The Indonesian archipelago has 17,000 islands of which Sumatra, Java, Borneo (or Kalimantan), Sulawesi and New Guinea are the largest. They are part of the Pacific ‘Ring of Fire’, whose subterranean tectonic plates have created hundreds of volcanoes from Sumatra to the Banda Sea. With 253 million citizens, Indonesia is the world’s fifth most populous country. But its large land area (similar to Queensland) means it is no more densely populated than say Poland or France.
At a Glance
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Indonesia has a long and fascinating history. Humans first came 45,000 years ago, followed in the fourth century by travellers bringing with them Hinduism and Buddhism. Later, Arab traders introduced Islam and today Indonesia is the world’s largest Muslim nation. In the 17th century, Europeans arrived in search of pepper, cloves and nutmeg, and the so called ‘Spice islands’ were eventually colonised by the Dutch. It was only after the 1945 defeat of Japan that this island nation gained independence. The largest ethnic group is the Javanese, who with 42% of the population dominate politically and culturally.
As the largest developing economy behind the BRICs (Brazil, Russia, India and China). Indonesia ranks 10th in the world. It has has grown strongly in recent times, and in the decade to 2012 per head GNI (Purchasing Power Parity or PPP) doubled to US$4,943. The country has large resources of petroleum and natural gas, minerals and precious metals, and hardwood timber. The economy is balanced with industry accounting for 46% of GDP and services for 38%. While the ash from past volcanic activity means fertile soils in some islands, only 12.3% of land is arable. As a result, agriculture accounts for just 14% of GDP, despite employing 38% of the work force.
Indonesia has grown rapidly in recent years and living standards have improved. The number of people living in poverty fell by half from 24% in 1999 to 12%. But poverty is still widespread, and is reflected in the gap between rural and urban areas. Poor infrastructure, complex regulations, and unequal resource distribution to outer islands, have all cramped growth. Some 17% of rural people are classed as poor, compared to 11% of urban dwellers. In other words, 70% of the poor live in rural areas.The country has a young population: some 26% are under 14, and only 6% are aged 60 and over.
Indonesia has relatively high literacy rates with 96% of men and 90% of women being literate. Schooling is compulsory for twelve years and an average Indonesian child receives 13 years of schooling. The enrolment rate is 94%in primary, 75% secondary and 27% in tertiary education. Most Indonesians speak at least one of several hundred local dialects - but of these Javanese is the most widely spoken as the language of the largest ethnic group. The UN Human Development Index (HDI) ranks Indonesia at 121 out of 187 countries, below comparable regional neighbours Philippines (114) and China (101).
Indonesia’s microfinance sector is extensive, with some 50,000 MFIs. But the market is fragmented and demand for microloans still outstrips supply. Despite heavy state involvement in rural finance, private operators thrive. Prudential standards for regulated institutions are the same as those faced by all banks in the country. These informal MFIs are not subject to prudential regulation, them, so there little oversight or restrictions on their activities. In its 2013 survey, the Economist Intelligence Unit ranked Indonesia’s microfinance business environment at 28 in the world.
Financial inclusion means vulnerable and low-income people have access to responsible financial services at an affordable cost. Over 3 million migrants leave the countryside each year for Jakarta and other major cities. Many end up with jobs in low-end services, hawking food by the roadside or selling fruit and vegetables from handcarts,as part of a vast informal economy accounting for 70% of GDP. According to World Bank data, only 20% of the population hold a formal bank account: 15% save with those institutions, and 8% have wages paid into an account. Raising credit, only 9% have taken a loan from an institution, compared to 42% who borrow from friends, family or moneylenders.
Here are our people in Indonesia. Read stories from local perspective – our born and bred Indonesian Village Trainer and Community Banker (coming soon). And from the Australian expats – our Field Support Officers, who are living in Indonesia for the first time.
Curious to know more? Please send in a question – ask us anything.