Improving Financing Services For Indonesia Migrant Workers Bobby H. Rafinus Assistant Deputy for Capital Market, Banking and Non-Banking Financial Institutions World Bank International Seminar Jakarta, December 9, 2009
Typhology Indonesian Migrant Workers (1) Indonesian Migrant Worker is classified by 5 types: 1. Workers are following a Government Program 2. Workers are recruited by Indonesian private agencies 3. Workers are assigned by overseas companies (overseas assignment) 4. Workers are recruited by foreign agencies (direct recruiment) 5. Foreign Graduate Working Abroad
Typhology Indonesian Migrant Workers (2) Government facilities to Migrant Workers: First type workers: o They receive full Government facilities, within their recruitment to placement. Second type workers: o They receive less facilities than the first one. o Their placement is under agreement between domestic and foreign agency. o Most of workers are poor and low-educated. o Government policy is to arrange their departure and arrival. o Overlapped responsibility between agencies and Government causes Government oftenly takes into account private agencies blame Third to fifth type workers: o Limited facilities received as they are mostly high-educated. o Government only facilites workers license and conducts supervisory to agencies.
Most of the Second type Migrant Workers come from lower income (poor) society General characteristics of Migrant Workers resulted from a survey over three pool regions (NTT, NTB and East Java) positively confirmed the indication that Migrant Workers is a part of society level who live close around the poverty line. The following indicators support findings of the survey: Income per capita level of the observed Migrant Workers over urban and rural areas are about 25% and 19% respectively under the poverty line (Consumption per capita per day is US$ 2). Part of the Migrant Workers over the poverty lines, yet they are vulnerable to down-grade as facing the significant debt to income ratio. Half of the groups have only low education level, graduated from primary school or less and non-school. Lower level of Financial Literacy compared to average of the national level. Mostly respondents are member of Askeskin (Poor Medical-aid Insurance).
Migrant Workers Accessibility to Financial Services WB s study raising important issues which indicated the linkage of financial education and poverty alleviation, such as : Migrant Workers are highly dependent upon remittance services of banks. Remittence transfers addressed to third-parties- indicating the spending tends to consumptions. Poverty level presumably brings about lower level of Migrant Workers as a bank customer than common society. Financial illiteracy of Migrant Workers to insurance benefits and difficulties in insurance claims raise a consideration that the insurance premium repaymet is a tax payment.
Financing Migrant Workers Before Departure (1) Migrant Workers are eviendently a part of poor society. Delivering financing Migrant Workers to private and informal parties have created a poverty trap. Wages of Migrant Workers that are all spent out during first 7-8 months for their debt repayment is a reflection of the trap. Migrant Workers have to work over 2 years in order to be out of the trap. This condition has encouraged more people becoming illegal Migrant Workers. Being a Migrant Worker is a form of potential enterpreneurship, but it has not yet been productive and bankable. Under the People Empowerment National Program (PNPM), it is in the second tier of clusters. For that reason, it is obviously necessary to develop a specific PNPM for Migrant Workers, which more focus on preparatory of their departure, i.e. Training of skill and foreign language, Financial Education, Culture Orientation and providing lower interest rate debt.
Financing Migrant Workers Before Departure (2) Financing the activities is enabled by a Society Direct Assistance (Bantuan Langsung Masyarakat) to districts (Kecamatan) and Regional Budget (APBD). Indeed, councelling to local-governments in formating preparatory activities for Migrant Workers candidate is a highly key point.
Initiatives to be addressed (1) Typhology of regions from where the source of Migrant Workers must be provided to identify pool-regions of Migrant Workers which is coincident to pool-regions of Poverty. Integrating Financing Migrant Workers from the area to PNPM Mandiri, specifically second cluster. Allocating People Direct Assisstance Fund to a preparatory activities of Migrant Workers departure, mainly training of skill and foreign language. Allocation of the fund also could be for laborintensive activities. The former Migrant Workers is enabled to participate the third cluster of PNPM Mandiri, hence they can access to KUR (Credit for People s Business). The integration of Migrant Workers management as part of PNPM activities is to draw and to enhance local government participation.
Initiatives to be addressed (2) Supporting the Government Iniative to amend Act. 39 Year 2004 re. Overseas Indonesian Migrant Workers Placement and Protection by proposing the improvement of insurance system. This is expected to protect more the rights of Indonesian Migrant Workers. Setting up a New Paradigm of Goverment Intervention to Migrant Workers. The policy should open various options to workers, i.e. Insurance, bank services and remittence service. As the consequencies, the education for workers is much important to secure themselves from mis-managed and mis-employed.
Thank you