Unpacking Informality

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report emphasizes the urgent need to expand retirement savings coverage for informal workers in Indonesia, highlighting that informal workers constitute 60% of the total workforce, yet less than 10% actively contribute to retirement savings schemes [11][12][14] - It identifies the challenges faced by informal workers in participating in retirement savings programs, including low income, geographical barriers, and lack of financial literacy [15][17][59] - The report suggests that a tailored approach is necessary to address the diverse needs of informal workers, as a one-size-fits-all strategy is ineffective [15][60] Summary by Sections A. Introduction - Indonesia's National Social Security System (SJSN) was launched in 2004, aiming to provide protection against health and employment-related risks for all workers [9][10] - Despite the establishment of various social security programs, the coverage for informal workers remains low, with only 7.5% contributing to annuitized pension programs and 9.4% enrolled in public defined contribution pensions [12] B. Who are Indonesia's Informal Workers? - Informal workers are defined primarily by their employment status, with approximately 78 million informal workers identified in 2021 [18] - The report categorizes informal workers into four groups based on their employment characteristics, with non-digital non-salaried workers being the largest group [28] C. Informal Workers' Retirement Savings Coverage - On average, 43% of informal workers have some form of retirement savings, but only 17% contribute to a retirement savings scheme managed by BPJS or other private plans [43][44] - Coverage is highest among salaried workers with contracts (74%) and digital non-salaried workers (64%), while it is lowest among non-digital non-salaried workers [44] D. Understanding the Challenges to Retirement Savings Participation - The report identifies unavailability of funds as the primary reason for not saving for retirement, with 84% of respondents citing this issue [57] - Other challenges include unfamiliarity with the JHT program, perceived ineligibility, and concerns over income irregularity [58][60]