SMEs Financing Amid The Financial Crisis : The Case of Indonesia ????????????:????????

1
SMEs Financing Amid The Financial Crisis The
Case of Indonesia????????????????????
Sharing for workshop on improving access to
finance for SMEs in the Asia-Pacific Region
Shanghai, China, 8 -12 June 2009
??????????????????? ????,2009?6?8-12

• Khairil Anwar
• Head of Rural Bank MSME Development Bureau
• Central Bank of Indonesia
• ????????????????

2
OUTLINE ??

• Overview of Financial Providers to MSMEs in
  Indonesia
• ???????????????
• Indonesia Banking Sectors Overview
• ?????????
• Lesson learned 1997/1998 crisis
• 1997/1998?????????
• Impact of 2008 Crisis to Banking sector, MSME and
  Indonesian economy
• 2008??????????????????????
• Rural Bank Strategy in Responding to Global
  Financial Crisis
• ???????????????
• Policy and Regulation to Lessen Impact of Global
  Financial Crisis
• ????????????????
• Promoting Banking Intermediary to Microfinance as
  an Intermediary Milestones to reach the Unbanked
  People
• ??????????????,???????????

3
FINANCIAL SERVICE PROVIDERS OF MSMEs ???????????
???
????????
??????
?????
Non Bank ???????
????
Bank ??
??
????
4
INDONESIAN BANKING SECTOR OVERVIEW ????????
Number of Banks (as of March 2009)
????(??2009?3?)
No. Category ?? Total Banks ???? Total Offices ??????
1 Commercial Banks (conventional) ?????? 123 12.047
2 Rural Banks (conventional) ?????? 1.768 3.408
3 Sharia Commercial Banks ??????? Sharia Commercial Banks ??????? Sharia Business Unit of Commercial Banks ??????????? 5 26 635 253
4 Sharia Rural Banks ??????? 133 208
Grand Total ?? Grand Total ?? 2.055 16.551
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LESSON LEARNED 1997/1998 CRISIS
1997/1998???????????

• Refocusing of Central Bank Policy based on New
  Bank Indonesia Act No. 23/1999
• Single objective to reach and to maintain the
  stability of rupiah.
• Bank Indonesia as lender of the last resort.
• Bank Indonesia shall no longer extend financial
  assistance (credit program) to SME, because
  Com.Bank able to mobilized funds.

1997/1998 crisis

• Some policy responses on SME
• Advise banks to allocate part of its lending to
  SMEs and state it in the business plan submitted
  to BI and publish the disbursement quarterly in
  the media.
• Encourage bank to lend to SME via Rural Banks and
  other MFIs.
• Provide technical assistance for bank officers
  and Business Development Services Provider
  (BDSP).
• Publish some leniencies in prudential regulation
  to push bank lending to SME.

Mon.Crisis (liq.squeeze)
Banking Crisis (16 Banks closed)
Political Crisis (President stepped down)
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LESSON LEARNED 1997/1998 CRISIS ???????????
??1999?????????23?,????????? ???????????? ????
???????? ?????????????????(????),????????????
1997/1998 ?? ????

• ???????
• ?????????????????,?????BI????????,????????
• ??????????????????????????
• ?????????????????????
• ????????????,???????????

????(?????)
?????(16?????)
????(????)
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LESSON LEARNED 1997/1998 CRISIS (CONT.)

• Impact on SMEs
• Financing to SME mostly provided by banks.
• Amount of bank business plan its disbursement
  are increasing from time to time.
• Market mechanism in SME financing (no subsidy,
  market interest rate)

• 2008 Financial Crisis
• SMEs become more resilient
• SMEs credit keeps a good performance
• Most SMEs are domestic-market-oriented ? less
  impact of financial crisis

8
LESSON LEARNED 1997/1998 CRISIS (CONT.)
???????????

• 2008?????
• ????????
• ??????????
• ?????????????,???????????

