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Financial Literacy and Financial Utility


The efforts of improving financial literacy used to mainly conducted in developed countries. However, developing countries currently is also have catching up by focusing their development policy in improving financial literacy and provision of broader financial access. One of the reasons for this development is the increasing understanding that low financial knowledge will not only have implications on the individual, but also on the economy as a whole. Increasing financial literacy will support a more stable financial system and will also encourage prudent behavior that will lead to lower financial fragility.

In Indonesia, there are several new significant improvements in the development of complex financial products. However, the utility of those financial products are still relatively low. This can be seen from the low rate of access to formal financial institutions, such as bank, low rate of the use of financial product, and the limited participation in the stock market. The Survey of Financial Literacy conducted by Financial Service Authority (FSA - Otoritas Jasa Keuangan (OJK)) in 2013 conclud that Indonesia financial literacy rate is still low. In terms of knowledge on financial products, the understandings of most of the people are still limited.

The efforts in improving the access to formal financial institutions and the use of formal financial products and services through improving financial literacy has been the main policy focus in many countries. To understand the impact of those efforts, many countries regularly conducting survey to understand the level of financial literacy. In Indonesia, the efforts are conducted by OJK, one of them through Survey of Financial Literacy. The information obtained from the survey will be used to design effective policies in improving financial access and use of financial products.

To obtain further information from the Survey of Financial Literacy in relation to financial literacy and financial utility, DEFINIT was appointed by OJK to conduct further analysis on the data collected from the survey. The analyses in this study are focused on the relations between financial utility and financial literacy. Through this study, it is expected to have information on the financial utility pattern and real need of financial products that can be use to formulate policies related to financial inclusion and literacy in Indonesia.

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