Indonesia Rural Credit Sector Review

Public Disclosure Authorized ReportNo.6917-IND Indonesia RuralCreditSectorReview (InTwoVolumes) VolumeII:StatisticalAnnexes April29,1988 FOROFFICIA...
9 downloads 0 Views 4MB Size
Public Disclosure Authorized

ReportNo.6917-IND

Indonesia RuralCreditSectorReview (InTwoVolumes) VolumeII:StatisticalAnnexes April29,1988

FOROFFICIALUSEONLY

Public Disclosure Authorized

Public Disclosure Authorized

Public Disclosure Authorized

AsiaRegional Office

Documentof theWorldBank

Thisreporthasa restricted distributionandmaybeusedbyrecipients onlyinthe performance of theirofficialduties.Itscontentsmaynototherwise bedisclosed withoutWorldBankauthorization.

CURRENCYEUIVALENTS !i15

BeforeNovember15, 1978

US$1.00= Rp

AnnualAverages1979-85 1979 1980 1981 1982 1983 1984 1985

US$1.00 US$1.00 US$1.00= US$1.00US$1.00= US$1.00 a US$1.00 =

September12, 1986

US$1.00 = Rp 1,644 /b

Rp 623 Rp 627 f Rp 632 Rp 661 Rp 909 /a Rp 1,026 Rp 1,125

FISCALYEAR Government

-

Bank Indonesia State Banks

-

April 1 to March 31 April 1 to March 31 January 1 to December 31

PRINCIPALABBREVIATIONS, ACRONYMSAND LOCAL TERMS Adat ASKRINDO

-

customary

-

PT AsuransiKreditIndonesia(CreditInsuranceCompanyof

Bank Pasar BAPINDO

-

Marketbank/pettytraderbank Bank PembangunanIndonesia(Development Bank of Indonesia)

BBD BDB BDN BEII BI

-

Bank Bank Bank Bank Bank

BIMAS BKD BKK BKPD

-

BimbinganHassal: "mass guidance" BadanKreditDesa: villagecreditbody BadanKreditKecamatan: subdistrict creditunit Bank Karya ProduksiDesa: villageproductionbank

BNI '46

-

Bank Negara Indonesia 1946

BPD BPR

-

Bank Pembangunan Daerah: regionaldevelopment bank Bank Perkreditan Rakyat: secondarybank

BRI

-

Bank Rakyat Indonesia

Indonesia)

/a

Bumi Daya Dagang Bali Dagang Negara Export Import Indonesia Indonesia

On March 1, 1983,the Rupiahwas devaluedfrom US$1.00= Rp 703 to US$1.00 = Rp 970.

/b

On September12, 1986,the Rupiahwas devaluedfrom US$1.00= Rp 1,125to US$1.00= Rp 1,644.

FOR OFFICIULUSE ONLY

INDONESIA statistical Annexes Annex 1: FinancialSystem in Indonesia Table 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.

Growthin SectoralValue Added, 1981-86 Real Rates of Interestof Deposits Total Bank Depositsin Nominaland Real Terms Bank IndonesiaLiquidityand DirectCredits Changesin FactorsAffectingMoneySupplyand Liquidity,1983-86 InterestRate of CommercialBanks,1983-86 PriorityLendingPrograms: Bank Indonesia Agricultural CreditSubsidies SubsidiesInherentin BI LiquidityCreditsto Agriculture Sourcesand Uses of Funds of VariousFinancialInstitutions Shareof Groupsof Banks in TotalAssets,Fundsand Outstandiuig Loans Total LoansOutstandingof the FinancialSystem Rural and Agricultural LoansOutstanding Populationper Bank/Office for SelectedCountries Institutional Structureof the CreditMarket Loans Outstanding of Rural FinancialInstitutions Numberof FinancialInstitutions (1980-86) Assetsof SecondaryBanks and Pawnshops Badan KreditKecamatans- CapitalAccumulation Outstanding Bank Creditsin Rupiahand ForeignExchangeby Sector Bank Creditsas Proportionof SectoralGDPs RegionalDistribution of Totaland Agricultural Lending Bank IndonesiaLiquidityCreditsfor RuralCreditPrograms Bank IndonesiaLiquidityCreditsto Agricultural Lending Rural SavingsDeposits,1983-85 Ratio of Quasi-Moneyto GNP in SelectedCountries Sourcesand Uses of Funds in Rural CreditSector CombinedBalanceSheet of NationalForeignExchangeBanks

Annex 2: Scopefor Development of Rural FinancialInstitutions Table 1. BalanceSheet: Bank Bumi Daya and Bank RakyatIndonesia 2. Composition of Bank Bumi Daya Loan Portfolio 3. Comparative Performance of Bank RakyatIndonesiaand Bank Bumi Daya (1985) 4. CondensedIncomeStatements:Bank RakyatIndonesiaand Bank Bumi Daya 5. Performance Indicatorsof Rural FinancialInsitutions

This documenthas a restricteddistributionand maybe usedby recipientsonlyin the performance of theirofficialduties.Its contentsmaynot otherwisebe disclosedwithoutWorldBankauthorization.