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IMPACT OF 2008 CRISIS TO COMMERCIAL BANK
2008????????????
Selected Commercial Banking Indicators ???????????
16.77
16.76
17.82
18.04
18.03
NPLs Gross (??????)
3.75
3.82
3.76
3.54
3.50
3.42
3.32
3.34
3.49
3.20
3.59
3.72
3.93
ROA ()????
2.72
2.56
2.62
2.53
2.68
2.71
2.64
2.68
2.60
2.33
2.69
2.60
2.76
LDR ()
70.66
71.65
72.80
73.89
76.00
79.02
77.72
77.48
77.60
74.58
73.76
73.50
73.08
No of Banks ????
128
128
128
127
127
127
126
126
126
124
123
123
123
Source Indonesian Banking Statistics ?????????

• The Indonesian banking sector remains strong as
  indicated by high CAR levels (18.03), the
  increase of deposits and low of NPLs (lt5)
• ?????????,????,??????(18.03),????,?????(lt5)
• Bank placements in SBIs (bonds issued by Bank
  Indonesia) experience an upsurge as credits fall.
• ???????,??????????????????

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10
IMPACT OF 2008 CRISIS TO RURAL BANK INDUSTRY
2008?????????????
Selected Rural Bank Indicators ?????????
Source Indonesian Banking Statistics ?????????
1. In general, rural bank industry presented
good performance as indicated by increase in
total asset, loan and third party fund.
????,??????????????????,????????? 2. The
increase of NPL in the 4th quarter of 2008 was
mainly because of a problem in one big rural
bank due to a mismanagement and fraud, as well as
the decline in commodity prices. Once this
problem was settled, the NPL ratio is improved,
as showed in the 1st quarter of 2009.
2008??????????????????????????????????????????????
?????????,?????????,??2009?????????? 3. There
was a decrease in the commercial bank placement
due to the liquidity squeeze in commercial banks.
This was the significant impact of the crisis to
the rural bank industry liquidity.
????????????,?????????????????????????????
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IMPACT OF 2008 CRISIS TO SMEs

• The decline of commodity price ??????
• The decline in non oil export transaction
  (tradable goods)
• including the export transaction of SMEs
• ??????????(?????),???????????

Decreasing in production ? Enterprises efficiency
(i.e. lay off) ?????????(???)
Survey on SMEs ?????????

• Some more resilient SMEs in retail trading,
  Hotel Restaurant,
• Food Beverages , and fashion.
• ?????????????????????????????
• Most SMEs are still optimistic about the economy
  condition and their future business
• ??????????????????????????

Decreasing in domestic demand ??????
Decreasing in production of other product (non
tradable goods, such as from Trade, Construction,
Transportation Communication, Financial and
Services ) Including those of domestic-oriented
export-linked SME ????????(?????????????????????
??????? ) ??????????????????
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Some Macro Economy Target ????????
???? ??? SBI
? ??(?????)
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Some obstacles of SMEs ?????????
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RURAL BANKS STRATEGY IN RESPONDING TO GLOBAL
FINANCIAL CRISIS ???????????????
1. During the crisis period, rural banks have
slowed down their operation. This was indicated
by some ratios in the 4th Quarter of 2008, such
as the increase in CAR of rural banks which
mainly due to the decrease of weighted risk
asset. Also, there was a decrease in LDR to
become 80.91 by the end of March 2009 (in
September 2008 it was 85.17).
????,??????????2008??4??????,?????????????????????
????????,LDR???2009?3??80.91(2008?9?????85.17) 2
. Rural bank was also more selective in
distributing loan by considering the secure
sectors (for example not directly link to export
business). ??????????????,?????????(??
,??????????????) 3. Rural banks which
implement personal approach and focus to their
community are able to hold rush of third party
fund. ??????????????????????????

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POLICY IN LESSENNING IMPACT OF THE GLOBAL
FINANCIAL CRISIS TO SMEs ????????????????????

