEs through loans as this will automatically have an impact on increasing the Indonesian people’s level of financial inclusion.

As of 2019, public financial inclusion in Indonesia had only reached 76.19 percent, which is still considered insufficient and needs to be increased through, among other methods, broad financing channels for MSMEs and ultra-micro businesses.

"This rate shows that not all Indonesians can enjoy access to financial services, including those that have the potential to become an ultra-micro business owner. One of the determinants of the sustainability of a business is access to affordable capital. Data shows that MSMEs received Rp 1.091 quadrillion [US$78.8 billion) in financing in December 2020, about 25 percent of the total loans extended by banks,” said Rofikoh.

He said there were four reasons why it was difficult for MSMEs to get access to formal financing. First, there is a lack of information because MSMEs usually do not have access to auditing institutions and banking institutions, or at least the use of related technology, and their assets are not guaranteed.

Second, information asymmetry still persists, leading to the implementation of credit rationing from banks. Credit rationalization causes many MSMEs to be charged with high financing costs by banks to anticipate potential defaults from the borrowers.

Third, there is granularity or the character of financing for MSMEs, which so far have been popular but small. Fourth, there us financial monitoring for granular financing, thereby, reducing financial institutions.

"This requires a transformation between institutions in the financial industry in Indonesia, to further enhance collaboration and strengthen banking networks in the MSME sector. Lending to MSMEs is not only operated by the banking sector, but also by various institutions, including microfinancing company PT Permodalan Nasional Madani [PNM], which disbursed ultramicro financing [UMi] to 8 million women from underprivileged families. State-owned pawnshop Pegadaian also disbursed UMi financing to around 219,000 customers. Bahana Artha Ventura also supports about 270,000 people with UMi,” he said.

Apart from UMi, the people's business credit (KUR) policy aimed at MSMEs has been in place since 2007. Research shows KUR helps MSMEs because of the ease of requirements.

KUR is widely used for business expansions and to boost productive sector activities. Even recipients of KUR have said that they had implemented the concept of creating shared value by paying attention to social and environmental aspects in running a business. KUR customers believe that this distribution of financing creates mutual value between the bank and the borrower.

It is not surprising that during a pandemic, account officers are willing to add 20 percent of working hours to continue channeling KUR in order to continue maintaining business continuity from the supply and demand side so that the economy continues to grow.

Rofikoh said extensive access to capital and support from many institutions made MSMEs more likely to increase their business scale, which in turn will have a positive impact on national economic growth and the welfare of the community.

He said collaboration among various financial institutions was important to create the spirit of the sharing economy. Cooperation will also have a major impact on increasing inclusiveness, productivity and increasing people's income.

The growing scale of the MSME business will also make more and more funding available to financial institutions. Then, there will be more and more MSMEs and ultra-micro agents transactions through banks/ financial institutions, thereby increasing traffic to the activities of financial institutions. In the end, banks can also benefit by increasing the distribution of financing to upgrade MSMEs.

"This is in line with the notion of social banking or social finance, that the financial industry should return the use of money to real life or the real economy. This social mission can be expanded by channeling funds from banks through microfinance institutions,” Rofikoh said.

"By combining contributions from various stakeholders, it is hoped that financial institutions can further strengthen their objectives of balancing social roles and achieving profit. This is one of the ways to strengthen the role of the financial sector in helping society achieve its goals and become a great support system in society.”

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