Opportunities in Indonesian Remittance Market - New 2015 Report

Indonesia is the fourth most populous country in the world (after China, India and the United States). An estimated half of the total Indonesian population is below the age of 30 years, so the country promises to be the source of a global labor force in the coming years. Indonesian banks are divided into commercial banks, known as public banks Bank Umum (BU) and rural banks, or people’s credit banks Bank Percreditan Rakyat (BPR). Commercial banks have a full range of functions and are able to participate in the payments system while BPR, the rural banks have restricted operational areas. BU is permitted to deal in foreign exchange but BPR is not. Banks that deal in foreign exchange are described as Bank Devisa (Foreign Exchange Banks) and are required to obtain a license from BI to carry out banking functions involving foreign exchange. Indonesia's banking system has 120 BU’s and 1837 BPRs. Non Financial Institutions such as MFIs are also not permitted to handle money transfers except Bank Rakyat Indonesia (BRI) which is a state owned commercial bank with a specific mandate for microfinance. It has its network of sub offices and units at sub-district level throughout the country.

With foreign exchange reserves at $[hidden] Billion at the end of 2013, remittances comprise significant 16% of this value. Also, with decreasing current account balance over the years, the Indonesian economy is eyeing growth in the remittance market as a source of foreign money in the country.

Indonesia ranks as the 3rd highest remittance receiving country in South East Asia

Indonesian remittance industry has been consistently growing over the past 5 years and has been a significant contributor to the growing economic conditions. The total remittance market in Indonesia is USD 16,469.5 million.

[Hidden] of the overall remittances in Indonesia are routed through formal channels and 20% through informal channels. Outward remittances play a significant role in the Indonesian remittance market with more than 30% of market share. Percentage adoption of formal channels in outward remittances from Indonesia is estimated to be higher at [hidden] % than the percentage of [hidden] % in case of inward remittances. This signifies the requirement of higher regulation or effective systems to regulate the inward remittances channel. Informal modes of remittance are non recorded and are facilitated through non-licensed individual remittance agents, hand carried by migrants, co-workers/ family /friends etc. Together, inward and outward remittance market in Indonesia is estimated to grow at a CAGR of 8.8%.

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Being the third largest recipient of remittances in South East Asia with around 6.5 million migrant workers, both inward and outward remittance from Indonesia is expected to grow steadily over the next few years. Indonesian government has been working towards developing the remittance market by identifying opportunities in migrant destination countries and promoting the recruitment companies. Together with them, the government is also now finding new overseas labor markets that need skilled and semi-skilled workers who are able to access better pay and working environments. The critical success factors for the Indonesian remittance market are pricing, good investment products for NRI’s and large remittance network for banks.

Table of Contents

1.0 Executive Summary

2.0 Macroeconomic Overview

2.1 Remittance in Indonesia

2.2 Use of Remittance by Category

3.0 Labour Migration to Indonesia

3.1 Category-wise Overseas Employment of Indonesians

3.2 Estimated Country-wise Emigration of Indonesian Workers each year

3.3 Reasons for Migration of Indonesians

3.4 Labour Migration –Way Ahead

4.0 Overview of Remittance Market

4.1 Minimum Remittance Regulation

4.2 Characteristics of Remittance Industry in the Country

4.3 Remittance Channels in Indonesia

4.4 Key Players’ Profiles

4.5 Drivers and Inhibitors of Remittances

5.0 Remittance in Indonesia

5.1 Remittance Market Size –Indonesia (Formal and Informal, Inward and Outward)

5.2 Remittance Projections from 2014 to 2019

5.3 Formal Inward and Outward Remittance by Country

5.4 Formal Remittance -Market Share by Player

5.5 Formal Remittance -Market Share by Channel

5.6 Cost of Sending Remittance to Indonesia from Least Costly Corridors

5.7 Emerging Trends in Remittance Business