-

ii

-

Annex 3: Assessmentof SelectedSpecialCreditPrograms Tree Crops ProjectsS Loan Amount,ProjectCost Table 1. Externally-Assisted CreditComponent and Smallholder 2. Loan Approvals,Outstandingand Arrears- KIK/RMKP 3. KUPEDESLendingProgram 4. Badan KreditKecamatanLoan Types,Maturityand InterestRates 5. Badan KreditKecamatanLendingProgram 6. CreditProgramOutreach 7. Analysisof KIK Arrears- January1985 8. BRI KIK/KMKPArrearsof (August1986) 9. Claimson ASKRINDOInsurance 10. KUPEDESDefaultRatios 11. Badan KreditKecamatanLoss Ratios 12. Sourcesof Funds of SelectedCreditSchemes 13. Cost of FinancialIntermediation Annex 4: FinancialResourceMobilization Table 1. FinancialAssetsAvailableto Saversin Indonesia 2. IndonesianBank Deposits,by Type, 1981-86 of BI LiquidityCreditsby Bank 3. Distribution Annex 5: Women in the Rural FinancialSector in SpecificLendingProgramsand Institutions Table 1. Women'sParticipation of Loans by EconomicClass and Sex of Borrowers: 2. Characteristics West Java Study of ThreeVillages and Employersin Rural Areasby Sex and Industry 3. Self-Employed Group in Indonesia Annex6: FinancialInstitutions Annex7: SelectedCreditPrograms in Indonesia Annex8: SavingsInstruments

ANNEX1 Table 1

INDONESIA RURALCREDIT SECTORREVIEW

Value Added, 1981-86 Growth in Sectoral (X p.a. at 1983 prices)

Average 1981-83

Agriculture Mining and quarrying oil and gas Non-oil Manufacturing LNG and refined oil Other

1.5 -7.5 (-8.0) (4.2)

1984

1985

5.9

3.2

Sectoral shares in 19S6 1986/a (% of GDP)

2.0

24.2

2.7 -9.4 7.0 (7.3) (-10.0) (2.8) (3.7) (1.5) (0.9)

17.1 (16.3) (0.8)

3.8 5.4 (3.4) (3.5) (6.2) (3.8)

13.0 (3.9) (9.1)

16.3 2.1 (4.6) (44.8) (1.4) (5.6)

Construction

2.6

-1.5

-1.3

0.2

5.5

Services

6.3

5.6

3.8

2.6

40.2

Gross Domestic Product (GDP) of which: Oil/LNG sectors Non-oil sectors

1.4

6.6

1.1

2.5

100.0

-6.7 3.9

12.2 5.1

-7.4 3.5

2.9 2.4

20.2 79.8

Memo Items Gross national product (GNP) Groas national income (GNY)

0.5 -1.1

6.1 6.0

1.7 0.5

4.3 -4.6

95.8 86.5

/a Preliminary. Source: Central Bureau of Statistics (CBS) and World Bank staff estimates.

-2-

ANNEX I Table 2

INDONESIA RURAL CREDIT SECTOR REVIEW

Real Rates of Interestof Deposits

Inflation rate /a

Real rates of interest savings deposits /b

Time deposits /c

1975

19.7

-10.7

to -1.7

1976

14.2

-5.2

to 3.8

-8.2

1977

11.8

-5.8

to

3.2

-8.8 to 6.2

1978

6.7

-0.7

to 8.3

-0.7 to 8.3

1979

21.8

-15.8

to -6.8

-18.7 to -6.8

1980

16.0

-10.0

to -1.0

-13.0 to -1.0

1981

7.1

-1.1

7.9

-4.1 to 7.9

1982

9.7

-3.7 to 5.3

-6.7 to 5.3

1983

11.5

0.5 to 3.5

3.3 to -6.8

1984

8.8

3.2 to 6.2

6.2 to 12.2

1985

4.3

7.7 to 10.7

9.7 to 16.7

1986

8.8

3.2 to 8.8

1.2 to

to

-13.7 to 4.3 to 9.8

8.2

/a CPI figures based on a weighted basket of 115 to 150 goods and services. /b Based on the low and high interest rates for TABANAS savings accounts less CPI change. tc Based on the range of commercialbank time deposit rates less CPI change. Source: Bank Indonesia, 1987.

ANNEX 1 Table 3

INDONESIA RURAL CREDIT SECTOR REVIEW

Total Bank Deposits in Nominal and Real Terms (Rp billion)

Nominal bank deposits /a

% growth of nominal deposits

Real bank deposits /b

% growth of real deposits

1981

3,127

-

4,061

1982

3,897

24.6

4,667

14.9

1983

6,983

79.2

6,893

47.7

1984

9,331

33.6

8,250

19.7

1985

12,985

39.2

11,004

33.3

1986/c

13,933

7.3

11,439

4.0

/a Sum of deposit money bank time and savings deposits, and foreign currency deposits. /b Using WPI deflator (excludingoil) end 1983 base year. /c Figures for June 1986. Source: Bank Indonesia,October 1986.

INDONESIA RURALCREDIT SECTOR REVIEW Bank Indonesia Liquidity and Direct Credits (Amounts in Rp billion)

Annual 1986 1985 1984 % disgrowth (x) Z disX disdisAmount tribution Amount tribution Amount tribution Amount tribution Nominal Real 1983 x

Liquidity credit 4,442

68.2

4,759

72.5

7,590

97.2

8,583

99.4

24.6

16.6

Priority

1,996

30.7

2,579

39.3

3,224

41.3

4,199

48.6

28.1

20.0

Nonpriority

2,446

37.5

2,180

33.2

4,366

55.9

4,384

50.8

21.5

13.7

Direct credit

2,073

31.8

1,805

27.5

218

2.8

52

0.6

-70.7

-72.5

6,515

100.0

6,564

100.0

7,808

100.0

8,635

100.0

9.8

2.9

Total Percentage of liquidity credit to total private credit (X)

42

-

33

Source: BI Research and Development Division.

