Banks nurture the greens shoots of growth

INDONESIA'S BANKING SECTOR HAS BEEN AT THE FOREFRONT OF THE COUNTRY'S EFFORTS TO OVERCOME THE 1997-98 FINANCIAL CRISIS, WITH BANK BUKOPIN AND BANK RAKYAT LEADING THE WAY

BANK BUKOPIN AND BRI have played a crucial role in the Indonesian economy’s recovery by supporting SMEs and agriculture.

After the massive and successful recapitalization which took place in the Indonesian banking sector following the 1997-98 crisis, most banks have once again begun to turn profits and some have managed to reach pre-crisis levels. Private national bank Bukopin and state-owned Bank Rakyat Indonesia (BRI) are cases in point. Bank Bukopin is one of the top twenty banks in the country in terms of assets and one of the top ten in terms of profits. The bank was the first to be released from IBRA’s recapitalization program and is now focusing on its SME credit program and in-house technology developments. Bank BRI has also successfully completed recapitalization and is the country’s fourth largest bank. Traditionally, Bank BRI focused on micro lending but it is now moving towards becoming a universal commercial bank. Both Bank Bukopin and Bank BRI are aware that the future of Indonesia and its competitive advantages lie in its rural sector and both have important agribusiness divisions. As President Director of Bank Bukopin, Sofyan Basir, states, “Agribusiness is a huge business as Indonesia is an agricultural country. It represents between 30-50% of our bank’s portfolio. Indonesia is a huge market with more than 200 million people and the majority of industry is in small-scale enterprises, which still form the basis of the Indonesian economy. The economy is rebounding now and Bank Bukopin is already in there in this market.”

SOFYAN BASIR President Director of Bank Bukopin

Bank Bukopin represents one of Indonesia’s private national banks that has been in existence for over three decades and which remains in sound operations today. Mr. Basir describes his bank as “a commercial bank, which is strongly committed to developing cooperative business, and micro, small, and medium enterprises.” In line with the bank’s mission to play a role in the development of small businesses and its reputation for innovative banking products and services, the bank has developed an inter-rural partnership called Swamitra that helps optimize credit use. “Using our 30 years of experience in financing and servicing these types of businesses, we designed Swamitra to serve the rural and micro customer,” states Mr. Basir. “Basically, it is a partnership program between Bank Bukopin and cooperatives and other micro-financial institutions that is supported by the utilization of modern real time on-line information systems. Bank Bukopin provides technology, human resources training and banking procedures through the partnership.” In 2001, 196 Swamitra outlets had been established.

Developing competencies in banking technology also remains a core focus for Bank Bukopin. Recent in-house developments have included the updating of the bank’s extensive ATM network (which connects its 193 branches), a new closed system network, as well as the on-going development of the Bukopin Direct inter-organizational banking transaction system for major corporations and state-owned companies. Bukopin
Direct is offered by the bank’s commercial banking division and offers solutions to the directors of large enterprises, enabling them to carry out real-time transactions from their locations, as well as monitoring balances and transferring customer funds within the bank.

“The main reason technological innovation has always been our strategy is the geographical spread of Indonesia,” explains Mr. Basir. “The country is very wide and technology is needed to connect remote branches. The IT development plan of the bank at the moment is focused on creating a closed system network capable of supporting the entirety of our customers’ transactions. Also, Indonesia is setting up a National Payment Scheme right now based on digitalization and banks must be prepared for this technology.” With its sharp
vision and business focus, long experience and prudent banking practices, Bank Bukopin has continued to grow financially and pre-tax profits for 2001 are estimated at 177 billion rupiah.

RUDJITO President Director of Bank Rakyat Indonesia (BRI)

Bank BRI is also boasting outstanding returns and steady financial growth. According to President Rudjito, current profitability is “unbelievable. My target for 2001 was 585 billion rupiah and, by June, I had closed at more than 800 billion.”
Originally founded in central Java in 1895 to manage the assets of a mosque and contribute to community lending, the bank has grown to its current status of over 36,000 staff and more than 4,000 offices nation-wide. Its active role as an agent of rural development began during Suharto’s New Order period in the 1960s when the government began a credit program for the agricultural sector. This soon expanded to include other rural sectors such as the fisheries industry and the financing of plantations. After a series of banking deregulations during the early 1980s, the bank began to assume the more modern commercial role it plays today. BRI currently dedicates 80% of its portfolio to micro, small and medium enterprises and has recently invested $100 million to update its IT system with the aim of further facilitating banking services throughout its extensive branch network.

Bank BRI should be ready for privatization in 2003, according to Mr. Rudjito, who states that throughout 2001 an internal team worked on readying the bank. As for potential investors, Mr. Rudjito’s suggestion is to look at the rural areas. “No other bank has rural branches like Bank BRI and we have 17 years of experience in micro financing. Our performance is good; rural non-performing loans stand at 2.5%. I am very confident of the future of this bank.”