Transcript Bank Rakyat Indonesia (BRI) - "Micro Credit Financing and
ISMANTO BANK RAKYAT INDONESIA Micro Credit Financing and Poverty Alleviation in OIC Member States Istanbul, July 9-11, 2007
BUSINESS LANDSCAPE (2006)
Number of Business Units (57.7mio)
Medium + Big Corporates 15%
(7.9 mio)
7.9 mio (15%)
MSEs 85%
(44.8 mio)
MSEs Source:
Kompas,
August 11, 2006 Medium + Big Corporates
Microfinance in Indonesia
MFIs
Source : Central Bank Directorate of Rural Banking Supervision
Bank Rural Banks (BPR/BPRS) Act License Supervision = The Banking Act No.10/1998 = Bank Indonesia, the Central Bank = The Central Bank Act No.23/1999 Non Bank Formal Non Formal BRI Unit Act License Supervision = The Banking Act No.10/1998 = Bank Indonesia, the Central Bank = * BRI Branches * Bank Indonesia for BRI as a Whole (Commercial Bank) Village Credit Board (Badan Kredit Desa =BKD) Act License Supervision = Bank act No.10/1998 = Bank Indonesia, the Central Bank = BRI on behalf of Bank Indonesia Cooperatives (KOSIPA) Act License Supervision = Cooperative Act No.25/1992 = State Ministry of cooperative & Small Enterprise = State Ministry of cooperative & Small Enterprise LDKP (The Funds and Credit Institutions) Act License = -------- = Governor of each Province Supervision = Local Government Level I
• • • •
Non Government Organization (NGO) Self Help Group BMT Rotating Saving & Credit Association (ROSCA)
ABOUT BANK BRI…
Bank BRI was founded in 1895 by Raden Arya Wirya Atmaja, in Purwokerto (Central Java) as a Support and savings bank for civil servants.
The growth of BRI is regarded as the beginning of Indonesian rural banking.
After 111 years of operation, Bank BRI still focuses its business on microbanking:
making banking products and services accessible for the poor in Indonesia
.
VISION
Becoming a leading commercial bank in Indonesia which puts customers’ satisfaction as the priority.
MISSION
1. Performing the best banking activities focusing on providing services for Micro, Small, and Medium Enterprises to support Indonesia’s economy.
2. Providing excellent services for customers through widespread network, supported by professional HR by implementing GCG.
3. Providing optimum added values for all stakeholders.
STRATEGIES
1. Focus on the core business 2. Expand operational coverage 3. Strengthen Risk Management 4. Use information technology for operational efficiency
BRI-Unit 1970
Initiated to support BIMAS Program (the Rice Self Sufficiency Program): BRI’s functioned as a government agent to channel subsidized loans for farmers BIMAS Program was successful.
BRI Unit Unsustainable
Since 1984, BRI Units …
Structurally an autonomous financial unit Staff accountability closely associated with Unit’s performance Under branch’s supervision Strengthening the internal supervision, audit capacities and staff capability Commercial approach Market based products
Fundamental Changes in Unit Banking Business Policies
Micro Banking staff become BRI Employees
New accounting system focusing on transparency
Introduction of KUPEDES (General Rural Credit)
Relocation of Poorly-sited BRI Units
Development of SIMPEDES (Rural Savings)
Introduction of performance incentives
Organization of staff and supervision
Personnel Training and Development
Simplicity
Basic Principles
BRI MICRO BUSINESS DIVISION
VISION
Promoting BRI as the Best Microfinance Provider in the World
MISSION
1. Providing economy; the BEST services in microbanking to enhance the poor 2. Making contribution to BRI in the form of maximum profit and benefit; 3. Actively participating in the international microfinance development.
