Illegal Investment Is Still Marak, As A Result Of Technological Progress Not Accompanied By Financial Literacy

JAKARTA Indonesia is still a country with low financial literacy. In fact, financial literacy has an important role in minimizing potential losses in the future.

The rapid development of the financial services industry has not been accompanied by adequate public financial literacy. The financial literacy index in Indonesia is still relatively low.

When the rapid innovation of digital financial services is not accompanied by financial literacy indexes, people are vulnerable to being victims of fraud and criminal acts related to financial technology.

This is reflected in the statement by the Deputy Director of Behavior Supervisory for Financial Services, Education, and Consumer Protection of the Financial Services Authority (OJK) of South Sulawesi and West Sulawesi Provinces, Meilthon Purba, that throughout 2017-2023 the community suffered losses of Rp139 trillion due to illegal investments.

"People's losses are because there are still many who are easily influenced by the lure of high interest rates," said Meilthon at the Workshop and Journalists Appreciation held by the South Sulawesi Journalists Coalition (KJS) in Makassar, Sunday (26/5/2024).

Far Below ASEAN Countries

In general, investment can be understood as spending or using time, money, or energy to gain profits or benefits in the future. Investment is not only aimed at obtaining large amounts of money, but also being used as old-age savings.

However, investment cannot be arbitrary. Especially in today's era, there are not a few investment products with the lure of big profits. For that, good financial literacy is needed so as not to be trapped by fraudulent investments.

Unfortunately, Indonesia's financial literacy index is still relatively low. The financial literacy in question is an understanding of its features, benefits, risks, and rights and obligations related to financial products and services. Financial literacy also measures the level of skills, attitudes, and behavior that are correct in using financial products and services.

The results of the Financial Literacy and Inclusion National Survey (SNLIK) belonging to the OJK in 2022 of Indonesia's financial literacy index are 49.68 percent. The results of this survey show that even Indosia's financial literacy has always increased in 2013, 2016, and 2019 in a row, which is only 21.84 percent, 29.70 percent, and 38.03 percent, respectively.

However, Indonesia's financial literacy index is still relatively low when compared to ASEAN countries such as Singapore which reached 95 percent, Malaysia by 85 percent, and Thailand by 82 percent.

When a person has good financial literacy, it will develop into financial skills that can be applied in everyday life. On the other hand, when financial literacy in a country is low, it will result in several things that are not only beneficial for yourself, but also for the country in general.

"With low literacy levels, a person does not have good financial planning, has no financial goals, inappropriate placement of investment instruments, and is trapped in fraudulent investment practices," said Sondang Martha in 2019, who at that time was still the Head of the OJK Literacy and Inclusion Department.

Gen Z's Challenges Are More Complex

Generation Z, the generation that is expected to become the backbone of Indonesia in the future, turns out that the level of financial literacy is still low. Based on OJK data, the level of financial literacy for Gen Z is 44.04 percent or 3.94 percent lower than the millennial generation, with the total population of gen Z in 2019 being 72.9 million people.

Still based on OJK data in December 2022, it turns out that gen Z has more debt than other generations. This can be seen from the account ownership data and the amount of outstanding loans in fintech P2P lending. As many as 62 percent of joint funding fintech accounts are owned by customers aged 19-34 years. Not far from this figure, 60 percent of loans from joint funding fintech are also channeled to customers aged 19-34 years, meaning that joint funding fintech users are dominated by Gen Z.

DR. Anas Iswanto Anwar, SE, MA, lecturer at Hasanuddin University's Faculty of Economics and Business (Unhas) said, Gen z will be a generation facing increasingly complex financial challenges, including increasingly expensive tuition fees, stiff work competition, volatile stock markets, and many others.

"With good financial literacy, Gen Z can avoid uncontrolled debt, manage their money wisely, and prepare themselves for a more financially stable future," said DR. Anas, quoted by Unhas' official website.

They can also understand concepts such as how to invest, how to save, manage risks and insurance, which will eventually help them make better financial decisions," he added.

Given the low level of financial literacy, especially for millennials and Z, it takes the hard work of stakeholders to encourage increased public understanding of financial service institutions.

Moreover, now advances in financial technology are also developing very rapidly, so people need education to use financial services optimally and not become victims of fraud due to lack of understanding.