Presentation on theme: "Micro Credit Financing and Poverty Alleviation in OIC Member States Istanbul, July 9-11, 2007 ISMANTO BANK RAKYAT INDONESIA."— Presentation transcript:
Micro Credit Financing and Poverty Alleviation in OIC Member States Istanbul, July 9-11, 2007 ISMANTO BANK RAKYAT INDONESIA
BUSINESS LANDSCAPE (2006) Source: Kompas, August 11, 2006 7.9 mio (15%) (44.8 mio) (7.9 mio) Number of Business Units (57.7mio)
Microfinance in Indonesia Source : Central Bank Directorate of Rural Banking Supervision Rural Banks (BPR/BPRS) Act= The Banking Act No.10/1998 License= Bank Indonesia, the Central Bank Supervision= The Central Bank Act No.23/1999 MFIs Bank Non Bank BRI Unit Act= The Banking Act No.10/1998 License= Bank Indonesia, the Central Bank Supervision= * BRI Branches * Bank Indonesia for BRI as a Whole (Commercial Bank) Village Credit Board (Badan Kredit Desa =BKD) Act= Bank act No.10/1998 License= Bank Indonesia, the Central Bank Supervision= BRI on behalf of Bank Indonesia Cooperatives (KOSIPA) Act= Cooperative Act No.25/1992 License= State Ministry of cooperative & Small Enterprise Supervision= State Ministry of cooperative & Small Enterprise Non Formal 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) Formal
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.
Becoming a leading commercial bank in Indonesia which puts customers’ satisfaction as the priority. VISION 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
BIMAS Program was successful. BIMAS Program was successful. BRI Unit Unsustainable BRI Unit Unsustainable Initiated to support BIMAS Program (the Rice Self Sufficiency Program): BRI’s functioned as a government agent to channel subsidized loans for farmers BRI-Unit 1970
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
BRI MICRO BUSINESS DIVISION VISION Promoting BRI as the Best Microfinance Provider in the World 1.Providing the BEST services in microbanking to enhance the poor economy; 2. Making contribution to BRI in the form of maximum profit and benefit; 3. Actively participating in the international microfinance development. MISSION
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 BRI MICRO BUSINESS DIVISION
1 Head Office 13 Regional Offices 11 Regional Audit Offices 331 Branches Phone Banking Facility ATMs : 977 ATM BRI 9.000 ATM Bersama 3.627 ATM Link 207 Sub Branches 4.229 BRI Units 133 Village Service Posts 45 Sharia Branches ATM Cirrus & Alto around the world BANK RAKYAT INDONESIA Networks
Target Customers Income LevelsCommercial Financial Services Subsidized Poverty Alleviation Programs Lower Middle Income Economically-Active Poor Extremely Poor & Displaced households Standard Commercial Bank loans; full range of savings services Commercial Micro loans Interest- bearing savings accounts for small savers Poverty programs for such purposes as food and water, Medicine and nutrition, employment generation, skills training, and relocation Poverty line Target Source: Robinson, M.. 2002. The Microfinance Revolution. Lessons from Indonesia,. The World Bank & Open Society Institute. Washington DC.
BRI APPROACHES Poverty Alleviation Program Target : Below the Poverty Line Collaboration between BRI & Government agencies Interest subsidized by government Funding from IFAD, ADB, BRI, etc. 1. Rural Income Generating Project (RIGP) 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
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) BRI’S APPROACHES Target : Above the Poverty Line Target: Viable small enterprises Loan size up to Rp 5 billion (US$ 55,000) Conventional banking approach 4. Small Loans
BANK RAKYAT INDONESIA - MICROBANKING A Commercially Sustainable Microfinance System 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 6%) BRI is known as the largest and the best microbanking system in the world.
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)
Share Price at Jakarta Stock Exchange IPO : Rp. 875 Recent: Rp. 6,400 Share Holders Government: 57.4% Public: 42.6% Local ownership: 11.5% Foreign ownership: 88.5.4% BRI is Public listed company at Jakarta Stock Exchange. (June 5, 2007)
BRI FINANCIAL PERFORMANCE DATA 31 Dec. 2005 (billion) In USD (mio) 31 Dec. 2006 (billion) In USD (mio) Growth Total Asset122,77613,641154,72517,19226.02% Outstanding Loans 75,5338,39390,28310,03119.53% Public Deposits97,04610,783124,46813,83028.26% Net Profit3,8094234,25847311.79% Net Interest Income 12,4261,38013,7701,53010.81% CAR15.29%18.82%23.08% Latest update: April 2, 2007
BANK RAKYAT INDONESIA Financial Highlight Loans : Maintained Key Success Factor Proven Commitment and Focus to Micro, Small and Medium Enterprises 86.7% Loans to MSME 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 Loan CAGR – by Business Segment
BANK RAKYAT INDONESIA Loans: Steady High Growth In the last five years, loan growth was driven by micro, small and medium loans Medium loans showed the highest growth in percentage, but in the amount of loan, micro loans and small commercial loans were still the segment where BRI expanded its loan book. 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
BANK RAKYAT INDONESIA Deposits : Trending Down of Cost of Funds and Improving Mix
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
Changes in Regulatory Environment 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). Relaxation Policies from Bank Indonesia Intended to spur loan disbursements, especially loans to MSMEs
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 customers’ needs and to compete better
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