• Yessi Rahmawati

On Investments, Financial Literacy, and Wealth Inequality during the Pandemic

Updated: Jul 1

Yessi Rahmawati


Injustice and inequality exist in all walks of life, including the financial sector such as the stock market. Injustice occurs when there is a gap between society in terms of how they can invest their money.


Since the first COVID-19 exposure which has then gone to affect lives and society, many countries have imposed regional and national lockdown that even remains in place until now. Indonesia is among the countries that continue to regulate interactions in order to manage the spread of COVID-19. In 2020, the Ministry of Administrative and Bureaucratic Reform released a series of policy documents concerning stay-at-home or work-from-home during the COVID-19. The restrictions produced a tremendous impact on the national economic stability.


The new normal policy since the COVID-19 outbreak improved financial literacy among youths and changed their perspective about finance (Forbes, 2021), which consequently a produced positive impact on the stock market. Although it started as a fear of missing out (FOMO), young people began to understand the importance of investment. Young people, those who belong to the 15-35 age bracket, started to pay attention to wealth management such as through entering the stock market. It was partly influenced by influencers on social media platforms such as Youtube, Instagram, and Tiktok.


The wave of new and young investors entering the market freely during the pandemic did not shatter even at times when the IDX Composite, an index of all stocks listed on the Indonesian Stock Exchange (IDX) continued to deteriorate for several months and the global economic growth forecast was not hopeful (Financial Services Authority, 2019).


In comparison to the International Stock Market, Indonesia’s capital market growth in 2020 was placed third with 14.43 %, followed by India (24.02 %) and Thailand (25.49 %) (Sitanggang and Utami, 2020). The excellent performance of the IDX Composite can also be seen by fast post-pandemic recovery.


The increasing demand for financial investment was supported by the establishment of numerous mobile and web-based investment applications. Investment applications such as BIBIT, AJAIB, MIRAE, IPOT, and MOST are the most well-known investment application. These applications generally offer a small fee for each transaction and hold seminars or webinars to assist new investors.


In addition to innovative development by the apps’ creators, social media influencers also play tremendous roles in introducing the importance of financial literacy, which opened their perspective about financial investments. Besides, the influencers also attracted the newbies by giving them referral codes as ticket discounts and the Indonesian Financial Services Authority (OJK) reported that the demand for investment applications has grown more than 50% since the beginning of the pandemic. The snow-ball growth of new investors during the pandemic can be easily seen from the cumulative new Single Investor Identification (SID) that has an annual increase of 65% since the beginning of the pandemic (OJK, 2020).


Unequal Progress in Financial Literacy

Sadly, if we see further, the significant spread of financial literacy among young people can only be found in Java Island. Supported by the 2020 data from the Indonesian Financial Services Authority, the new Single Investor Identifications (SIDs) were mostly present in Java Island (73%) and Sumatera Island (13%). Cities with the largest number of SIDs are those that are supported with good electricity and internet connection. Good electricity and internet connection are the prerequisites of accessing investment applications in the digital era. Young people in big cities are familiar with advanced technology, which allows them to be adaptive and capable of absorbing new information regarding the financial market.


In contrast to Indonesia’s Java Island, the far-away Papua has not yet reaped the benefit from infrastructure development. Only 6% of total SIDs are from Papua (24.186 SID). That is 0.7% of the total population in Papua. Why is this happening? The potential reason lying behind the unequal progress was that the electrification ratio in Papua was only 36.4%, far behind Java Island (80% (Asian Development Bank, 2020). This is also compounded by the 2019 internet ban in Papua due to racism.


The same pattern is also visible from the total transaction of the stock market in Indonesia. 74% of total transactions in the stock market were dominated by Java Island (IDR 450.728M), followed by Bali Island (IDR 78M). Unlike SID, the total transaction was influenced by wealth. By December 2020, the highest total transaction was from DKI Jakarta (54%), East Java (9%), West Java (9%), and Banten (4%). These regions control the economic activities of provinces outside of Java Islands, which only shared less than 3% of the total national transactions.


Injustice and inequality exist in all walks of life, including the financial sector such as the stock market. Injustice occurs when there is a gap between society in terms of how they can invest their money. As such, a path to alleviate inequality in finance is by giving everyone the same choices and facilities to learn about financial literacy and the importance of wealth management.



Yessi Rahmawati is Lecturer at Sekolah Tinggi Ilmu Surabaya








This article is featured in JUSTIN Development Review (JDR) Vol. 01 Issue 01 — June 2021

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