Not all financial consumers are equipped with the necessary knowledge of the products and services that they are using. A wide gap exists between the level of financial inclusion (76.19%) and financial literacy (38.03%) in Indonesia. Low level of financial literacy could lead consumers to make poorly-informed financial decisions, incur too much debt, or even fall victim to illicit investment products. In the long run, these problems may damage consumer trust in financial services, which could hamper growth in the financial sector.

In addition to organizing various financial literacy programs, Indonesia’s Financial Authority Services (Otoritas Jasa Keuangan, or OJK) has mandated financial services institutions (FSIs) to run at least one initiative to improve financial literacy and one initiative to improve financial inclusion every year. This has significantly increased the number of literacy programs in Indonesia.

Programs from both OJK and FSIs have contributed to increasing financial literacy in Indonesia, but overall levels of financial literacy remain relatively low (OJK, 2019) compared to the level of financial inclusion. Efforts by FSIs to improve financial literacy through product-related information, the introduction of new products and services, and reducing barriers to entry for some financial products are often omitted when discussing about efforts to increase financial literacy. However, despite the risk, they can positively contribute to increase user’s financial understanding. Regulators could therefore explore the potentials of this approach, with emphasis on ensuring that consumers understand the products that they are buying.

Financial literacy gaps, such as those between urban and rural populations, also need further attention from both OJK and FSIs. In the long run, mandatory reporting and the national repository of financial education programs maintained by OJK should be treated not as a mere formal requirement, but as a useful tool to improve the quality and benefits of financial literacy.

OJK and FSIs must create and implement comprehensive and systematic evaluation methods for their programs and establish which have the largest benefits and are most cost-effective as they seek to address these challenges.