Wednesday, April 20, 2011
MENTION microfinance in Asia and thoughts usually turn to India, which is struggling to regulate the industry, and Bangladesh, where Muhammad Yunus, the Nobel prize-winning founder of Grameen Bank, has been turfed out of his job. Indonesia offers a brighter picture. There, a range of lenders is successfully funnelling credit to its entrepreneurial poor.
They include Bank Rakyat Indonesia, a state-owned behemoth that had a whopping $7.4 billion in microloans outstanding in September and operates throughout Indonesia’s many islands. Non-profit lenders, pawnshops and co-operatives also swim in the microcredit sea.
So, too, do private-sector banks. Among the keenest of them is Bank Tabungan Pensiunan Nasional (BTPN), which entered the market in 2008 after a buy-out by Texas Pacific Group, a private-equity firm. BTPN’s microloan portfolio doubled in 2010, for the second year in a row, to 4.6 trillion rupiah ($500m) or roughly 20% of the bank’s total loan book. The bank, which was founded in 1959 to serve retired bureaucrats, boasted a racy 4% return on assets in 2010. Microloans, which command higher yields to reflect greater risk, had a 14% net interest margin.
Most of BTPN’s firepower is concentrated on Java, Indonesia’s most populous island, and on the family firms that are the lifeblood of the informal economy: market traders, household producers, repair shops and so on. A typical loan is for $3,000, usually for a year or two, with annual interest rates of around 25%. Many opt for daily or weekly loan repayments. With the economy growing rapidly, many small businesses are eager to expand.
Customers are often too busy to drop in to the branch so BTPN equips its staff with portable electronic devices that have been customised to scan fingerprints as well as bank-issued cards. A fingerprint detector is handy for customers who are illiterate or have an inconsistent signature. The device also zaps data back to head office so that management can keep tabs on loans and deposits in real time, instead of waiting for forms to arrive from BTPN’s 1,000-plus branches, triple the number in 2008.