Indonesia’s push to cut its reliance on foreign funds to fill the yawning current account gap has prompted it to chase a new and growing source of funding — digitally savvy millennials.
At a recent marketing event in Jakarta’s hip Kebayoran Baru district, Indonesia’s finance ministry used celebrities, dance music, and social media influencers to pump up interest in national savings bonds.
The latest two-year bond, dubbed by media “James bonds” due to the 007 series number, was one of the 10 Indonesia plans to launch this year as authorities look to tap young Indonesians’ growing appetite for fixed income. Last year, authorities only sold five, but the ministry said more than half the buyers of the latest offering were millennials.
Indonesian authorities have for years sought to mobilize domestic savings to reduce the reliance on volatile foreign investment to fund the deficit. Nearly 40% of government bonds are currently owned by foreigners.
Also driving the push for millennials’ funds is the explosive growth of Indonesia’s online market places, which have opened new financial investments to young people, away from more traditional asset classes, like property, that were favored by their parents.
New fin-tech startups offering investments ranging from gold to mutual funds include the country’s biggest market place Tokopedia, backed by Softbank and Alibaba, and BukaLapak, which has China’s Ant Financial and Singapore sovereign wealth fund GIC as investors.
“Instead of keeping their cash at home, even students can try those financial services, they can put in 500 rupiahs (3.5 US cents), invest in things like gold, and a week later see that money grow,” William Tanuwijaya, chief executive of Tokopedia, told Reuters. Tokopedia claims 90 million monthly users.
Indonesia is Southeast Asia’s largest economy and the world’s fourth most populous nation, with 260 million people, but financial markets remain shallow with only 49% of adults with bank accounts and the retail investor community small.
At the government’s “007” bond launch, held at a cooking school and emceed by popular beauty queen Melanie Putria and radio host Paman Gery, young people used mobile phones and selfie sticks to live stream the event on social media
Ledis Situmorang, a 31-year-old mother working in hospitality, saw the event advertised on Instagram and turned up to find out more.
A government pilot project to boost online retail bond investment last year attracted more than 45,000 new investors, most of them aged between 25 to 38, said Loto Srinaita Ginting, the finance ministry’s director of debt securities.
“The features and marketing strategy of retail bonds fit perfectly with the millennials,” said Ginting, explaining how the ministry used Instagram and Twitter to promote the bonds and encourage financial literacy.
Fintech companies like Modalku, Investree, and Bareksa.com also offer retail government debt on their platforms.
Mutual funds are also growing with nearly a million investors as of the end of 2018, doubling from 2016 with over 60% of new investors under 40, according to official data.
Total investment in mutual funds jumped nearly 50% over the same period to 505.4 trillion rupiahs, although it’s still a small fraction of Indonesia’s 10.7 quadrillion rupiah financial markets, which includes stocks and bonds.
For retail investors, booking investment gains is done more easily through online platforms than traditional investment channels such as banks or broker.
The booming interest in such transactions has prompted Tokopedia to add new products and look at ways artificial intelligence can help customers better understand their investment needs based on risk profiles, said Samuel Sentana, Tokopedia’s associate vice president of financial technology.
Growth in new investment channels for the historically underbanked segment of the population has also helped the government meet some of its financial inclusion objectives.
Fintech company Modalku, one of the government’s distribution partners for retail bonds, said its platform allowed easier promotion of government bonds to a wider pool of customers, mostly small business owners.
However, not all young investors are so eager to embrace new technology.
Anky Adedansi, 29, an account manager at a digital agency, said she still preferred conventional channels such as banks or brokerages over online market places.
“I feel too many third parties are involved in a transaction…that I don’t think my safety, my privacy is protected.”