US-based newspaper The Wall Street Journal recently reported that Indonesian banks are quickly expanding into the country’s microfinance market [1]. This finding is in contrast to a brief published by MicroCapital in September 2010 that reports on the challenges major banks face in disbursing microloans [2]. According to The Wall Street Journal, the total amount of microloans disbursed over the past five years has reached USD 30 billion. To enter the microfinance niche, banks such as Mandiri Bank and Danamon Bank are serving rural town markets, simplifying the loan application process and collecting payments on a daily basis. Net interest margins from microloans have been cited as hovering around the 10 percent mark, which amounts to approximately three times the amount earned on many corporate loans in the country.
As of 2009, Bank Mandiri reported total assets of IDR 319 trillion (USD 35.1 billion) and 956 domestic branch offices. In 2009, Bank Danamon reported total assets of IDR 98.6 trillion (USD 11.5 billion), a gross loan portfolio of IDR 63.3 trillion (USD 7.4 billion), return on assets of 1.5 percent and return on equity of 11.2 percent.
By Jacqueline Foelster, Research Associate
About Bank Mandiri: Bank Mandiri was formed in 1998 as part of a restructuring of the financial system by the government of Indonesia. In 1999, four state-owned banks – Bank Bumi Daya, Bank Dagang Negara, Bank Exim and Bapindo – were amalgamated into Bank Mandiri. Bank Mandiri provides financial services to private and state-owned businesses and individuals, including microentrepreneurs. As of 2009, Bank Mandiri reported total assets of IDR 319 trillion (USD 35.1 billion) and 956 domestic branch offices.
About Bank Danamon: Established in 1956, Bank Danamon is a private commercial bank that offers products and services for personal banking, commercial banking, financial planning, electronic banking and trade finance. In the wake of the regional financial crisis in 1998, it underwent a series of recapitalizations and mergers as part of the government of Indonesia’s bank restructuring program. In 2003, Danamon was acquired by Asia Financial (Indonesia) Private Limited, a partnership between Fullerton Financial Holding, a subsidiary of Temasek Holdings of Singapore, and Germany’s Deutsche Bank AG. In 2009, Bank Danamon reported total assets of IDR 98.6 trillion (USD 11.5 billion), a gross loan portfolio of IDR 63.3 trillion (USD 7.4 billion), return on assets of 1.5 percent and return on equity of 11.2 percent.
Source and Additional Resources:
[1] The Wall Street Journal, May 28, 2011, “Indonesia Banks Chase Microloans,” http://online.wsj.com/article/SB10001424052702303654804576343521563352218.html
[2] MicroCapital.org Brief, September 7, 2010, “Indonesia Banks Falling Short of Microfinance Lending Targets,” https://www.microcapital.org/microcapital-brief-indonesian-banks-falling-short-of-microfinance-lending-targets/
MicroCapital.org Brief, November 29, 2010, “Microfinance Dominates Shariah Lending in Indonesia, Commercial Banks Take Notice”, https://www.microcapital.org/microcapital-brief-shariah-microfinance-invokes-expansion-of-indonesian-banks/
MicroCapital.org Brief, September 27, 2010, “Government of Indonesia Signs Memorandum of Understanding with Indonesia Microfinance Institutions and Small and Medium-Sized Enterprises to Update Provisions for Microfinance, Accelerate Disbursement of $1.45b in Government-Sponsored Microloans,” https://www.microcapital.org/microcapital-brief-government-of-indonesia-signs-memorandum-of-understanding-with-indonesian-microfinance-institutions-and-small-and-medium-sized-enterprises-to-update-provisions-for-microfinance-ac/
MicroCapital Universe Profile: Bank Mandiri, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bank+Mandiri
MicroCapital Universe Profile: Bank Danamon, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bank+Danamon
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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