-

43

-

44

-

-

-

-5-

ANNEXI Table 5

INDONESIA RURALCREDIT SECTORREVIEW Changes in PactorsAffectingMoney Supply and Liquidity,1983-86 (Rp blllion)

Changesin

1984

1985

Net foreignassets

2,824

3,553

2,181

4,702

42.3

18.3

33.3

-10.0

Net governmentdeposits

'1,087 -3,255

-626

96

58.8

7.1

-1.0

-21.2

Credit to publicenterprises Credit to privatesector Net other assets Domesticliquidity(M2) Money supply (MI) Currency Demand deposits

1986/a/b 1984

Annual growth (%) 1985 1986/b 1986/c

1983/a

61

t89

513

186

3.8

9.8

3.2

3.2

2,371

3,646

3,333

2,843

34.1

23.2

16.1

14.1

-581

-859

-185

-3,710

21.9

3.9

74.4

11.8

3,588

3,274

5,216

4,117

22.3

29.1

17.8

11.5

448

1,012

1,523

1,157

13.4

17.7

11.5

11.5

(399)

(379)

(728)

(915) (11.4) (19.6) (20.6) (20.6)

(49)

(633)

(795)

(242) (14.9) (16.3)

Time and savingsdeposits (QM) /d 3,140

2,262

3,693

2,960

31.9

39.5

(4.3)

(4.3)

22.7

11.6

tlemoItems M2/GDP ratio

19.9

21.0

25.7

27.3

QM/GDP ratio

9.6

10.9

14.5

16.0

/a Includeseffectof the exch2ngerate changeson March 30, 1983 and September12, 1986 /b Provisionaldata for October 1986. /c Excludesvaluationchangesresultingfrom the Seatember12 devaluation. /d Includesforeign-currency deposits. Source: Bank Indonesia.

-6-

ANNEX 1

Tabl'e"6

INDONESIA RURAL CREDIT SECTOR REVIEW

InterestRates of CommercialBanks,1983-86 (% p.a.) December December December September December 1983 1984 1985 1986/a 1986 NominalDepositRates /b Statebanks

14.8

17.1

14.6

14.3

13.9

Privatebanks

17.4

20.7

15.9

15.1

14.8

Statebanks

2.5

7.3

9.8

10.8

4.4

Privatebanks

4.8

10.6

11.0

11.6

5.2

Statebanks

17-24

17-24

17-24

16-24

16-24

Privatebanks

18-28

24-30

18-27

17-36

16-33

Statebanks

4-10

8-14

12-17

12-23

6-14

Privatebanks

5-14

14-19

13-22

13-32

6-22

1983

1984

1985

1986

LIBP-Le

9.7

10.9

8.4

6.8

Inflationdifferential betweenIndonesia& USA

8.6

6.1

1.3

7.2

Real DepositRates /c

NominalLendingRates _d

Real LendingRates /c

Memo Items

of September12, 1986. /a Ratespriorto the devaluation Nominalrateson three-month time deposits. 77 Deflatedby the ConsumerPrice Indexfor the relevantyear. 7T Nominalrateson workingcapitaland term loans;the amountof lendingundertaken by banksat the maximuminterestratesis generallyquite small. /e LondonInterbankOffer Rate on three-month US dollardeposits.

7W

Source: Bank Indonesiaand World Bank staffestimates.

INDONESIA RURALCREDIT SECTOR REVIW Priority

Lendiai 1 Progras:

(Septeme

Program am

Progra objectives

Date started

Loan celltus (Itp)

Interest rate

*bare A.

fank

30, 1986)

Uquidity A cost Workint

Indonesia

Max. term of loan

Bforover share

fanks Involved

Share

Capital

KREDIT ESPO8R: (Export Credit)

Exporters credit

01/82

KPt KCredit Modal Kerja Permane (Workiug Capital Credlt)

Small eanterprises

01/74

15 m

12X

8I 52 e 3 W.B. 25X 0 10.11

5 yrs

01

11/69

Open

122

St 751

31

I yr

25S

8RI: import distribution

-

92

BI 702 0 31

I yr

ISS

All

banks

ASKRTNDO 851 Si 7.5S

us

Production. dietribution and Import credits for fertilizers a checals for

-

e

Collateral awint/form

rlsks

All

national

dities co cerned

7.51

ASIUINDO 751 He 251

At least lowm

&

RB

100C

Commodities erned

IOS

con-

PS:s Kredit Perkebunan Swasta Hawsonal (Private tr e Estates)

Palm oil. tea, coffee. rubber, cocoa, coSonut

071/78

Open

12X

BE 752 Q 31

Open

30

0EtI, 0BD, 12t BDN. SAPINDO

He

1001

At least loan

IO0

Kits: Credit Modal Kerja (Working Capital Credit)

Naedium prises

05/84

75 a

15S

at 7O1 0 3X

1 yr

g01

All

national

ASKRINDO 701 H8 301

At least loan

1001

KIMt: tEPPBES 29/1984 (Working Capital Credit)

State prises

Enter-

05/84

75 a

15X

81 701 Q 3Z

I yr

302

All

nattional

ASKRINDO 702 H8 302

At least loan

IOO1

CKi: Kredit Candak Kulak

$=1t

traders

04/76

KUPEDESs (Village Credit)

Small borrawers

02/84

At least lo*n

100I

KUt: (Kredit Usdha: Tani) (armer Groups)

Farm production

06/85

UEDItT I/P COPESASI ops Credit)

Priortty purchase

09181

a. (Co-

nter-

goods CODslly BSt

2,000 15,000 1 a 80,000 100,000/ba 00/ Open

121

-

S days7 months

02

KODs

CO0

1001

taX flat

at 75X 0 15S

2 yrs

O0

SRI

BaR

1001

122

GOI 1OOZ e 32

7 months

O

B81 a cha nnel for ItUO o s

Penn SRI

PKtK952 S

Assets

122

8I 902

3 yrs

OX

National

Peru

pxK 902

At least loan

e

31 881

banks

BI

51

created

1o00 Ooa

St Program objectives

Program nnmm

Loan cellings (Op)

Date started

B.

b.

c.

