Here is a draft of the findings section of my ‘big’ paper about youth financial inclusion in Eastern Indonesia. The 15 page paper summarizes about 30 hours of in-depth interviews that I conducted earlier this year. While writing it, I thought to myself several times, “How I miss the trips to the village!” I will never forget all the times that I held my breath when the young people talked about how hard it was for them to make a living. They were always so kind and gracious, and maybe happier than some of us. One day we made rujak (a young papaya salad with sweet chili sauce) in Lombok. It was a quite a production, requiring over ten people to make one rujak. Everybody pitched in their own way. Then, when they started eating it they shreiked like little children. The chili sauce had about seven too many peppers. One of them remarked, “The only one who likes it this hot is the one who added the chilis.”
An analysis of the overarching themes in the data concludes in the following findings:
Youth generally lack financial literacy – There is a lack of financial literacy when it comes to financial products among the youth we interviewed. Most of them have never visited a bank. Except for a very few youth, youth could not understand the banking concepts that were in the market research questions unless the interviewer explained the concepts to them. However, they tend to know that banks and other microfinance services exist. They know people in their village who use banking institutions. Youth also mentioned learning about financial literacy after a negative experience. For example, Yana knows the importance of saving large amounts of cash in a bank because her father started to use bank services after he lost 14 million Rp (about 1400USD) on his way back from Malaysia. Nazri learned about interest rates and terms when he borrowed three million Rp from a moneylender to migrate to Malaysia.
Youth feel uncomfortable going to the bank – One challenge to reaching a youth market based on study of the demand is discomfort with using formal financial services. First, youth perceive the products as not used by people who do not have a formal wage. They perceive themselves as ‘masyarakat’ (common people) or ‘farmers’ and therefore different from people who have salaries and use banks, such as teachers and army officers.
When asked how he thinks people perceive him, 16-year-old Dani who did not finish primary school, said this: “Coming from people like me…well…[they perceive me] as someone who does not have a degree. [They feel they] have more and are smarter.”
As members of a close-knit village, the youth respondents tend to not want to stray from the norm. Behavior change, it would appear, requires someone ‘brave’ enough to try first.
“I have no courage to go there [the bank]. I don’t even think about it…. I am afraid, I mean I never have been to the bank before, so I am afraid to take a loan from a bank.” – 21 year old Delfi
Second, they were also were reluctant to save, borrow or lend to people whom they felt they did not know well.
The respondents in West Timor had the choice to save with loan officers in a newly launched savings account with an BPR in West Timor called TLM. Jeni saved about 30,000 Rp every week this way. She said she preferred this method to the local financial cooperative: “I choose TLM just because…. I am happier [with] them. Many people here choose TLM.” She mentioned that she trusted TLM because they had a relationship with the church she attended.
Third, youth perceived that there was either too much paperwork involved in banks or that the branch was too far for them to travel to justify keeping it outside their homes. Youth who did have BRI accounts opened them when they had a large enough amount of savings. The average threshold amount is difficult to gauge without a larger sample. In this study, there were five youth who put their savings in the bank if it reached more than 1 million Rp (about 100USD).
Fourth, they perceived opportunity costs to visiting a bank, including time and cost in terms of productive activities and travelling to the city.
Youth use informal financial services – The most common form of saving was in the home. Usually it was in a bamboo box called a celengan. Ayu and Hilmiyah, always had about 100,000Rp each week for the following week’s living expenses. Jeni always had about 300,000Rp that she used for contingency expenses for her cake business. Other informal methods included saving with in livestock, saving with a loan officer/MFI, saving in school, saving and borrowing with a cooperative, arisan (group savings and loan mechanism), borrowing in-kind or zero percent loans from friends and family, or a loan at interest from a moneylending neighbor. Even if a youth knows how and where to access bank products, they are reluctant to make the decision to join because of the perceived convenience of services that exist in their village.
18-year-old Edi perceived borrowing from his family as the fastest and easiest way to pay for a sudden emergency that cost him about 100USD, but felt uncomfortable about asking them if they did not have the money.
Yusi: Is it convenient to borrow from family?
Edi: Yes, it’s convenient if the family has it. I can borrow when the family has the money whenever. Apart from that, it’s convenient because I can get it right away.
Yusi: If they are not alright, what then?
Edi: That’s all. If there is no money, then it’s not cool to ask, and then I don’t feel good about asking.
