risk management modules bank rakyat
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Micro Credit Financing and Poverty Alleviation in OIC Member States
Istanbul, July 9-11, 2007
ISMANTOBANK RAKYAT INDONESIA
BUSINESS LANDSCAPE (2006)BUSINESS LANDSCAPE (2006)BUSINESS LANDSCAPE (2006)BUSINESS LANDSCAPE (2006)
Source: Kompas, August 11, 2006
7.9 mio(15%)
MSEs85%
Medium + Big Corporates
15%
MSEs Medium + Big Corporates
(44.8 mio)
(7.9 mio)
Number of Business Units (57.7mio)
Microfinance in IndonesiaMicrofinance in IndonesiaMicrofinance in IndonesiaMicrofinance in Indonesia
Source : Central Bank Directorate of Rural BankingSupervision
Rural Banks (BPR/BPRS)
Act = The Banking Act No.10/1998License = Bank Indonesia, the Central BankSupervision = The Central Bank Act No.23/1999
MFIs
Bank
Non Bank
BRI Unit
Act = The Banking Act No.10/1998License = Bank Indonesia, the Central BankSupervision = * BRI Branches
* Bank Indonesia for BRI as a Whole (Commercial Bank)Village Credit Board (Badan Kredit Desa =BKD)
Act = Bank act No.10/1998License = Bank Indonesia, the Central BankSupervision = BRI on behalf of Bank Indonesia
Cooperatives (KOSIPA)
Act = Cooperative Act No.25/1992License = State Ministry of cooperative & Small
EnterpriseSupervision = State Ministry of cooperative & Small
Enterprise
Non Formal
LDKP (The Funds and Credit Institutions)
Act = ---------License = Governor of each ProvinceSupervision = 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
MISSION1. 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.
STRATEGIESSTRATEGIES
1. Focus on the core business2. Expand operational coverage3. Strengthen Risk Management4. Use information technology
for operational efficiency
BIMAS Program
was successful.
BIMAS Program
was successful.
BRI UnitUnsustainable
BRI UnitUnsustainable
Initiated to support BIMAS Program (the Rice Self Sufficiency Program): BRI’s functioned as a government agent to channel subsidized loans for farmers
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
Simplicity
Transparency
Cost
Recovery
Accessibility
SustainabilityBasic
Principles
BRI MICRO BUSINESS DIVISION
VISIONVISION Promoting BRI as the Best Microfinance Promoting BRI as the Best Microfinance Provider in the WorldProvider in the World
1.1. Providing the BEST services in Providing the BEST services in microbanking to enhance the poor microbanking to enhance the poor economy; economy;
2. 2. Making contribution to BRI in the form Making contribution to BRI in the form of maximum profit and benefit;of maximum profit and benefit;
3. 3. Actively participating in the Actively participating in the international microfinance international microfinance development.development.
MISSIONMISSION
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 DIVISIONBRI 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 CustomersIncome Levels Commercial Financial Services
Subsidized PovertyAlleviation Programs
Lower MiddleIncome
Economically-Active Poor
Extremely Poor & Displaced households
Standard CommercialBank loans; full range of
savings services
CommercialMicro loans
Interest-bearing savings
accounts for smallsavers
Povertyprograms for
such purposes as food and water,Medicine and
nutrition,employment
generation, skillstraining, 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 APPROACHESBRI’S APPROACHESTarget : 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 - MICROBANKINGA 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<2%, ROA>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
DATA31 Dec.
2005
(billion)
In USD
(mio)
31 Dec. 2006
(billion)
In USD
(mio)Growth
Total Asset 122,776 13,641 154,725 17,192 26.02%
Outstanding Loans
75,533 8,393 90,283 10,031 19.53%
Public Deposits 97,046 10,783 124,468 13,830 28.26%
Net Profit 3,809 423 4,258 473 11.79%
Net Interest Income
12,426 1,380 13,770 1,530 10.81%
CAR 15.29% 18.82% 23.08%
Latest update: April 2, 2007Latest update: April 2, 2007
BANK RAKYAT INDONESIA Financial Highlight
Loans: Maintained Key Success FactorProven Commitment and Focus to Micro, Small and Medium Enterprises
30.5% 30.5% 30.8% 30.2% 30.2%
24.2% 23.4% 23.1% 21.9% 21.2%
24.2% 26.9% 28.0% 28.5% 27.0%
3.7% 4.6% 4.6% 6.2% 8.2%17.4% 14.7% 13.6% 13.2% 13.3%
0%
50%
100%
2002 2003 2004 2005 2006
Micro Small Consumer Small Commercial Medium Corporate
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
2002 - 2006 (Full Year)Mikro 22.8%Small Consumer 19.1%Small Commercial 26.5%Medium 50.3%Corporate 15.0%
12.01 14.54 19.19 22.78 27.289.52 11.2014.38
16.5419.15
9.5312.70
17.4721.55
24.42
1.452.17
2.86
4.72
6.866.99
8.46
9.94
12.00
7.42
39.3747.60
90.28
75.53
62.37
-
50.00
100.00
2002 2003 2004 2005 2006
IDR
Trill
ion
Micro Small Consumer Small CommercialMedium Corporate Total
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
2005-2006 Loan Expansions by Business Segment (IDR Trillion)
2.05
2.71
2.88
2.61
4.50
- 2.50 5.00
Corporate
Medium
Small Commercial
Small Consumer
Micro
idr trillion
BANK RAKYAT INDONESIA
Deposits: Trending Down of Cost of Funds and Improving Mix
13.4 17.4 16.6 21.0 20.7 27.9
51.8 58
.3
44.6 49.4 48.1 50
.2
30.3
24.5
33.0
38.439
.7
36.7
7.43
12.75 12.75 12.2511.25
9.75
4.60 4.73
6.206.24 6.21 6.07
0.0
4.0
8.0
12.0
Dec-04 Dec-05*) Mar-06 J un-06 Sep-06 Dec-06*)10
50
90
130
Demand Savings Time BI Rate (%) COF BRI (%)
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
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 IndonesiaIntended 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
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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