As the central bank of the Republic of Indonesia, Bank Indonesia’s most important task is not only to safeguard monetary stability, but also financial system stability. Financial system stability is the pillar of effective monetary policy. The financial system provides a channel for monetary policy transmission and any financial system instability will prevent monetary policy transmission from operating normally.
We think it’s not exaggerating to say that Bank Indonesia is the backbone of our country’s economy.
It goes without saying that the people in Bank Indonesia need to work hard in order to safeguard the monetary stability and financial system stability. In a country of 260 million people spread across more than 17,000 islands, that could be a real challenge for sure. With millions of financial data available, it’s not easy to gather the right kind of information at the right time.
So, when it was announced that Bank Indonesia is turning to the big data to help them maximize their roles for the country, well… we should applaud them. Big data analytics is known for its roles in helping organizations harness data and use it to identify new opportunities. That, in turn, leads to smarter business moves, more efficient operations, higher profits, and hopefully happier customers.
Many financial institutions have used big data to improve their business operations. It’s time for Bank Indonesia to jump on the bandwagon, too.
How does Bank Indonesia implement the big data?
All economy stability starts with the right policy and that’s what Bank Indonesia is trying to do.
Did you know that Bank Indonesia has a Statistics Department? The department’s role contributes straight to decisions on policies. For instance, 15 days before an interest rate announcement, the department scours social media, news sites, and other content on the internet to monitor public perception and rate expectations. After that, they will transmit them to the policy makers: Agus Martowardojo, the current Governor of Bank Indonesia, and his board. Yati Kurniati, the head of Bank Indonesia’s Statistics Department, said that the response from policy makers has been very positive.
However, although big data has helped Bank Indonesia in screening very large amounts of information, Kurniati and her team still have to use their own eyes to make sure the context is appropriate. She said that information gathered from big data sources and the so-called internet of things (data stored on everyday gadgets that are linked up by wireless technology, like fridges) can’t replace conventional statistics. But it still plays a crucial role.
Indonesia’s economic growth estimated at 7%
Bank Indonesia’s decision to use big data is not without reason. Big data allows them to access the information needed in real time, so it really reflects the current condition in the field. That way, Bank Indonesia will be able to create a policy that is in line with what really happens in the economy industry.
According to Detik.com, Martowardojo is quite optimistic that big data implementation could improve the economic productivity significantly. This will create better job opportunities and better public services. In fact, if Bank Indonesia can optimize the implementation of big data machine, the country’s economic growth is predicted to increase to 7% per year.
Indonesia may still have a long way to go to achieve that goal. But the Governor of Bank Indonesia said that it’s not impossible. We can’t just rely on the big data itself. We also still need to work together with other institutions, whether it’s from the government, academics, or industries. In fact, Bank Indonesia has successfully done that in the past. And, of course, there’s big data implementation involved.
One time Bank Indonesia worked together with online housing sources to collect data on the secondary property market. The aim was to get a better sense of the health of the economy. Another time, Indonesia’s statistics agency publishes employment data, which they regularly do every six months. Bank Indonesia was supplementing that with information extracted from online jobs portals.
Some of the challenges
Big data makes it all seem easy: you can make faster and better decision making, create new products and services that could give customers what they want, and not to mention that it also brings significant cost advantages!
But it goes without that saying that just like many changes in life, there are obstacles coming in the way. Bank Indonesia is also faced with some of those obstacles, too. One of them is the data safety issue. Bank Indonesia thinks that there should be a particular mechanism to connect data owners so that they could give their data without having to worry about confidentiality.
It’s not just that, though. Big data comes with various characteristics, one of them is veracity. It means that unstructured data contains a significant amount of uncertain and imprecise data. For example, social media data is inherently uncertain. This uncertainty sometimes makes it hard for Bank Indonesia to find out if an information is qualified enough to use. Thankfully, they came up with an idea of data cleansing. This process helps Bank Indonesia to make sure that certain data is valuable enough for them to analyze.
How big data helps to fill the information gap
Big data is indeed helping institutions tackle many of their problems. But not all of them. Kurniati said to Bloomberg that big data helps to provide information more rapidly and it fills a data gap. It can help complete the big picture.
For instance, thanks to the growth of online shopping, now Bank Indonesia is receiving flows of information from some of the biggest players in Indonesia’s e-commerce market. Through this information, Bank Indonesia found out that online transactions in Indonesia have surged more than 400% to 17.8 trillion rupiahs last year from 2015 and are already at 13.8 trillion rupiahs in the first eight months of the year.
This expansion of data sources will help Bank Indonesia respond to challenges more effectively. When Bank Indonesia knows the exact region or the exact sectors that are not responding to the policy, they can dig down into those and seek a targeted solution. In this case, big data doesn’t only help them make a more effective policy, but also help them with their decisions.