23-year-old Iwar saved in an arisan that she participated in with other women in the village once every month for the past five months and enjoyed the ability to buy things she would not have been able to afford on her own and because she enjoyed the socializing aspect:
“If our arisan falls, and if we need it, yes, we are happy for sure. Just that. For example… also it’s fun because friends like to go to the arisan…It’s fast to get a loan…Yeah we just relax-relax (laughs). The profits are the advice that we friends give each other.”
While convenient, the most commonly perceived disadvantage of borrowing from others was the risk of gossip and losing one’s reputation. Delfi’s grandmother died and the family was forced to borrow a pig from a neighbor, which they are paying back “little by little”. The family also had to pay about 1.2 million Rp for the burial and the rice for the feast. When asked why she wouldn’t take out another loan, she answered, “It’s hard to take out a loan for us…. If we borrow from people around here, they don’t really believe in us.”
Youth face several barriers to managing their money (savings habit and on-time loan repayment). They include their small and unsteady incomes, lack of discipline and they may be less committed to saving long-term because of their mobility.
Youth who were a part of this study worked in small farm agricultural, or owned small businesses. They were motor taxi drivers, kios (convenient store) owners, fish sellers, vegetable sellers and to a lesser degree kindergarten or primary school teachers and warung (restaurant) employees. Unless they received a sufficient amount in remittances or worked in the formal sector, youth had an unsteady income, which affected their ability to save and budget for unexpected expenses.
“Every month saving is not steady. Because we teach in a private school, so the income is not steady. So we don’t know when we can save our salary.” – 24 year old Arnold
When we asked 17-year-old Roni if he saved on his own, he explained that he is just a teenager and lacks the discipline to save:
Yusi: Roni, do you save? How do you do it?
Roni: Never. Money that is given to me, it’s already gone.
Yusi: Why didn’t you think about saving it?
Roni: Because with teenagers, we spend what we get right away.
24-year-old Nazri’s mobility has affected his ability to be loyal to just one financial institution. For example, he withdrew all his savings at the school after he realized he was going to Malaysia instead of continuing on to junior high school. He discontinued saving in the LKP cooperative after he decided to Malaysia for a second time. He discussed why he has taken so long to finish school, which he attributes to the unemployment and underemployment in his village and timely opportunities:
“I am a madrasah junior high school student. Actually I just graduated and will go on to high school. I graduated primary school in 1999 but I took a break before joining the madrasah. In 2001, after my break, I had a small problem [paying for school]. Because there was no work at home, I went to Malaysia for two years, and then I came back here, joined a computer course in Mataram, but it wasn’t useful. Finally, I went back to Malaysia, and in 2008 I came back here again. Here, you know, every day is just like this. Last year I wanted to register to go to Singapore, but there was some difficulty and I decided it was better to just attend school.”
There is demand for financial products – There is a large demand for formal financial products. Even if a youth did not have any experience with financial instruments, when asked if they needed them they always mentioned at least a few that they felt they needed.
For example, 24-year-old Arnold expressed feeling dissatisfied about never having very much money at any one time and perceived a minimum balance account as an opportunity to create a nest egg: “If there is a choice like that [50,000 Rp minimum balance], I like that…. The reason is because at least it’s nominal. It is a pretty big deal for common people like us.”
Remittances can serve as an entry point to formal banking. All youth had some a migrant family member or had at one point migrated and sent home remittances. Several youth who have migrant siblings mentioned that they needed ATM cards and bank accounts in case they wanted to receive money from relatives.
An improved understanding of the behaviors, needs and demands that motivate youth to use financial services warrants improved product design. This paper offers recommendations regarding products and features that would resonate with rural youth of Eastern Indonesia who live in similar conditions. One should bear in mind, however, the success of a new financial product, policy or program will depend on sound commercialization and marketing strategy. 
Market segmentation – The youth market can be segmented, and financial products designed for their particular segmented needs, based on age, school going status, remittance relationship, degree of financial responsibility and ability to save:
– Age –youth with a KTP national identity card who are eligible to open a bank account (age 17-24) vs. youth who are not old enough (age 15-16).
– Degree of financial responsibility – youth who contribute minimally to household expenses vs. breadwinner who acts as head of household because parent breadwinner has died or is unemployed. The findings from this paper finds that taking on a large financial responsibility is a better segmentation nexus than age because youth can be forced to take on adult roles at any age depending on their family’s particular circumstances.
