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Branchless Banking Process in Rural Areas: A Price Barrier?

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  • Ktut Silvanita Mangani
  • Adolf Bastian Heatubun
  • Martua Eliakim Tambunan

Abstract

Branchless Banking is one of the programs of Indonesia's financial inclusion strategy. The programs' name is "Financial Service Without Office in the Framework of Inclusive Financial" which called “Laku Pandai.†This study aims to portrait the implementation of the Branchless Banking program concerning the obstacles that occurred to achieve program objectives. The research conducted using qualitative methods. The existence of Branchless Banking agents close to the community has fulfilled the program objective, to make an easy way for society to do financial transactions without having to go to the bank office. Therefore, the implementation of the Branchless Banking program met the criteria for eliminating non-price barriers in financial services in remote areas. However, delegation authority to the agent as an extension of the bank to provide limited financial services has encouraged agents to engage in moral hazard behaviors by charging the tariff that greater than the official rate set by the managing bank. It showed that the agent has taken the consumer surplus provided by the Branchless Banking technology. Although accepted by society since considerably cheaper than the fee to go to the nearest bank office, that condition becomes a price barrier for the future development of Branchless Banking.

Suggested Citation

  • Ktut Silvanita Mangani & Adolf Bastian Heatubun & Martua Eliakim Tambunan, 2021. "Branchless Banking Process in Rural Areas: A Price Barrier?," Journal of Public Administration and Governance, Macrothink Institute, vol. 11(2), pages 317330-3173, December.
    • Handle: RePEc:mth:jpag88:v:11:y:2021:i:2:p:317-330
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    References listed on IDEAS

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    1. Josiah Aduda & Elizabeth Kalunda, 2012. "Financial Inclusion and Financial Sector Stability With Reference To Kenya: A Review of Literature," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(6), pages 1-8.
    2. Santiago Carbó & Edward P. M. Gardener & Philip Molyneux, 2005. "Financial Exclusion in Developing Countries," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Financial Exclusion, chapter 0, pages 145-168, Palgrave Macmillan.
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    Cited by:

    1. Md. Imran Hossain & Md. Al-Amin & Md Abu Toha, 2021. "Are Commercial Agent Banking Services Worthwhile For Financial Inclusion?," Business Management and Strategy, Macrothink Institute, vol. 12(2), pages 206-227, December.
    2. A. A. I. N. Marhaeni & Kittisak Jermsittiparsert & Sudarmo & Lucia Rita Indrawati & Andjar Prasetyo & Noviati Fuada & Arnis Rachmadhani & Tri Weda Raharjo & Heri Wahyudianto & Bekti Putri Harwijayanti, 2023. "Adoption of the Green Economy through Branchless Rural Credit Banks during the COVID-19 Pandemic in Indonesia," Sustainability, MDPI, vol. 15(3), pages 1-20, February.

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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