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BRI UNIT. MICROBANKING SYSTEM. ISMANTO. BANK RAKYAT INDONESIA. Micro Credit Financing and Poverty Alleviation in OIC Member States. Istanbul, July 9-11, 2007. Number of Business Units (57.7mio). (7.9 mio). (44.8 mio). BUSINESS LANDSCAPE (2006). 7.9 mio. (15%).

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slide1

BRI UNIT

MICROBANKING SYSTEM

ISMANTO

BANK RAKYAT INDONESIA

Micro Credit Financing and Poverty Alleviation in OIC Member States

Istanbul, July 9-11, 2007

slide2

Number of Business Units (57.7mio)

(7.9 mio)

(44.8 mio)

BUSINESS LANDSCAPE (2006)

7.9 mio

(15%)

Source: Kompas, August 11, 2006

microfinance in indonesia

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

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

MFIs

Cooperatives (KOSIPA)

Act = Cooperative Act No.25/1992

License = State Ministry of cooperative & Small Enterprise

Supervision = State Ministry of cooperative & Small Enterprise

Formal

Non Bank

LDKP (The Funds and Credit Institutions)

Act = ---------

License = Governor of each Province

Supervision = Local Government Level I

Non Formal

  • Non Government Organization (NGO)
  • Self Help Group
  • BMT
  • Rotating Saving & Credit Association (ROSCA)
Microfinance in Indonesia

Source : Central Bank

Directorate of Rural Banking

Supervision

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.

ABOUT BANK BRI…
slide5
Becoming a leading commercial bank in Indonesia which puts customers’ satisfaction as the priority.

BRI AT THE GLANCE

VISION

  • Performing the best banking activities focusing on providing services for Micro, Small, and Medium Enterprises to support Indonesia’s economy.
  • Providing excellent services for customers through widespread network, supported by professional HR by implementing GCG.
  • Providing optimum added values for all stakeholders.

MISSION

slide6

BRI AT THE GLANCE

STRATEGIES

  • Focus on the core business
  • Expand operational coverage
  • Strengthen Risk Management
  • Use information technology for operational efficiency
slide7

BRI Unit Microbanking System

BRI-Unit 1970

Initiated to support BIMAS Program (the Rice Self Sufficiency Program): BRI’s functioned as a government agent to channel subsidized loans for farmers

BIMAS

Program

was

successful.

BRI Unit

Unsustainable

slide8

BRI MICROBANKING System

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

Fundamental Changes in Unit Banking Business Policies
slide10

Simplicity

Transparency

Sustainability

Basic

Principles

Cost

Recovery

Accessibility

DEVELOPMENT OF BRI UNITS

bri micro business division
Promoting BRI as the Best Microfinance Provider in the WorldBRI MICRO BUSINESS DIVISION

VISION

MISSION

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.

bri micro business division1
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

STRATEGIES

slide13

BANK RAKYAT INDONESIA

Networks

1 Head Office

4.229 BRI Units

133 Village Service Posts

13 Regional Offices

11 Regional Audit Offices

ATMs :

977 ATM BRI

331 Branches

9.000 ATM Bersama

3.627 ATM Link

ATM Cirrus & Alto around the world

207 Sub Branches

Phone Banking Facility

45 Sharia Branches

target customers

Lower Middle

Income

Standard

Commercial

Bank loans;

full range of

savings

services

Interest-

bearing

savings

accounts

for small

savers

Commercial

Micro loans

Economically-Active

Poor

Poverty line

Poverty

programs for

such purposes as

food and water,

Medicine and

nutrition,

employment

generation, skills

training, and

relocation

Extremely Poor &

Displaced households

Target Customers

Income Levels

Commercial Financial Services

Subsidized Poverty

Alleviation Programs

Target

Source: Robinson, M.. 2002. The Microfinance Revolution. Lessons from Indonesia,. The World Bank & Open Society Institute. Washington DC.

slide15

BRI APPROACHES

Poverty Alleviation Program

Target : Below the Poverty Line

1. Rural Income Generating Project (RIGP)

  • Collaboration between BRI & Government agencies
  • Interest subsidized by government
  • Funding from IFAD, ADB, BRI, etc.

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
slide16

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)

4. Small Loans

  • Target: Viable small enterprises
  • Loan size up to Rp 5 billion (US$ 55,000)
  • Conventional banking approach

BRI’S APPROACHES

Target : Above the Poverty Line

slide17

BANK RAKYAT INDONESIA - MICROBANKING

A Commercially Sustainable Microfinance System

BRI is known as the largest and the best microbanking system in the world.

  • 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 go public
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)
slide19

BRI is Public listed company at Jakarta Stock Exchange.

Share Price at Jakarta Stock Exchange

IPO : Rp. 875

Recent : Rp. 6,400

(June 5, 2007)

Share Holders

Government : 57.4%

Public : 42.6%

Local ownership : 11.5%

Foreign ownership: 88.5.4%

bri financial performance
BRI FINANCIAL PERFORMANCE

Latest update: April 2, 2007

slide21

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)

slide22

BANK RAKYAT INDONESIA

Loans: Steady High Growth

Loan CAGR – by Business Segment

slide24

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.
slide25

BANK RAKYAT INDONESIA

Loans: Steady High Growth

slide26

BANK RAKYAT INDONESIA

Deposits: Trending Down of Cost of Funds and Improving Mix

slide27

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
slide29

Changes in Regulatory Environment

Relaxation Policies from Bank Indonesia

Intended to spur loan disbursements, especially loans to MSMEs

  • 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).
slide30

BRI in 2007 : General Directions

  • 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
slide31

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