At the end of 2014, the Financial Services Authority (“FSA”) passed a new regulation number 19/POJK.03/2014 (“Laku Pandai Regulation”) on Financial Services Using Virtual Office in the Framework of Inclusive Finance, commonly known in Indonesia as “Laku Pandai.” Laku Pandai is the activity of providing banking services and/or other financial services without branch offices, but through cooperation with other parties (agents) and supported by the use of information technology tools, such as cell phones, electronic data capture (“EDC”) and/or Internet banking. This regulation has enabled banks, along with other financial services firms such as insurance companies (“Financial Institutions”), to expand their financial services to people in rural, remote and low income areas without having to open physical branches.

The expansion of financial services to the scattered population in the huge Indonesian archipelago is expected to boost economic growth and contribute to social equality. Financial Institutions, especially banks and financial intermediary institutions, will play a significant role to drive such economic growth.

The Laku Pandai Regulation provides that Financial Institutions may become the operator of Laku Pandai after obtaining approval from the FSA. The products that may be offered by the Financial Institutions are basically financial products geared to the needs of Indonesia’s rural and underclass population, without bank accounts. The products covered are: (i) Basic Savings Account (conventional and sharia) (“BSA”), (ii) credit and financing for micro customers, (iii) Micro Insurance, and/or (iv) other financial products approved by the FSA.

BSA is an account with characteristics among others of a maximum balance of Rp 20,000,000 (twenty million Rupiah), a maximum monthly cash withdrawal or transfer of Rp 5,000,000 (five million Rupiah), is free of fees, and is interest bearing on bank balances. Credit and financing for micro customers has the characteristics among others of a maximum loan period of one year and maximum loan value of Rp 20,000,000 (twenty million Rupiah). Micro Insurance means insurance products geared to the lower income segment.

Further, the Laku Pandai Regulation also enables banks, as the operators of Laku Pandai, to work with agents to provide the products. The agent, an individual and/or business entity, acts as the representative of the bank to provide banking services to the target populace by using digital technology.

Laku Pandai provides opportunities to Financial Institutions and, importantly, technology providers to participate in mobile and digital banking in Indonesia to a huge untapped market.

This article is courtesy of NYDS Law Firm, Jakarta, in association with Robert Wang & Woo LLP, Singapore. Please contact Mr. P. Balachandran at for more information.