The government still struggles with loopholes in payment delivery to states and agencies that work at the last mile. The smart payments solution can enable frictionless expenditure, decrease administrative burden, and increase accountability in their payment processes.
This playbook seeks to facilitate the smart payments framework’s practical applicability for various government payments, whether it is government-to-government (G2G) payments, government-to-businesses or contractors (G2B), or government-to-persons (G2P). It will allow them to identify gaps in their current processes and implement smart payments as an effective solution.
It can also be a reference for any government department that wants to automate its payment processes. Access the playbook here.
Rizal is a 35-year-old DFS agent in a peri-urban area of Padang city in West Sumatra. He offers services from multiple providers and switches seamlessly between different apps on his smartphone to handle various customer requests. He rebalances his account through a third-party provider that delivers cash or float at his outlet.
Rizal has been an agent for more than five years and manages around 30 daily transactions across one bank and four nonbank providers. This enables him to offer more competitive pricing as he can curate services across providers to match customers’ needs. This attracts a diverse customer base and leads to higher transaction rates.
In contrast, Amir is a dedicated agent who offers his customers a single bank’s services. His kiosk is located in a rural village not far from where Rizal operates. It features the bank’s marketing collateral and mimics the look and feel of a bank branch. Amir took advantage of the high demand for financial services and low agent concentration in the area to expand his business and added three additional outlets in the vicinity. Amir travels to the nearest ATM or bank branch to rebalance his accounts.
Rizal’s non-exclusive provider approach contrasts with Amir’s dedicated and exclusive focus on one provider. However, both arrangements earn profits. Indonesia’s agent network has evolved to enable multiple business models and diverse practices to offer financial services to the last mile. This diversity enriches the market, offers consumers different options, and fosters innovation and accessibility to DFS.
Rizal and Amir are among thousands of agents in Indonesia who provide financial services to the last mile and play a crucial role in Indonesia’s financial system.
Over the years, Indonesia’s agent network landscape has undergone significant changes. Service providers have proliferated while different business models have emerged. Moreover, events, such as COVID-19, alongside regulatory and policy changes, have shaped the network’s growth. Indonesia’s agent network landscape needed further investigation into the changes underway and their impact on agent sustainability.
This need spurred MSC to undertake the third phase of the Agent Network Accelerator (ANA) research in 2023 with funding from the Bill & Melinda Gates Foundation. It serves as a crucial benchmark that compares the agent network’s growth in 2023 with the last ANA research in 2017. The ANA 2023 research also included the biggest-of-its-kind survey of agents in Indonesia, with participation from 2,644 agents countrywide.
The following section highlights key trends in Indonesia’s agent networks in 2023.
The agent network in 2023 was more diverse, although still dominated by banks
Indonesia’s agent network has doubled since 2017, with more than 1.5 million bank agents in 2023. Public sector banks, such as BRI, BNI, and Mandiri, dominated the agent network, while FinTech companies and e-commerce players also established their agent networks.
Women continued to constitute the majority of agents in 2023, which mirrored the trend observed in 2017
Indonesia’s agent network continued to be gender-balanced. 55% of DFS agents in 2023 were women, compared to 59% in 2017. Per ANA 2023 findings, male and female agents did not have performance or income disparities. The operating hours of the agent outlet also had no gender disparity.
Agent retention rose in 2023, which implies reduced turnover
In 2023, 30% of agents were working as an agent for more than five years, while 51% worked in the agency business for more than three years. This marks a shift from 2017 when 75% of agents had less than two years of experience. This indicates reduced agent churn in the agent network.
Agents were more profitable, which enhanced the agent network’s sustainability
The median daily transactions for agents increased fivefold between 2017 and 2023. Services, such as top ups, bill payments, money transfers, and cash-outs, drove this growth. Improved stability in the agent network after the pandemic and the slow growth of new bank branches and product use cases contributed to this growth.
ANA 2023 revealed that agents outside Java experienced more daily transactions than agents in Java due to a sparser agent network and high demand in non-Java areas. Additionally, non-exclusive and dedicated agents achieved higher median transaction volumes, as depicted in the graphs below.
The study shows that increased transactions have made 95% of active agents profitable. The median monthly profitability had grown from USD 6 in 2017 to USD 134 in 2023, which represented a CAGR of 68%. Bank agents were three times more profitable than nonbank agents because they handled more high-value transactions, such as money transfers and cash withdrawals.
