Transcript Slide 1

STRENGTHENING THE BANKING SECTOR
CAPACITY FOR MSMEs FINANCING :
THE ROLE OF BANK INDONESIA as THE
CENTRAL BANK
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About Indonesia
Indonesia is one of the world's biggest archipelagic country. Situated
between two continents.i.e. Asia and Australia/Oceania , it has a total
of 17.508 islands. This strategic location has a significant
influence towards its Culture, Social conditions, Politics and
Economy.
Area
- Total
- Water (%)
1,919,440 (land) km²
735,355 sq mi
48,5
Population
- July 2007
- 2000 census
- Density
234,693,997
206,264,595
134/km² 347/sq mi
GDP (nominal)2007
- Total
$438.1 billion
- Per capita $1,947.1
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ROLES OF MSMEs IN THE ECONOMY
Employment
Number of Entity
Large Corp
4%
Large Corp
1%
SME
99%
SME
96%
Non oil export
SME
20%
Investment
GDP
Large
Corp
80%
Large Corp
47%
Large Corp
SME
46%
54%
SME
53%
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Definitions of MSMEs
 Micro enterprise :
– Annual turn over of IDR 100 million (USD 10,000)
– Net worth (excl. land n building) of max IDR 25 million
(USD 2500)
– Max. employees of 5 persons
 Small enterprise :
– Max. annual sales of IDR 1 billion (USD 100,000)
– Max. net assets of IDR 200 million (USD 20,000)
 Medium enterprise :
– Annual sales range between IDR 1 billion (USD100,000)
up to IDR 50 billion (USD 5,000,000)
– Net assets range between IDR 200 million (USD 20,000)
up to IDR10 billion (USD 1,000,000).
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Number and Credit Outstanding of MSMEs
MSMEs Credit Outstanding
(2004-March 2008)
Number of SME
Rp billion
million unit
50
45
38.9
48.9
40.8
42.5
43.7
250
202.5
44.7
181.9
200
157.9
40
150
35
30
100
25
50
116
82.7
72.4
110.2
101.8
129.9
116.2
166.9
154.8
203.3
171.6
165.9
20
0
15
2004
10
Micro (IDR bilion/
2005
2006
2007
Mar-08
116/11.6
157.9/15.79
181.9/18.19
202.5/20.25
203.25/20.33
72.4/7.24
101.8/10.18
116.2/11.62
154.8/15.48
165.93/16.59
82.7/8.27
110.2/11.02
129.9/12.99
166.9/16.69
171.6/17.16
USD milion)
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Small (IDR bilion/
0
USD milion)
2001
2002
2003
2004
2005
2006
Medium (IDR bilion/
USD milion)
Note: USD 1 = IDR 10.000
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Financial Accessibility Problem for MSMEs
Financial Institution
 Feasible
 Bankable
Regulator
BI
• Insentive to Financial
Institution
• Technical Assistance to
MSMEs
*) Not bankable : MSMEs don’t
have sufficient collateral, limited
access to market information,
bookkeeping and limited formal
legal status
Only 33,8% MSMEs
are Bank’s debtor
MSMEs
 Feasible
 Not Bankable*
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BI’s Approach to MSMEs
1999
Before 1999 :
After 1999 :
Central Bank Act 1968 : Direct &
Indirect Policy in Financing MSMEs
Central Bank Act 1999 : Indirect
Policy in Financing MSMEs
 Based BI’s act No. 13 year 1968, The
objective of Bank Indonesia is to
achieve and maintain the stability of the
Rupiah and to improve sustainable
growth of production and economic
development along with increasing of
job opportunity that leads to raise the
people’s welfare
 Providing liquidity credits (financial
assistance) and technical assistance to
MSMEs through the banks
• Based BI’s act No. 23 year 1999,
The Objective of bank Indonesia is
to achieve and maintain the
stability of the Rupiah
Only provides technical assistance
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BI’s Policy in Financing MSMEs as a regulator/Supervisor
Before 1999 :
1. Subsidized Credit Program
 Priority sectors (MSMEs, plantation, and housing for low income
people)
 Lower interest rate and long-term funding
 Funded by Govt. budget and BI
 About 20 schemes of credit programs had been introduced
2.
Banks Regulation
 Quota on lending to micro and small enterprise
 Lending to MSMEs was required to be min. 20% of net credit
expansion
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BI’s Policy in Financing MSMEs as a regulator/Supervisor (Cont.)
3. Technical Assistance
 Micro Credit Project
 The Self-Help Group Linkages to Banks

