Lombok Timur, Indonesia, September 20, 2016 - For many families in East Lombok, an impoverished district in eastern Indonesia, remittances from relatives working overseas are often the only source of income.
“When it’s not harvest time, remittances money is all we have,” says Radiah, a farmer whose husband works in Malaysia.
Yet despite its importance, many migrant workers use risky channels to send back money. Unfamiliar with financial services and remittance service providers, they turn to account mediators – holders of bank accounts who, for a fee, help with remittance transfers.
Account mediator Herman Fauzi keeps close track of the funds going through his bank account – and the withdrawals. Why do migrant workers turn to him? “Sometimes,” explains Fauzi, “people use my services because they don’t trust their families.”
However, cases of funds disappearing through risky channels are not uncommon – and risky channels can include account mediators as well as families. Tanwir worked in Malaysia for several years at a palm plantation before sending money back home through his sister. He has since lost all of his hard-earned income.
Tanwir first sent the funds to his sister, who used it to start a business. Then she died, and her daughter controlled her money. “When I asked for (the money), she said that she doesn’t know, even though she was the one who went to the bank,” said Tanwir, full of regret.
Challenges in managing remittances: limited financial services and low awareness
East Lombok is home to the largest number of Indonesian migrant workers, yet formal financial services remain scarce. Services are limited, and public awareness of existing services, including banking, is lacking.
“Our remote location makes it difficult for financial services to reach our villages,” said Gunanto, head of Tetebatu Selatan village. “Apart from that, the majority of the people here are only elementary school graduates and they are afraid to save too much money.”
“For ordinary people, banks are something unusual,” said Marjan, a micro finance practitioner. “People dress up when they go to the bank. To use the ATM they need help from someone else.”
Gunanto adds that his village has started awareness campaigns on how to use financial services and manage finances. He hopes that better management of remittances can help local entrepreneurs thrive.
“When migrant workers send their remittances usually it’s for something like house renovations and not for business capital,” said Gunanto.