Banking
From The Report: Indonesia 2012
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With only about 20% of Indonesian adults having any sort of relationship with the financial service sector, the country’s massive, untapped customer base offers great potential for the big industry players. The combination of a broadening and deepening market, and ever-sinking interest rates, has boosted the already-growing demand for financial services in the archipelago, from microcredit to mezzanine finance. Challenges ahead include determining how and to what extent the private sector can fund Indonesia’s massive infrastructural projects, which are expected to draw both foreign and domestic capital. These long-term projects require a recalibration of time-scales for banks used to thinking in yearlong or five-year periods.

This chapter includes interviews with Darmin Nasution, Governor, Bank Indonesia; Gatot M Suwondo, President Director, Bank Negara Indonesia; and a roundtable with Jahja Setiaatmadja, President Director, BCA; Michael Young, President Director, HSBC; Zulkifili Zaini, President Director, Bank Mandiri and David Fletcher, President Director, Permata Bank.

Articles from this Chapter

Overview

Size and scope: New opportunities emerge as infrastructure plans are realised and lending grows
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Despite a turbulent history in financial services, Indonesia has plenty to offer overseas bankers. Some of what is compelling has long been so, such as the huge potential inherent in the world’s fourth-most-populous nation. Indonesia has for decades had a significant and largely untapped customer base – only about 20% of the country’s adults have any sort of ongoing financial services relationship. It was for this reason that some of the larger names in the industry, such as Citigroup and…

Analysis

A rising star: Sharia-compliant financing is an increasingly popular alternative
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Home to the world’s largest Muslim population, Indonesia is in theory fertile territory for the development of Islamic finance, the practice of lending, investment, finance and insurance without interest rates or speculation. Still, in the South-east Asian region, it is neighbouring Muslim-majority Malaysia, which is a fraction of the size of Indonesia, that has historically been the market leader in this field. While sharia-compliant finance in Indonesia has to date been a lower priority for…

Interview

Gatot Suwondo, President Director, Bank Negara Indonesia (BNI): Interview
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Interview:Gatot Suwondo To what extent is lending still considered conservative? Are we likely to see loan-to-deposit ratios (LDRs) increase over the medium term? GATOT SUWONDO: Even though more than a decade has passed since the financial crisis of 1998, the banking industry remains prudent when it comes to lending. Our LDR is conservative compared to other countries in the region. However, most banks, including us, derive a significant portion of revenue from loan products and most of the…

Analysis

A closer look: Profiles of the country’s leading banks
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According to the sector’s regulator, the Bank of Indonesia, there are 120 commercial banks and 1681 rural lenders in Indonesia. In reality, however, a small number of them are responsible for most of the lending activity in the market, with 15 banks accounting for about 70% of credit. As ranked by assets, the following are the five largest banks in the country, including three state-owned institutions. BANK MANDIRI: The largest Indonesian bank by several measures, Bank Mandiri was set up…

Interview

Jahja Setiaatmadja, President Director, BCA; Michael Young, President Director, HSBC; Zulkifli Zaini, President Director, Bank Mandiri; and David Fletcher, President Director, Permata Bank
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Interview:Jahja Setiaatmadja,Michael Young,Zulkifli Zaini,David Fletcher To what extent will the industry be able to maintain current increases in loan-to-deposit (LDR) ratios while ensuring adequate risk management? JAHJA SETIAATMADJA: Bank Indonesia’s (BI) policies on LDRs and declining BI rates are a clear indication of its determination to increase lending and lower interest margins to facilitate intermediary function. While we and the banking industry are committed…

Analysis

Managing downside: The rate of loan defaults declines as bankers grow more cautious
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The local banking sector has undergone many improvements since the 1997-98 Asian financial crisis. Risks are now being more carefully managed at the regulatory and individual bank levels, with strong incentives to manage credit portfolio losses. Perhaps as a result of these changes, the ratio of non-performing loans (NPLs) has declined over the last few years, although banks with high exposure to small business loans have continued to face higher ratios. LONG-TERM TREND: Data from Bank Indonesia…