PRPTE

PSN

Paddy Field mation

For-

XI: Investast (Investment Credit) Iredit loperast: (Investment Credit Cooper a. tives) b.

ASKRIX O HB

aos o

31

20 srs

0O

SRI, BBD 811

COt guarantee

e

31

20 yrs

O

SRI, BBD B111

10 yrs

1O0

BAPINDO

1005 8B Small farmer plots are at 00t risk 100 8B Small farmer plots are at 1GO1rk IOS HUB

32

1-2 yrs

-

CO0

001

3S

10 yrs

-

creEdl firect ini. Agri. to SRI

cOt at bIt

601 2t.5S 12.5S

0O0

10 yrs

-

BBI

G0 BI SRI

602 27.5S 12.5S

GOX

All

us

All state banks

Perum PX1 90S SS SRI 5X SI

122

As above plus cocoa, coffee. pepper 6 coconut

1979

Open

121

Large private tea, estates: oil palm, cocoa. coffee, coconut, rubber

06/78

Open

t21

1. Construction riee fields 2. AS above and becomes lIK type loan tn farmer's name 3. An above for 2

09/79

pen

32

-

-

10.5S

ST too1

-

-

121

RI 80X

Nedimi size enterprIses

06/83

122

B

ourPrtority chase priority goods Other activities

09/81

12S

St 9010

e e

BI 552 We 251

SI 801

_

e

BI 851

BI b0010

.

1001

All

Open

.

At Icast luan

ox

08/t0

_

100I

8Byrs

Nacleus estatess tea, rubber 6 oil palm

I_

At least loan

32 10.11

121

-

100

BRI

1I a

73

Collateral amount/form

rtsks

BRI

01/74

t

Sh. .

02

Small entrepreneurs

borrowers

Banks Involved

3 yrs

12S flat

Intredit tIt: (Small vestast Investment Credit) KR130T PZRUKBUNAN: (Tree Crope) a. PIR

BI 1002 0 32

1 m

Small

Borower share

Loans

Investment

02/84

21P19RS

Has. term of loan

Llquloity share & cost

interest rate

Program (continuation)

Credit

e

e

31

31

M801 31

10 yrs

101

31

10 yrs

O0

.

w

Fh~~~~~~~~~~~~~~~~~~~~~

751 251

1001

001 guarantee CD At least IOan

1001

At least 1001 IOaD

-9-

ANNEX 1 Table 8

INDONESIA RURAL CREDITSECTORREVIEW Agricultural CreditSubsidies (Rp billion)

Dec 1983

Dec 1984

Dec 1985

Jun 1986

Total

70.9

75.4

94.5

113.9

354.7

Nationalprivate banks

1.2

2.0

2.6

3.8

9.6

Regionaldevelopmentbanks

1.5

1.7

2.1

2.3

7.6 0.2

Statebanks

Foreign banks

-

0.1

-

0.1

Total

73.6

79.2

99.2

120.1

372.1

Source: Estimatedfrom BI statisticsusinga marketreferencerate of 18%.

-

ANNEX 1 Table 9

10

INDONESIA RURAL CREDIT SECTORREVIEW SubsidiesInherentin BI LiquidityCreditsto Agriculture (Rp billion)

Agriculture liquiditycredits Mar Mar Mar Mar 1983 1984 1985 1986

Mar 1983

Subsidies Mar Mar 1984 1985

BIMAS

139

136

110

29

KUDs

209

208

164

193

0

8

13

13

Import/Distn. fert.

35

130

184

171

KMKP

56

5E

56

57

5.04

5.04

KIK

101

96

90

86

9.09

8.64

Tree crops

134

225

324

513

6

4

9

63

0.54

0.36

Paddy formation

22

23

24

24

1.98

2.07

Total

710

901

Sugar nurseries

KKK/KI/Kelayakan

Note: Referencerate is 12%.

994 1,191

12.51 12.24

Mar 1986

Mar 1983-86

9.90

2.61

37.26

'8.81 18.72 14.76

17.37

69.66

1.17

1.17

3.06

3.15 11.70 16.56

15.39

46.80

5.04

5.13

20.25

8.10

7.74

33.57

12.06 20.25 29.16

46.17

107.64

0.81

5.67

7.38

2.16

2.16

8.37

63.18 79.74 87.66 103.41

333.99

0.00

0.72

INDONESIA RURALCREDIT SECTORREVIEW Sources

and Uses of Punds of Varsous (Rp billionk)

National foreign e chanie baziksa A2nunt X

Forelonbanks/b Anount X

16,204.0 S8.39

2,090.0

87.16

34.01

238.0

9.92

7.59

70.0

2.92

Other cormercial banks AmmAAount 2

Vamcial

Institutions

Development banks Amount X

Savings AAount

banks 2

Secondary banks lc

Sedan kredlt kecanatan

Sources Deposits Borrowings

9.439,0

Equity

2,107.0

Total

2,165.0

77.77

1.101.0

37.77

153.0

9.80

113.0

65.32

2.2

18.33

335.0

12.03

1.330.0

45.63

1,086.0

69.57

16.0

9.25

3.5

29.17

284.0

10.20

484.0

16.60

322.0

20.63

44.0

25.43

6.3

52.50

173.0 100.00

12.0

100.00

27,750*0 100.00

2,398.0 100.00

2,784.0 100.00

2,915.0 100.00

1,561.0

18,817.0 67.81

1,173.0

48.92

2,3S7.0

84.66

2,397.0

82.23

1,282.0

82.13

143.0

82.66

12.0

100.00

100.00

Uses

Loans Investments

6,547.0

23.59

1,093.0

45.58

223.0

8.01

334.0

11.46

207.0

13.26

0.0

0.00

0.0

0.00

Others

2,386.0

8.60

132.0

S5S0

204.0

7.33

184.0

6.31

72.0

4.61

30.0

17.34

0.0

0.00

173.0 100.00

12.0

100.00

Total

/

27,750.0 100.00

2.398.0 100.00

Consist of five state and tea prtvate banks. Consist of ten foreign banks and one joint bank. Consistof bank pasar, village and production banks.