Non-exclusivity among agents grew while the proportion of non-dedicated agents declined marginally
Exclusivity, as calculated by the number of agents who offer the services of more than one service provider, decreased significantly from 97% in 2017 to 75% in 2023. However, the Laku Pandai regulations on exclusivity, which prohibit agents from offering services from two different banks, reduced exclusivity among bank agents by only 5%.
Most agents in Indonesia are non-dedicated. However, the proportion of dedicated agents has increased significantly, especially outside Java, which has risen 8% since 2017. A high demand for financial services and low agent concentration in islands outside Java make it profitable for agents to remain dedicated.
Agents, especially bank agents, offer more products and services through their outlets
More bank agents have expanded their services to offer insurance and online virtual (VA) payments. Increased access to public insurance (BPJS) and the growing use of online platforms in rural and urban areas drove this shift. However, nonbank agents continue to rely on top ups and bill payments for their transactions.
ANA 2023 also found that about 20% of all agents adopted QRIS payments. Although DFS agents are the ideal target segment for QRIS adoption, the adoption rate is low due to the long settlement times for QRIS transactions.
Meanwhile, the adoption of e-commerce among agents remained limited to personal consumption and did not expand business revenues.
During the 2017 ANA survey, agents expressed strong optimism about their agency business’s potential. This optimism translated into remarkable success in 2023 as agents became more profitable and sustainable.
In our next blog, we will discuss the challenges in the agent network and propose recommendations for different stakeholders to strengthen Indonesia’s agent network.
For a complete overview of the recent findings, you can view the full Agent Network Accelerator (ANA) Research – 2023 report here
Well before the COVID-19 pandemic disrupted global health systems and moved the needle for adopting a focused approach to the intersectionality of climate change and health, climate change had been proclaimed as a medical and health emergency by leading organizations devoted to public health, environmental health, patient advocacy, medical practice, and nursing services.
Many global and regional discussions and studies have highlighted the harmful impact of climate change on human health, prompting a One Health approach to health systems. However, these discussions often focus on the physical effects on people and animals, overlooking climate change’s lesser-known mental and psychosocial impacts, particularly on vulnerable groups.
Climate change and human health
Climate change has diverse impacts on the overall health of the affected population, leading to increased risks of mortality and illness from extreme weather events like heat waves, storms, and floods. As our planet warms due to climate change, infectious diseases, particularly zoonotic diseases, i.e., diseases that are transmitted from animals to humans (Ex. COVID-19, Rabies, Anthrax, etc.), are expanding their geographic range beyond traditional warmer latitudes. Extreme climate events also disrupt food systems and worsen issues related to food and water, thus contributing to health shocks, including mental health concerns.
There is clear evidence demonstrating the impact of climate change on mental health. Extreme weather events significantly aggravate stress and anxiety. They may lead to severe clinical conditions like depression, post-traumatic stress disorder (PTSD), and, in many cases, substance abuse disorders.
Children and older adults are more vulnerable to the mental health impacts of climate change. In children, factors such as physiological development, cognitive abilities, and emotional skills intersect with other threats like parental health, depression, anxiety, and poverty. In comparison, older adults face greater physiological susceptibility to climate-related health effects, compounded by factors like physical disabilities and limited access to resources and care.
Furthermore, climate change undermines factors crucial for good health, such as stable livelihoods, societal equality, and access to healthcare and support networks, disproportionately affecting marginalized and vulnerable groups like women, children, ethnic minorities, impoverished communities, migrants, older individuals, and those with pre-existing health conditions.
Dual burden of climate change
Extreme climatic events also impose a significant financial burden on vulnerable communities. These communities, already grappling with limited resources and socioeconomic challenges, bear the brunt of the economic fallout from climate-related disasters. The United Nations highlights how climate change accelerates financial burdens, particularly affecting those most vulnerable and impoverished. For instance, when extreme weather events strike, such as hurricanes, floods, or wildfires, these vulnerable groups often lack adequate insurance coverage or financial reserves to cope with the damages to their homes, businesses, and livelihoods. Global economies such as the European Union have experienced extreme weather and climate events that pose risks to debt sustainability. Financial resilience to climate change is still an under-explored and underfunded theme in India.
