25th February 2024

Better business. Better community

Business Industry and Financial

How Ultra Micro Holding Connects Finance to Millions in Indonesia


Microfinancing offers an indispensable lifeline to entrepreneurs around the world. The model of small, low-interest loans brings much-needed financial services and relief to individuals, families, and small businesses searching for a foothold in emerging economies.

Unfortunately, households and enterprises in such markets as Peru, Bolivia, India, and Indonesia may still lack broad access to the formal financial services they need to manage their finances and attain prosperity.

Numerous obstacles to financial inclusion stand in the way. Some are literal: potential banking customers in rural, remote, or disadvantaged locations may be miles from the nearest financial institution. Others are social and cultural, including intricate processes that demand extensive documentation, inequitable loan rates, and unregulated markets.

As a result, unbanked potential customers may rely on personal borrowing networks—friends, family, personal savings—or they may turn to less scrupulous or fraudulent informal sources, such as loan sharks who charge exorbitant fees and interest rates.

In Indonesia, the Public Digital Infrastructure (PDI), a government-supported digital financial system to facilitate microfinancing, promotes financial inclusion through education and expanded access.

Microfinancing Challenges

With more than 17,000 islands, Indonesia is the largest archipelagic country in the world. Its biggest challenge is how to serve all its citizens equally.

Micro, small, and medium enterprises (MSMEs) have long served as the backbone of Indonesia’s national economy. In 2022, the Ministry of Cooperatives and MSMEs reported a staggering 64.2 million MSMEs, constituting 62% of the economy. Sixty-four percent of these entrepreneurs are women: a valuable, growing segment facing numerous challenges.

Despite their pivotal role in driving economic growth, MSMEs encounter obstacles that impede their growth, including limited access to capital—particularly in geographically challenging locations, negative experiences with financial services, and product schemes that don’t align with their needs.

Limitations to financial access are pronounced among women and those in rural and economically disadvantaged areas. Beyond the physical barriers to reaching a bank branch, these entrepreneurs often experience intimidation, feel distrust of formal financial institutions, or have insufficient funds to access banking services. The result is a growing dependence on non-formal financial institutions, often accompanied by exorbitant interest rates.

Addressing these challenges is essential to unlocking the full potential of MSMEs and fostering inclusive economic growth.

In 2022, Indonesia’s financial inclusion index reached 85.1%, a significant jump from 76.2% in 2019, but it is still considerably lower than the 95.58% financial inclusion index of Thailand, its Southeast Asian neighbor with similar geographic and cultural conditions.

The disparity highlights the opportunity for Indonesia to enhance its financial inclusion initiatives and bridge the gap with its regional counterparts.

Much of the MSME sector belongs to economically weak or marginal communities. The ultramicro sector consists of individuals or groups with less capital than the micro segment due to factors including:

  • unequal service coverage from formal financial institutions;
  • financial agents’ roles not yet optimized to serve them; and
  • a dependence on cash that leaves them exposed to inequity.

Indonesia established the Ultra Micro (UMi) Holding in 2021 to improve access to affordable financing and social empowerment, connect more customers and businesses to the solutions they need, and partner on mobile and in-person banking. UMi is well-positioned to provide more unbanked and underbanked individuals, households, and enterprises access to affordable financing and social empowerment.

Encouraging Financial Inclusion

PT Bank Rakyat Indonesia (BRI), one of the country’s largest state-owned banks, is the world’s largest and longest-running microfinance service provider. In the four decades since launching its microbanking arm, BRI has expanded the lending sector, more than doubling its number of microbanking offices in the past 30 years.

Today, BRI serves MSMEs through a network of more than 7,000 branches and more than 100,000 employees. Nearly 85% of its loans go to MSME portfolios, with an outstanding value of USD $67 billion (IDR 1,038 trillion), supporting BRI’s Hybrid Bank strategy, which combines physical presence and digital capabilities to serve ultramicro and micro customers.

With the support of Indonesia’s Ministry of State-Owned Enterprises, BRI’s new ultramicro initiative promotes financial inclusion with an intricate governance process that involves the commitment of diverse stakeholders and a comprehensive share restructuring between the three companies.

For this initiative, BRI collaborates strategically with its pawning and group-lending subsidiaries Pegadaian and Permodalan Nasional Madani (PNM) and uses insights from their combined customer data set to more capably serve a broader spectrum of individuals and enterprises.

The UMi Holding Integrated Customer Journey

The key to financial inclusion begins with a keen understanding of the needs of current and prospective customers—and the obstacles they face in fulfilling them.

Delivering a more comprehensive customer journey for the microfinancing segment is a three-step process:

  • empowering customers to become independent entrepreneurs;
  • integrating them into a broader community and range of products; and
  • upgrading them to a higher level of microfinancing services.

During the empowerment phase, PNM and BRI collaborate to help guide prospective unbanked ultramicro customers toward financial independence—especially entrepreneurs in the women-focused PNM Mekaar financial empowerment program.

In the integration phase, Pegadaian and BRI address the individual lending needs of customers who have transitioned to becoming banked. With their empowerment and enhancement, BRI can then upgrade these ultramicro customers to the micro segment.

Notable financial brands in Indonesia that empower, integrate, and upgrade customers and foster financial inclusivity through ultra-microfinance include UMI tailored Mobile Banking Solutions (Senyum Mobile), the Ultra Micro service center (SenyuM Outlets), UMI Saving Account (Simpedes UMI), Gold Savings, Gold Pawn, BRI Loans, and PNM Mekaar.

Ultramicro’s Impacts on Socioeconomics

UMi’s drive to educate unbanked communities and women entrepreneurs about formal financial institutions led to a milestone of financial inclusion in September 2023, when more than 10 million customers had opened accounts—a benchmark accompanying a 9.36% reduction in the national poverty rate and a 5.32% decrease in Indonesia’s unemployment. Along with supporting the nation’s economic growth, UMi’s focus on the ultramicro segment drives toward a goal of 90% national financial inclusion by 2024.

As part of the UMi initiative, Ultra Micro Financial Service Center (SenyuM) has opened more than 1,000 colocation outlets and brought in 1 million customers. With more than 700,000 marketing personnel using the SenyuM mobile app, customers even in the most remote parts of Indonesia can now bank and boost their income through BRILink banking agents.

Consolidating data from over 37 million borrowers and 165 million microsavings accounts among the three enterprises, BRI, Pegadaian, and PNM, enables UMi to apply hyper-personalization and business intelligence to generate product recommendations tailored to each customer’s detailed profile.

This approach enhances customer satisfaction by creating meaningful, personalized financial experiences—and it has helped 1 million ultramicro customers upgrade to the micro segment, reducing Indonesia’s unserved ultramicro segment from 18 million people in 2018 to about 9 million in 2022.

A Replicable Ultramicrofinance Model

UMi’s microfinancing approach of institutional innovation and the rapid adoption of advancing financial technology can be an instructive template and a replicable model for other financial institutions to support MSMEs.

The UMi program contributes to a substantial boost in Indonesia’s economy while expanding financial inclusion and empowering customers beyond conventional limitations—potentially benefiting financial institutions and offering valuable insights about customers in other emerging markets.


Discover the full potential of Ultra Micro (UMi) Holding.

link