2.284.0 100.00

2.915.0 100l.0

10561.0 100.00

[3!

- 12 -

ANNEX 1 Table Tl

INDONESIA RURAL CREDIT SECTOR REVIEW

Share of Groups of Banks in Total Assets, Funds and OutstandingLoans (Percentage)

State banks National private banks

Assets 1983 1984 1985

Loans 1983 1984 1985

Funds 1983 1984 1985

77 74.8 73.4

78.4 74.4 73.9

70.7 69.5 66.6

11.2 13.9 15.3

11.9 15.5 17.5

13.2 16.5 18.5

Local development banks

3.2

3.5

3.5

3.2

3.1

2.9

Foreign banks

8.6

7.8

7.8

6.5

7.0

5.7

Source: Bank Indonesia.

3.5

3.6

3.9

12.6 10.6 11.0

- 13 -

ANNEX 1 Table 12

INDONESIA RURALCREDITSECTORREVIEW Total LoansOutstandingof the FinancialSystem (Rp billion) Loans outstanding 1985 June 1986 Amount % Amount % Banks/a Bank Indonesia(directcredits) Statebanks Other commercial banks Foreignbanks Development banks Savingsbanks Subtotal

964.0 15,145.0 4,106.0 1,073.0 640.0 1,005.0

4.07 63.95 17.34 4.53 2.70 4.24

1,103.0 15,586.9 4,715.0 1,060.0 666.0 1,325.0

4.36 61.61 18.64 4.19 2.63 5.24

22,933

96.83

24,455.0

96.67

Nonbankfinancialinstitutions

162.0

0.68

182.6

0.72

RuralFinancialInstitutions (RFIs) BRI Unit Desa

229.0

0.97

285.1

1.13

214.3 193.0 19.0 2.3

0.90 0.81 0.08 0.01

233.0 209.8 20.7 2.5

0.92 0.83 0.08 0.01

Pawnshop

64.8

0.27

61.4

0.24

Other ruralnonbankfinancial institutions BKKs,KURKs,etc. KUDs

81.0 31.0 50.0

0.34 0.13 0.21

81.0 31.0 50.0

0.32 0.12 0.20

589.1

2.49

660.5

2.61

Secondarybanks BankPasar Villagebanks Paddybanks

SubtotalRFIs TotalCreditOutstanding /a BI statistics.

23,684.1 100.00 25,298.1 100.00

INDONESIA RURALCREDIT StCTOR REVIEW Loans Outstandlng and Agricultural (In Rp billions)

Rural

by ComaerCredit Agrleultural ci-l and Development BanksLa State banks banks private National banks development Regional Foreign banks credit credit

BBD rural nonagricultural EfK/RNgp nonagricultural Subtotal

Total In constant

la

1983 Pdees

June Loans

1985 Loa-s

Loans

of

llinl

44.19 0.75 0.94 -

1,256.00 34.00 28.00 2.00

43.52 1.18 0.97 0.07

1,575.00 45.00 35.00 1.00

44.32 1.27 0.98 0.03

1,899.00 63.00 38.00 2.00

46.93 1.56 0.94

208.00 778.00

11.03 41.25

279.00 942.00

l1.8k 39.88

302.80 918.00

11.30 34.35

275.90 994.00

9.56 34.45

393.40 960.00

1L.0? 27.01

467.20 960.00

11.55 23.72

1,799.00

95.40

95.10

2,246,00

2.65 n.a. 0.48 0.02 aas n.a. n.a. 1.45

75.00 n.e. 11.60 0.70 28.50 n.a.

3.18 n.a. 0.49 0.03 n.a. 1.21 n.a.

86.90

4.61

1154.0

4.90

1.885.90

1OP.00

100.00

U.&.n.a.

2,361.80

2.446.00

91.53

89.75

2,589.90

3.009.40

84.68

BL statistics

/d

Using WPI deflator

(excluding

before

of Finance o11):

January

estimates 1981 - 77.0;

1984 and thereafter of the

distribution

1982 - 83.5;

3.429.20

0.05

84.75

3.48 2.36 0.51 0.05 0.75 1.32 n.a.

89.00 121.00 16.10 1.80 27.60 40.30 n.a.

3.08 4.19 0.56 0.06 0.96 1.40 n.a.

229.00 193.00 19.00 2.30 28.20 42.10 31.00

6.44 5.43 0.53 0.06 0.79 .18 0.87

285.10 210.00 20.60 2.50 28.00 39.90 31.00

7.05 5.19 0.51 0.06 0.69 0.99 0.77

226.30

8.47

295.80

10.25

544.60

15.32

617.10

15.2S

2.672.30

100.00

100.00

3.SS4,00

100.00

93.00 63.00 13.60 1.30 20.00 35.40 n.a.