Extreme weather events also lead to supply chain disruptions such as transportation issues, labor troubles, and raw materials shortages. The cost of rebuilding and recovery further exacerbates the financial instability of vulnerable communities, perpetuating a cycle of poverty and stress.
Mental health burden in India
India faces a significant mental health burden, with a large portion of the population in need of care but lacking access to services. The utilization of mental health solutions is low, with only 30 percent of mental health patients receiving help and a significant treatment gap across various psychiatric disorders. The mental health infrastructure is inadequate, with a scarcity of mental health professionals and limited resources, especially in rural areas. The overall availability of qualified mental health personnel in the public and private sector is scarce, with only 898 clinical psychologists and 1,500 psychiatric nurses compared to a demand of 3,000, as reported to the Lok Sabha in 2018. The cost of accessing mental healthcare in India is high, with private therapy costing anywhere between INR 1,500 to 3000 (USD ~20 to 40) per session. Access to care is limited, particularly in rural areas, which struggle with a deeper stigma associated with mental health. The stigma associated with mental health in India is a significant issue that affects the quality of mental health care and contributes to the hidden burden of mental health disorders. This stigma takes various forms, including public and self-stigma, and can be influenced by cultural, social, and economic factors and is driven by a pronounced lack of societal support and self-awareness.
Building a climate-resilient healthcare ecosystem in India
The Government of India has made several policies and programmatic steps to address these concerns, such as the Mental Healthcare Act 2017 of 2017 and the District Mental Health Programme (DMHP), built on the Bellary model, to detect, manage, and treat mental health concerns.
However, strategic investments in mental health infrastructure, including expanding services and training healthcare professionals, are crucial. Collaboration between government agencies, civil society organizations, and local communities is essential to develop holistic and culturally sensitive approaches to mental health resilience.
Further, a comprehensive community-driven, locally-led adaptation of the directives in the Mental Health Act, 2017, spearheaded by the State Governments and district administrations, will initiate a much-needed feedback mechanism for impact. Utilizing technology-enabled mental healthcare platforms can be a vital link between youth and community action.
Lastly, integrating mental health considerations into climate change adaptation and disaster response policies is vital to prioritize mental health needs during crises. More profound research on climate-resilient mental health systems is critical to inform evidence-based policies and interventions. Understanding the vulnerabilities of different population groups and identifying best practices for building community-based resilience at various levels is key to addressing the mental health challenges posed by climate change.
India must urgently address the intersection of climate change and mental health to ensure the well-being of its population, especially the most vulnerable. By integrating mental health resilience into climate change policies, India can take significant strides towards safeguarding mental health in the face of climate challenges. It is time for concerted efforts and collaborative actions to build a more resilient health system to effectively mitigate the mental health impacts of climate change in India.
Mr. Nandan Nilekani, Cofounder of Infosys, highlights the need to enhance state capacity via people, processes, and technology. He advocates incentives for decisive actions, the need to foster continuous learning, and citizen-centric process design for anytime-anywhere access to services. He provides examples of technological interventions, such as Aadhaar and UPI, which facilitate national benefit portability and streamlined tax payments that drive efficiency. Mr. Nilekani stresses transparent government processes and citizen-facing services, which can ensure accessibility and efficiency for all stakeholders and mark strides toward effective governance.
In his interview, Mr. Iqbal Dhaliwal, Global Executive Director of MIT’s Abdul Latif Jameel Poverty Action Lab, discusses five bottlenecks that hinder state execution capacity: hiring challenges, role clarity, training adequacy, incentives, and data-driven decision-making. He encourages several steps to overcome these challenges. These include ways to implement competency mapping, promote lifelong learning, and strengthen accountability measures. He stresses the importance of using technology and investments in human resource management to bolster efficiency. Mr. Dhaliwal uses attendance improvements in rural health centers as an example to highlight the complexities of system design and implementation.
Mr. Anupam Kulshreshtha, who once was the Deputy CAG of India, talks to us about ways to address India’s PFM challenges in the context of fiscal federalism-related complexities and bureaucratic obstacles. Though PFMS implementation has improved payment regulations, issues linked to integration remain. Mr. Kulshrestha advocates for JIT funding and emphasizes enhancing accountability mechanisms and data integrity. The separation of accounting and auditing functions within the CAG’s department ensures integrity, yet the reformation of accounting cadres poses administrative hurdles. He highlights the importance of proactive audit measures essential to sound policy formation and governance efficacy.
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