To link group of micro entrepreneurs to banks
4. Institutional Development
 Promoting the establishment of rural banks
 Promoting the syariah based banking operation
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BI’s Policy in Financing MSMEs as a regulator/Supervisor (Cont.)
After 1999 :
1. Regulation on MSMEs credit :
 Advised banks to allocate part of its lending to MSMEs
 Advised banks to submit business plan to BI and publish
the quarterly report on realization of the business plan.
2. Easing Banking regulation within the prudential banking
framework
 Credit performance of loan up to IDR 500 million (USD
50.000) is based only on prompt repayment of principal
and/or interest.
 Risk–weighted Assets for Small Business Loan is
calculated of 85%
 The Risk-weighted Assets is calculated of ≤ 50 % for credit
which guaranteed by government’s guarantee firms.
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BI’s Policy in Financing MSMEs as a Mediator
1. Technical Assistance





Training for bank officers and Business Development Services
Provider (BDSP)
Researches to support policy formulation
Building an SMEs Development Information System (SIPUK)
Training with certification (CERTIF) for candidate of directors
and directors BPR/BPRS
Training on productive sector financing for Rural Bank officer
2. Linkage Program
 To enhance bank loan to MSMEs via Rural Banks and other
MFIs
 As of June 2007, 28 financial institution (27 commercial banks
and PT PNM) has linkaged to 1,156 Rural Banks with total
outstanding loan amounted Rp2,026 billions (USD 202,6 million)
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BI’s Policy in Financing MSMEs as a Mediator
(Cont.)
3.Promoting the Role of Credit Guarantee
BI acts as a facilitator :
• To encourage cooperation between credit guarantee agency and banks
• To encourage cooperation between regional government and credit
guarantee agency
• Prerequisite : Approval from Regional Parliament to place fund in the
regional credit guarantee agency
BI as a counterpart of the Government in regulated the Credit
Guarantee Policy :
 BI also acts as a facilitator between the Banking Industry and Government
in implementing Government Program so called Credit for People (Kredit
Usaha Rakyat – KUR)
 The purpose of this program is to enable MSMEs without sufficient
collateral to get loan IDR 500 million (USD 50,000). The insufficiency of
collateral was thus covered by credit guarantee, of which the guarantee
premium is paid by the government
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BI’s Policy in Financing MSMEs as a Mediator
(Cont.)
4. Facilitating dialogue between banking sector,
MSMEs sector and government agencies
 In form of bazaar of banking intermediary
 Held by BI branches
5. Promoting the establishment of MSME center


Special unit extending services to MSMEs in commercial
bank
Information center for MSMEs clients
6. Extending the facilities of Credit Bureau
 Center of data base of all bank borrowers
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BI’s Policy in Financing MSMEs as a Mediator
(Cont.)
7. Supporting the Establishment of Promoting
Enterprises Access to Credit (PEAC) units.


8.
Special unit extending services to BDS Provider
To improve the quality of BDS Provider services and
productivity in making MSMEs bankable
Facilitating the establishment of APEX Institutions
for Rural Banks (BPR/BPRS)
- Functioning as a pooling of fund from the Rural Bank
member
- Providing both financial and technical assistance
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MSMEs Credit Outstanding by Type of Utilization (2004-March 2008)
100%
48.3%
50.5%
48.8%
50.0%
51.4%
50%
10.5%
9.3%
8.9%
8.8%
8.6%
25%
41.2%
40.2%
42.3%
41.2%
39.9%
75%
0%
2004
2005
Working Capital Credits
2006
Investment Credits
2007
Mar-08
Consumer Credits
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MSMEs Credit Outstanding by Economics Sectors (March 2008)
3.3%
0.3%
7.2%
0.1%
2.4%
26.0%
51.8%
1.3%
6.2% 1.4%
A griculture, hunting and agricultural facilities
M ining
M anufacturing Industry
Electricity, gas & water
Co ntructio n
Transpo rtatio n, cargo sto rage and co mmunicatio n
Trade, restaurants and ho tels
B usiness Services
So cial Services
Others
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Non Performing Loans of MSMEs Credit
Percentage
20
15
11.58
10
8.1
7.57
5
5.68
4.5
3.23
6.14
3.88
4.38
4.28
3.89 3.84
4.15
3.68
3.39
0
2004
2005
MSME credit
2006
Non MSME credit
2007
Mar-08
Total Credit
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Disbursement Vs Business Plan of MSMEs Credit
Rp billion
160.0
174.6%
140.0
Persentage
200.0%
160.0%
143.5%
120.0
111.8%
100.0
120.0%
85.2%
80.0
80.0%
60.0
40.0
14.1%
20.0
0.0
0.0%
2004
Business Plan (Rp billion/
40.0%
2005
2006
2007
Mar-08
38.5/3.85
60.4/6.04
68.1/6.81
86/8.6
129.3/12.93
67.2/6.72
86.7/8.67
58/5.80
96.19/9.62
16.60/1.66
174.6%
143.5%
85.2%
111.8%
12.8%
USD million)
Realization (Rp billion/
USD million)
Persentage
Note: USD 1 = IDR 10.000
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