2,885.70

3,011.86

2,551.46

2,672.30

2,828.50

2,449.23

and Nidl Credits

and Ministry

/c

x

1,181.00 20.00 25.00 -

B1 statistics.

lb Consisted

1986

41.75 0.59 1.06 -

27.40

/d

I

986.00 14.00 25.00 -

50.00 n.a. 9.10 0.40

Credlt

Loss

S

41.57 0.64 0.90 -

(RFIs) Rural

Loans

784.0'1 12.00 17.00 -

Institutions Rural Financial BRI unlt disa lb Bank Pasars banks Village Paddy banks KUDs /cu Pawnshops Ic l Us, KURKs,etc. Subtotal

S

1984

1983

1982

1981 Loans

KUPEDES loans. of credit.

1983 - 100.0;

1984 - 113.1;

1985

-

118.0;

and 1986 - 121.8.

4.046.30 3,322.08

100.00

ANNEX1

- 15 -

Table 14

INDONESIA RURAL CREDIT SECTOR REVIEW

Population per Bank/Office for Selected Countries

Population per bank office Urban Rural

Indonesia

18,287

40,220/a

Philippines

5,900

18,100

Thailand

9,826

20,278

India

6,910

23,449

-

22,497

Pakistan

/a Outside Java. Note: 1983 data from M.H. Agabin, "Rural Savings Mobilization, Asian Perspective and Prospects,"September 1985, Technical Board for AgriculturalCredit, Manila, Staff Paper 2-85.

ANNEX

TabJle

- 16-

M*St CuSSlt nstltatien

L1wl/ type of tosttua

etios _etso

p

stop

toa siz (3'000)

opstloi

)V,tW

l Steetutei of tbe Cdilt

tetotlyt

"Mrket

Coll.t@tI)

ifettati 10t55 t lM

lo

26.In30 p..

ole.t

In

typ

Stbur of loea saotoi boitowtr. to 1"S V(

0t bertat

V11las. UKs. VLS, 520,

etc.

510.

Ptow. Sow

tJI

Los

ots

toermtu

otuteoeplww"top *My

UIbt bank; calloty

sewlap

cotelwen

KlOs

Sten oxty

Crndt

6 s

o

100o As. *S7 20 mu.

Short-tax, not sucsdt I it alums of

mtlb

tor 10-

Ae. * 30

10 was"

0..

son-tore

lb"

13t p.&.

up to S tr

1r05. buildog. oip-

2t-2

VAs posIeSot

rtowl troders62

Mwetly te

tedtr

CoopotI"s

esebetr

7)0

U3 b

SubdIStrict de"

811 cut

tak

ste-amse

Ureca itwu "rp 0esUg

sn 7 de best

priets*

Pses

omnweat Coerptstive

p!a_shop

*3

oIle eO- I O10 000 Awf. - 460

wooary

sawlp

I0 MO_O.

bAir_

of

I It

Awe. * 735

Uit

beki

so neip

2.-300

?teIe isVeStnr0.

up to I

1ntre

etly sotel oatre prosre" sod treder

991

t*"

262

with tollat4tel MeuiWA32Pet

tI*ndorT

wombha

_omee-

Coerm

malmall

per

Pilon

dussbls". jlx1"v

ot" looe eds^ this Up 20.,01

-a

P_.htm_o Intel ctade (bet

fid

ox

State

p.s.

mmt

seetm

sits dosit of St of 1loss aff*ctti* . 48.402paw.

* 362 * 62 eX -

34t

Wpea"ot lI"" ffsfe*r

this

ft 20.000; District end ProvInce fterw.soiarnust

sm

Iracwl, of com_rclil 6 de. beak

ftttoos) M2ftta breec

sd of s_oe-

is

Ste

I ptiwtte

Wench etork; volunsary dilgp 6 ethet OVIten

lb lund eIltlg

Shont-, sidi& long-tsrs

lead. flzed Sssets

lKl bak * 5-24 p.s. Ptivate

tblic ettptle. 0 t* - 6 litge-stle M at*pi

6 PrIvet

grsm% utoxkg full bea 6 Itsi"el

Me t(ud eiiugt

Shout-. rnlm

load, tflud

State beak 12t2 p.s

twhlt 55151p1is5.

enebeak I itiecUl lSS Jeitituttfoes ts Jkiorts lTt"

to

t

4*WM*

5W30-470, fott-. modive- Lend. fluid loneg-term sial

dcal Ad5w. banks.

4-bIstloste

_

Stescb unetwos volestory servi*etrP|s tW ewvisg 6 other,

e.2U9.

of sumber of cooperstiwewen

servites

WM24p.s.

Psvetse

lmll- 6 wdie-$c*I* sotrpreour

ltrs.-.cel,

ars" 6 torsig

lePrt-

4.00

ANNEX 1 Table 16

- 17 -

INDONESIA RURALCREDITSECTORREVIEW LoansOutstanding of RuralFinancialInstitutions (Rp billion)

December1985 Amount %

June 1986 Amount

BRI unit desas

229.0

42.0

285.1

46.2

Bank Pasars

193.0

35.4

210.0

34.0

19.0

3.5

20.6

3.3

Paddybanks

2.3

0.4

2.5

0.4

Pawnshops

42.1

7.7

39.9

6.5

BKKe,KURKs,etc.