BRI MICRO BUSINESS DIVISION
STRATEGIES
Reorganizing so as to be more focused in competition Taking steps for efficiency and effectiveness Product development Market expansion IT development HR quality and service enhancement BRI Units’ Office/outlet performance enhancement Optimizing networks Locking micro market using
Strategic Alliance
BANK RAKYAT INDONESIA
Networks
1 Head Office 4.229 BRI Units 13 Regional Offices 11 Regional Audit Offices 331 Branches 207 Sub Branches 45 Sharia Branches 133 Village Service Posts ATMs : 977 ATM BRI 9.000 ATM Bersama 3.627 ATM Link ATM Cirrus & Alto around the world Phone Banking Facility
Income Levels
Target Customers
Commercial Financial Services
Subsidized Poverty Alleviation Programs
Lower Middle Income
Standard Commercial Bank loans; full range of savings services
Economically-Active Poor Poverty line
Target
Commercial Micro loans Interest bearing savings accounts for small savers
Extremely Poor & Displaced households
Source: Robinson, M.. 2002.
The Microfinance Revolution. Lessons from Indonesia
,. The World Bank & Open Society Institute.
Washington DC.
Poverty programs for such purposes as food and water, Medicine and nutrition, employment generation, skills training, and relocation
BRI APPROACHES
Poverty Alleviation Program Target : Below the Poverty Line 1. Rural Income Generating Project (RIGP)
• • •
Collaboration between BRI & Government agencies Interest subsidized by government Funding from IFAD, ADB, BRI, etc.
2. Program Loans
• • •
Focus on strengthening rice production and food security program including cooperative sectors Target: farmers, agricultural sector, and cooperatives Interest rate set up by the government
BRI’S APPROACHES
Target : Above the Poverty Line
3. Microbanking
Target: micro entrepreneurs & the economically active poor Loan size up to Rp 50 million (US$ 5,600) Commercial approach Simple procedures, quick disbursement Loan product: Kupedes (the General Rural Credit)
4. Small Loans
Target: Viable small enterprises Loan size up to Rp 5 billion (US$ 55,000) Conventional banking approach
BANK RAKYAT INDONESIA - MICROBANKING A Commercially Sustainable Microfinance System BRI is known as the largest and the best microbanking system in the world.
• more than 4,200 outlet, covers the country up to the level of sub-district and village • almost 30,000 employees • 3.4 million borrowers, 32 million savers • Provide wide range market-driven products (loan, saving and other services) • Good financial performance (almost all outlets are profitable, NPL<2%, ROA>6%)
BRI
GO PUBLIC
• • Bank BRI made its Initial Public Offering (IPO) in November 2003, with 59.5% of the shares was owned by the government and 40.5% belonged to the public (55.3% went to foreign investors, and 44.7% to domestic investors).
As of September 2006, 42.6% of the shares was owned by the public (88.5% went to foreign investors; 11.5% to the domestic)
BRI is Public listed company at Jakarta Stock Exchange.
Share Price at Jakarta Stock Exchange IPO : Rp. 875 Recent : Rp. 6,400 (June 5, 2007) Share Holders
Government Public : 57.4% : 42.6% Local ownership : 11.5% Foreign ownership: 88.5.4%
BRI FINANCIAL PERFORMANCE
DATA Total Asset Outstanding Loans Public Deposits Net Profit Net Interest Income CAR
Latest update: April 2, 2007
31 Dec. 2005 (billion) In USD (mio) 122,776 13,641 31 Dec. 2006 (billion) 154,725 In USD (mio) 17,192 Growth 26.02% 75,533 97,046 3,809 12,426 8,393 10,783 15.29% 423 1,380 90,283 124,468 4,258 13,770 10,031 13,830 18.82% 473 1,530 19.53% 28.26% 11.79% 10.81% 23.08%
Loans:
BANK RAKYAT INDONESIA Financial Highlight Maintained Key Success Factor
Proven Commitment and Focus to Micro, Small and Medium Enterprises
100% 17.4% 3.7% 24.2% 14.7% 4.6% 26.9% 13.6% 4.6% 28.0% 13.2% 6.2% 28.5% 13.3% 8.2% 27.0% 50% 24.2% 23.4% 23.1% 21.9% 21.2% 86.7% Loans to MSME 30.5% 30.5% 30.8% 30.2% 30.2% 0% 2002 2003 2004 2005 2006 Micro Small Consumer Small Commercial Medium Corporate
Loan Definitions : By Loan Size
Micro Loans : Up to Rp 50 mio (US$ 5,000) Small Consumer : Up to Rp 200 mio (US$ 20,000) Small Commercial : > Rp 50 mio to Rp 5 bio (US$500,000) Medium Loans : > Rp 5 bio to Rp 50 bio (US$ 500,000 – US$ 5 mio) Corporate Loans : > Rp 50 bio ( > US$ 5 mio)
BANK RAKYAT INDONESIA
Loans: Steady High Growth
100.00
50.00
39.37
9.53
9.52
12.01
2002 Micro Medium 47.60
12.70
11.20
14.54
2003 62.37
8.46
2.86
17.47
14.38
19.19
75.53
9.94
4.72
21.55
16.54
22.78
90.28
12.00
7.42
24.42
19.15
27.28
2004 Small Consumer Corporate 2005 2006 Small Commercial Total Loan CAGR – by Business Segment Mikro Small Consumer Small Commercial Medium Corporate
2002 - 2006 (Full Year)
22.8% 19.1% 26.5% 50.3% 15.0%
BANK RAKYAT INDONESIA Loans: Steady High Growth
In the last five years, loan growth was driven by small and medium loans micro,
Medium loans showed BRI expanded its loan book.
