Business and Investment - August 24, 2007
The Jakarta Post, Jakarta
After concentrating on corporate banking for years, ABN AMRO Indonesia will gradually turn its business focus to small and medium enterprises (SMEs) to ensure future growth.
Country head for business banking of the Netherlands-based bank, Madi D. Lazuardi, said Thursday the bank had significantly expanded its lending to SMEs, and hoped loans to this business sector would triple to Rp 1.5 trillion next year from around Rp 500 billion (US$53.7 million) at the end of 2007.
"By next year, we expect SME loans will contribute 50 percent to our total lending portfolio," he said. As of the first semester this year, the bank disbursed Rp 400 billion in loans to SMEs or about 27 percent of the bank's loan portfolio.
As part of the bank's program to boost lending to SMEs, ABN AMRO Thursday launched a new product called Flexi Business Loan (Flexi BL), which will not require collateral in securing loans.
The requirement to pledge collateral has hampered SMEs from securing bank loans. As a result, most SMEs have suffered from a lack of capital to expand their businesses.
"We expect the Flexi BL product, which offers loans ranging from Rp 100 million to Rp 500 million, will address the capital challenges facing most SMEs," Madi said.
The Flexi BL product will be offered with interest rates starting from 17.04 percent per annum -- higher than the normal rates of between 12 and 14 percent currently charged by banks.
"Flexi BL will target newly established SMEs and there will be a different loan for existing SMEs offering bigger loan platforms with lower interest rates," he said.
The bank also signed a memorandum of understanding with the Association of Indonesian Handicraft Producers and Exporters (ASEPHI) and the Jakarta Computer Center Association (JaCC).
"Members of the associations will be given priority at our bank."
ABN AMRO will cooperate with trade associations in other major cities, including Bandung, Surabaya and Medan, to expand its SME lending, Madi said.
Indonesia has around 48.9 million SMEs, but only 13 percent of them have access to bank loans, he added.
SMEs, despite mostly being unbankable, have shown resiliency and contributed significantly to the country's economic growth. In 2006, SMEs contributed Rp 1,778 trillion or 53.3 percent to the national gross domestic product.Madi said with its new focus, ABN AMRO will become the first bank to concentrate on SME business banking.