31.0

5.7

31.0

5.0

KUDs

28.2

5.2

28.0

4.5

544.6

100.0

617.1

100.0

Villagebanks

Total

%

TAe

- 18 -

I 17

INDONESIA RURALCREDITSECTORREVIEW (1980-86) Numberof RuralFinancialInstitutions

BRI unit desas

Secondary Pawnshops banks

BKKs

KUDs

Total

Growth rate (%) -

1980

3,432

5,833

N/A

486

4,752

14,503

1981

3,610

5,792

463

486

5,254

15,605

7.6

1982

3,617

5,808

471

486

5,254

15,636

0.2

1983

3,626

5,811

473

491

6,141

16,542

5.8

1984

3,626

5,825

474

496

6,579

17,000

2.8

1985

3,626

5,835

479

496

N/A

N/A

1986

2,272

5,820

479

497

6,786

15,854

-

-

19

ANNEX 1

Table 18

INDONESIA RURALCREDITSECTORREVIEW Assetsof SecondaryBanks and Pawnshops (Rp billion)

1981

1982

1983

1984

1985

60.3

79.9

103.5

177.3

292.4

32.5

29.5

71.3

64.9

95.7

103.5

156.8

247.8

22.2

8.2

51.5

58.1

0.23

0.24

0.24

0.32

0.44

59.2

78.6

81.4

90.9

105.2

32.8

3.6

11.7

15.7

94.1

81.4

80.4

89.2

22.4

-13.5

-1.3

10.9

0.24

0.19

0.16

0.16

SecondaryBanka Totalassets In currentprices - Value % growth

In constantprices- Value % growth

2 of assetsto totalassetsof financialinstitutions

-

78.3 -

Pawnshops Totalassets In currentprices - Value % growth

In constantprices- Value X

growth

% of assetsto totalassetsof financialinstitutions

-

76.9 -

0.22

Note: SecondarybanksincludeBank Pasar,villagebanksand paddybanks. Source: Bank IndonesiaEconomicand StatisticsDivision.

- 20 -

ANNE I INDONESIA

RVRAL CREDIT SECTORREVIEW 8adan Kredit Keeamatans- Capital

Accumulation

tKIp)-

End of year

1972

Loans outstanding minus paymentoverdue-currentassets (1)

1974

1975

38,389,316

(-8,694,086)

408,468,208

306,012,388

110,699,534

(-8,243,714)

857,929,870 -181.271941 -a7.b37,!2

446,091,673

220,101,512

10,464,744

463,616,242

285,392,121

101,936,687

462,236,249

338,350,749

178,715,334

1,058,:30,601

422,038,972

356,273,056

280,218,573

1,581,211,393 -374 974 308 1,206;Z37,n

394,354,418

385,466,791

426,415,876

1,886,175,896 -454 046 228 i,43Z,T s9,668

397,568,712 435,743,355

598,817,601

500,336,759

565,943,347

880,491,057

572,179,840

733,837,997

1,337,851,148

498,256,179 -89,787971

1,096,294,184 -245.349134 1,305,824,896 -326.514564

79,31U,332 1977

1978

1979

1980

1,420,097,129 -361.566 528

2,507,736,077 -560 964 914

T77T~T~ 1981

3,319,535,051 -675,666066 z,643,868,985

1982

1983

4,817,822,677 -808,176519 4,009,T 46.TW

1,001,204,9791,002,394,497 2,006,046,082

6,598,388,679 -1.000.930309 393V7,4377

1984

Equity (retalned earninse) (1-2-.

152,263,500

GDU,94.3#U3U

1976

Savings (3)

213,428,597 -31,469,685

T1G13,5$V1z 1973

Borrowed capital (2)

1,325,447,7101,372,403,983 2,899,606,677

9,421,244,181 -1.359 965 022 1,982,926,3251,794,062,852 4,884,289,982

1985

1986 (Sep)

11,943,055,206 -1 904 443 023 10 038 612 183

2,478,087,4612,156,831,874 5,403,692,848

14,097,265,491 -2.073.838225 1z,2Z3,4z/!7,

3,465,895,0512,246,781,275 6,310,750,940

ANNEX 1 Table 20

-21 -

INDONESIA RURAL CREDIT SECTORREVIEW OutstandingBank CreditsIn Ruplahand ForeignExchangeBy Sector (Rp billion) Annual change X

1980

1981

1982

1983

1984

1985

1986

Agriculture Mining Industry Trade Services other

526 1,866 2,563 1,977 482 466

813 1,693 2,763 3,062 1,385 444

1,025 1,472 3,923 4,129 1,867 606

1,226 807 5,207 5,132 2,276 651

1,318 384 6,667 6,344 3,169 931

1,656 258 7,592 7,255 4,183 1,213

2,071 357 8,022 8,277 3,834 1,985

26.9 -25.0 21.9 28.3 43.4 28.7

Total

7,880

10.159

13.022

15,299

18,813

22,157

24,546

21.8

28.9

28.2

17.5

23.0

17.8

14.6

750 2,662 3,656 2,820 688 665

1,056 2,199 3,588 3,977 1,799 577

1,228 1,763 4,698 4,945 2,236 726

1,226 807 5,207 5,132 2,276 651

1,165 340 5,895 5,609 2,802 823

1,403 219 6,434 6,148 3,545 1,028

1,700 293 6,586 6,796 3,148 1,630

15.3 -31.9 10.8 16.5 30.3 16.9

11,241

13,196

15,299

16,634

18,777

20,153

10.7

Sector CurrentPrices

Annual Change

7

n)-

1983 ConstantPrices /a Agriculture Mining Industry Trade Servtices Other Total

15,596

Annual Change 17.4

18.2

-2.0

8.7

12.9

9.9

PercentageDistributioa Agriculture Mining Industry Trade Services Other

6.7 23.7 32.5 25.1 6.1 5.9

8.0 16.7 27.2 30.1 13.6 4.4

7.9 11.3 30.1 31.7 14.3 4.7

8.0 5.3 34.0 33.5 14.9 4.3

7.0 2.0 35.4 33.7 16.8 4.9

7.5 1.2 34.3 32.7 18.9 5.5

8.4 1.5 32.7 33.7 15.6 8.1

Total

100.0

100.0

100.0

100.0

100.0

100.0

100.0

/a Using WPI deflator(excludingoil): 1980 - 70.1; 1981 - 77.0; 1982 - 83.5; 1983 - 100.0; 1984 - 113.1; 1985 - 118.0;and 1986 - 121.8. Source: BI Statistics,Decemberyears except 1986 which is in September,World Bank Base Data.