• Policy and Regulation to Commercial Bank
  ?????????
• a. Adjustment on Commercial Bank Reserve
  Requirement (9 to 7.5)
• ???????????? (9?7.5)
• b. Extension of SWAP transaction period (7 days
  to 1 month) ??SWAP?????(7??1??)
• c. New regulation on foreign exchange
  transaction ????????
• d. Adjustment on existing regulation on short
  term foreign loans ??????????????
• e. Adjustments to current regulation on Bank
  Indonesia Short Term Funding Facility (FPJP)
  for commercial banks
• ?????????????????????????
• II. Policy and Regulation to Rural Bank ?????????
• a. Issuing short term funding facility for
  rural banks ???????????????
• b. Leniency in providing provision of loss
  productive asset on fund placed at other banks
  which is under special survellaince
• ??????????????????,????????????????????
  ????

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POLICY IN LESSENNING IMPACT OF THE GLOBAL
FINANCIAL CRISIS TO SMEs (cont) ??????????????????
??

• III. Regulation to Expand credit to MSME
  ???????????
• Reducing Risk-weighted Assets on credit for MSME
  (e.g. For Credit for the People scheme, Housing
  loan and personal loan)
• Credit performance of loan up to IDR 1 billion
  (USD 50,000) is based only on prompt repayment of
  principal and/or interest
• IV. Deposit Protection Scheme ??????
• Increase the limit of guaranteed deposits
  in banks from Rp100 millions to Rp2 billions
• ??????????Rp1????Rp20?
• V. Interest rate ???
• BI has gradually decreased the benchmark
  interest rate (BI Rate) from 9.5 on November
  2008 to 7 on June 2009 (250 base points)
• ????????????,?2008?11??9.5?2009?6??7
  (250???)

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Promoting Banking Intermediary to Microfinance as
an Intermediary Milestones to Reach the Unbanked
People??????????????,???????????
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Approaches to Promote Banking Intermediary to
Microfinance?????????????
Promoting Banking Intermediary to
Microfinance ?????????????
The Unbanked ????????
Reinforce the competitiveness and institutional
structures of rural banks ???????????????
Improve access to MSMEs credit and
financing ??????????????
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Reinforce the Competitiveness and Institutional
Structures of Rural Banks???????????????
Improve access to MSMEs credit and
financing ??????????????

• Strengthen linkage program between commercial
  banks and rural banks
• ??????????????????
• Simplify process for opening branch offices of
  rural bank
• ?????????????

• Facilitate establishment and monitoring of
  regional guarantee schemes for loan and financing
• ????????????????????
• Encourage banks to extend financing to MSMEs with
  focus on low income people and rural communities
• ????????????????,??????????????

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Aims of policy and regulation of financial
inclusion ?????????????

• Transparency on characteristics of Financial
  Product Services
• ?????????????
• Benefits ??
• Risks ??
• Costs ??

Policy and Regulation of Financial
Inclusion ??????????
Improve Public Awareness ??????
Robust consumer protection ????????
Improve Public Acess ????????
Creating a credible database of unbanked
individuals Financial Identity
Database ????????????????????????
Promoting banking intermediary to microfinance as
a step stone to the unbanked ?????????????,????
??????
21
The Relationship FIN, CIN, and DINFIN,
CIN?DIN?????
Customer Identity Number (CIN) ???????
Financial Identity Number (FIN) ??????
Creditors (Banked Individuals)???(?????)
Unbanked Individuals???????
Debtors (Banked Individuals)???(?????)
Debtor Identification Number (DIN) ???????

• Accomodated in the Debtor Information System
  (DIS) managed by Bank Indonesia
• ???????????,???????
• - under improvement ????

• From FIN to CIN then DIN?FIN?CIN??
• FIN will be the complement to DIN / CIN FIN
  ???DIN?CIN???

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• End of Presentation
• ????
• Thank You
• ??

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