– Ability to save – youth who own an amount of money large enough to not feel safe keeping in the home vs. those will an amount of money they perceive as being too small to validate a trip to the bank.
– Remittance experience – youth have experience sending or receiving remittances with a banking institution vs. youth those who have not. Includes married women with husbands who regularly send remittances, current or former migrant workers that have sent remittances and family members of migrant workers who send remittances.
These segmentations suggest that youth use financial services differently based on their maturity level. It also suggests that young people use financial services that are pertinent to their lives: as individuals who must cover their own personal expenses and as members of a family or larger social unit, or both. They are also slightly different from those found in the Plan study (age and marriage status) and the Micra study (employment status).
Products and features
While products and features are segmented to some extent, there were some general trends for all youth:
– Savings accounts – Savings is an appropriate response to the varied aspirations, responsibilities, financial difficulties and money management challenges that youth face. While youth admittedly used microfinance loans to smooth consumption needs, this is most likely not a sustainable solution to their long-term consumption needs. Youth who had a history of poor repayment and were constantly probed by a loan officer or moneylender became averse to taking out additional loans. In addition, many researchers point to the so-called “asset effect” of building up assets through savings. They argue assets rather than consumption are the key to economic improvement for the poor; asset accumulation provides not only material comfort but greater psychological and social well-being as well (Zimmerman and Deshpande 2010: 2).
– Mobile products – In East Indonesia, where there are depressed wages resulting from poor agricultural profits, youth will want to migrate for work. Knowing this, it would be wise to offer mobile products and other products that accommodate the transnational nature of the financial exclusion problematic.
– Mobile banking/door-to-door banking- Youth indicated that the most important feature of a service they wanted was that it was close. They perceived this as being convenient, fast and low cost.
– Emphasis on customer service vs. price and quality –Youth identified characteristics of good savings and loan products as ‘easy’, ‘fast’, ‘convenient’, a ‘solution’ (jalan keluar) or ‘help’ (bantu) for their cash flow problems. They preferred staff who they knew that would be able to collect on a weekly versus a monthly basis and who could potentially help with their particular business or financial literacy training needs.
– Cultural competency – Features from informal or traditional products that youth already use can be adapted to formal financial instruments. The administration of these products could take place in the village’s church or mosque, posyandu (maternity center)/village head’s house/village office, primary school or puskesmas (health clinic) and involve stakeholders from local leaders and the parents of youth in the rollout process. If it is a program, it should be offered during times of the day when youth do not have other competing productive or social obligations. Major times in the year to avoid in Lombok are its major holidays, in particular, Ramadan and Lebaran as well as funerals in the village; in West Timor: Christmas, communion season in Catholic families. Harvest times such as the month of June would be auspicious, as people tend to have more disposable income to save. Tying the product to a respected institution, as modeled by TLM’s relationship to the church, can serve to create trust around the product.
Conclusions and further research: Many of the findings confirm previous studies, including the lack of financial literacy and youths’ inclination towards savings over credit. There are also two new findings. First, because youth in depressed areas in Indonesia coincide with high rates of migration and the nature of the Indonesian remittance environment, youth respondents were forced to interface with banks when they remit or receive remittances. Further research should explore the nexus between remittances and financial inclusion outcomes. Second, because there appears to be some savings threshold at which youth decide to save in a bank, further research is necessary. Studies of statistically significant sample sizes could confirm, deny or elaborate on these two qualitative insights.
 The distribution of remittances received in Indonesia through formal regulated channels is concentrated in the banking sector. Six Indonesian banks dominate the formal remittance market: Bank Negara Indonesia, Bank Mandiri, Bank Rakyat Indonesia, Bank Central Asia, Bank Niaga, and Bank Danamon. After the funds have arrived in the Indonesian bank, the recipient can withdraw the money from the local bank branch. Source: Hernández-Coss, R. et al., 2008, “The Malaysia-Indonesian Remittance Corridor”, World Bank. Available at http://www.google.com/url?sa=t&source=web&cd=1&ved=0CB8QFjAA&url=http%3A%2F%2Fsiteresources.worldbank.org%2FINTAML%2FResources%2FMalaysia-Indonesia.pdf&rct=j&q=remittance%20Indonesia%20from%20Malaysia&ei=drmPTtjYDaPk0QHqydBM&usg=AFQjCNGmyHo0rt3G9qav937eb0AcAB9g1A