the highest growth in percentage, but in the amount of loan, micro loans and small commercial loans were still the segment where
In 2005 -2006, loan increased by IDR 14.75 trillion. Micro and Small Commercial Loans contributed 50 % of it.
BANK RAKYAT INDONESIA
Loans: Steady High Growth
2005-2006 Loan Expansions by Business Segment (IDR Trillion) Micro Small Consumer Small Commercial Medium Corporate 2.05
2.50
idr trillion 2.61
2.88
2.71
4.50
5.00
BANK RAKYAT INDONESIA
Deposits: Trending Down of Cost of Funds and Improving Mix 12.0
12.75
12.75
12.25
11.25
9.75
130 8.0
7.43
6.20
6.24
6.21
6.07
90 4.0
4.60
4.73
50 0.0
13.4
17.4
Dec-04 Dec-05*) Demand Savings 16.6
Mar-06 Time 21.0
20.7
27.9
Jun-06 Sep-06 Dec-06*) BI Rate (%) COF BRI (%) 10
BANK RAKYAT INDONESIA
Deposits: Trending Down of Cost of Funds and Improving Mix BRI’s cost of funds had been relatively resilient in the period of increasing interest rate, and decreasing steadily in the time of declining interest rate Although there were some shifts toward high cost funds (time deposits) in late 2005 up to Q3 2006, low cost funds were still the majority in BRI deposits.
Despite the shift, BRI’s deposits mix was steadily better than the Industry’s
2007 : Outlook
Changes in Regulatory Environment
Relaxation Policies from Bank Indonesia
Intended to spur loan disbursements, especially loans to MSMEs
Easing criteria of one debtor one loan classification. Single loan classification will only be applied to loans with total exposure of equal or more than Rp. 5 billion
Opportunities for companies with bad loan history to get new loans as long as the cause of the bad loans are not related to any mismanagement practices or any bad intentions.
Quality of loans with total exposure below Rp 5 billion , or loans to projects guaranteed by the Government, will be determined solely on timeliness of payments.
Maximum loans of up to 30% bank’s legal lending limit will be permitted for loans to all State Owned Enterprises engaged in development projects (not only infrastructure projects).
BRI in 2007 : General Directions
Maintaining loan growth at around 20%
Maintaining high loan quality, by keeping NPLs (gross) at around + 5%
Targeting deposits growth at around + 14% Maintaining the dominance of low cost funds in the deposit mix, targeting more retail depositors
Lower interest rate will give more advantage to BRI:
High net interest margin can be maintained: - Better mix of funds resulted in a lower cost of funds - High quality of loan growth
better valuation of government bonds
BI’s relaxation policy and lucrative business in serving MSMEs meanthat there will be more opportunities as well as more competitions among banks
BRI in 2007 : General Directions
Micro Businesses - Emphasizing the Economic of Scale
Opening new outlets in the prospective areas, continue the on line process of the existing outlets, on cost and benefit basis
Widening micro customer base by recruiting new customers long fostered through ‘subsidized loan schemes’
Setting more challenging targets for micro units accompanied by fairer incentive schemes
Improving and polishing products to cater more to needs and to compete better customers’