Prudence pays off as bank looks to the future

JIMMY KURNIAWAN LAIHAD President Director of PT Bank Buana Indonesia

PT BANK BUANA Indonesia prefers the word prudent to conservative, as it is characteristically described. They also want to make it clear that they are the original small and medium enterprise (SME) bank in Indonesia and have been for almost 50 years–not just since the Indonesian banking crisis of 1997-98 when other banks, seeing the prescience of this focus, jumped on the bandwagon.
Bank Buana’s prudence not only helped it to successfully weather the 1997 crisis, it enabled the bank to quadruple its assets. Moreover, at the core of this great success was precisely its long-term focus on SMEs, which endured the crisis much better than other sectors, as President Jimmy Kurniawan and Managing Director Pardi Kendi stress. “The one thing I liked about the crisis is that beforehand we were considered conservative but after we were called prudent!” Mr. Kurniawan says. “Since the beginning, the bank has only concentrated on SMEs, even during the boom times we didn’t shift our strategy to corporate. Probably this paid off during the crisis, along with our traditionally conservative nature. During the crisis, the bank’s total assets increased four times. Also, from 1999 until now, our equity has basically tripled. In the future, we will continue targeting SMEs. That is what we have been doing for the past 46 years and we know that business very well.”

PARDI KENDI Managing Director of PT Bank Buana Indonesia

Traders and retailers account for 80% of Bank Buana’s revenues. “We focus more on the trading sector, which we think is more diversified and more dynamic as it consists of many kinds of businesses,” states Mr. Kurniawan. With a capital adequacy ratio of 23%, excess funding, and a network of branches strategically located in major trading centers, Bank Buana has established strong fundamentals for future SME loan disbursements. “Basically we go where there is commerce. If we see that there is a city or a place in the country that has a high concentration of trading activity or SMEs, then we open a branch there,” explains the bank’s president.
According to Mr. Kurniawan, the nature of Bank Buana’s business has reinforced its commitment to close customer relationships. “Basically, SMEs are about flexibility and relationships because with this size of business you deal with the proprietor, not like in a large corporation where you deal with an officer,” he states. “A close relationship between the customer and the bank helps to build good rapport. We think it is important to talk to the customers and ask them what they need. Then they know that their complaints or comments will be taken into onsideration.”

Bank Buana says that it will consider foreign partnerships in the event of future expansion. “At the moment, the bank is not in need of money. If we grow, the need for a strategic partner will be greater, not only for the financial investment, but also because we can learn from their expertise. It is important for the investor who comes to Indonesia today, however, to know that in some countries where growth relies mainly on SMEs, there is no point in looking at the stock market, as these businesses are not listed. If they want to follow the growth of Indonesia, they should come to Bank Buana.”