ANNEXI Ta-b 2

- 22 -

INDONESIA RURALCREDITSECTORREVIEW Bank Creditsas Proportionof SectoralGDPs

Sector

1980

1981

1982

1983

1984

1985

4.5

6.0

6.8

6.9

6.4

7.3

Mining

16.6

12.8

12.1

5.8

2.4

1.7

Industry

40.3

39.1

52.4

63.4

58*8

58.5

Trade

27.0

34.2

40.6

42.7

45*4

49.0

All sectors

16.1,

17.4

20.8

20.7

21.5

23.1

4.6

6.1

7.1

6.9

6.2

7.3

Mining

16.6

13.5

12.7

5.8

2.3

1.6

Industry

50.0

45.5

58.9

63.4

62.1

64.0

Trade

27.9

36.3

42.1

42.7

45.6

50.0

All sectors

16.9

18.4

21.9

20.7

21.3

23.6

CurrentPrices Agriculture

1983ConstantPrices Agriculture

- 23 -

Table 22

INDONESIA RURALCREDIT SECTORREVIEW ReglunalDistrlbutionof Total and AgriculturalLendins (March1986)

Province

Per I discapital tribution Total Agric. agric. total Total population lending lending agric. lending (1000) (Rp bln) (tRP) lending (Rp bln)

Aceh North Sumatra West Sumatra Riau Jambi Banxkulu South Sumatra Lmpung West Java DKI Jakarta Yogya CentralJava East Java Bali West Kalimantan CentralKalimantan South Kalilantan East Kalimantan North Sulawesi CentralSulawesi East Sulawesi SouthSulawesi Maluku NTB NTT Timor Timur Irian Jaya

2,999.9 9,452.0 3,779.6 2,513.4 1,755.3 946.9 5,423.1 6,089.7 31,142.0 7,873.2 2,891.1 27,387.2 31,266.7 2,672.0 2,771.5 1,123.9 2,285.5 1,603.0 2,359.0 1,549.8 1,091.9 6,574.7 1,617.4 3,045.1 2,999.3 608.4 1,332.0

17.5 672.6 19*4 38.8 5.2 1.4 12.0 49.2 140.6 182.7 15.2 177.0 325.5 16.0 34.3 1.3 30.3 33.0 12.0 3.6 1.1 22.2 4.6 6.7 2.3 0.1 0.6

5,834 71,160 5,133 15,437 2,962 1,479 2,213 8,079 4,515 23,205 5,258 6,463 10,410 5,988 12,376 1,157 13,257 20,586 5,087 2,323 1,007 3,377 2,844 2,200 767 164 450

1.0 36.9 1.1 2.1 0*3 0.1 0*7 2.7 7.7 10.0 0.8 9.7 17.8 0.9 1.9 0.1 1.7 1.8 0.7 0.2 0.1 1*2 0.3 0.4 0.1 0.0 0.0

Total

165;153.6

1.825.2

11.052

100.0

Per capita S distotal tribution Agric. lending total lending (Rp) lending I total

166.9 55,635 1,431.5 151,449 307.0 81,226 246.6 98,114 98.9 56,344 34.9 36,857 349.9 64,520 315.1 51,743 1,618.3 51,965 10,644.4 1,351,979 167.2 57,833 1,249.1 45,609 2,309.1 73,852 180.0 67,365 350.0 126,285 56.6 50,360 288.3 126,143 352.7 220,025 131.7 55,829 66.5 42,909 33.1 30,314 341.6 51,957 245.1 151,540 67.6 22,200 41.2 13,737 3.8 6,246 39.2 29,429 21,136.3

127.980

/a Outstandingof all bankingcredits,excludingInterbankand foreignresidentsloans. Source: Bank IndonesiaEconomicsand Statistices Department.

0.8 6.8 1.5 1.2 0.5 0.2 1.7 1.5 7.7 50.4 0.8 5.9 10.9 0.9 1.7 0.3 1.4 1.7 0.6 0.3 0.2 1.6 1.2 0.3 0.2 0.0 0.2

10 47 6 16 5 4 3 16 9 2 9 14 14 9 10 2 11 9 9 5 3 6 2 10 6 3 2

100.0

9

eX I Table 23

- 24 -

INDONESIA RURALCREDITSECTORREVIEW Bank IndonesiaLiquidityCreditsfor RuralCreditPrograms (Rp billion)

Ruraland SmallLoans WorkingCapital BIMAS MIDI/KUPEDES KMKP PSN

Cooperatives Total Term Investments MIDI/I KUP%ESKIK PIR PRPTE PSN Cooperatives Total TotalRural Shareof total (X) Nonrural and Large Loans Other Prog rams import, procuction of fertilizers Exportcredits KMK/KEPPRES

Investment credits(KI) National contractors

House purchase Teachers,studentcredit Total Nonrural Shareof total Total BI PrioritzProgram LEIUldty uredith Source: BI, Divisionof GeneralCredits.

1983

1984

1985

1986

139 32 620

136 56 621

109 70 621

29 142 634

3

2

-

-

136

157

165

204

927

970

968

1,011

6 360 43 75 15 30

12 343 73 112 40 43

23 323 119 122 80 41

51 307 211 124 176 29

529

623

708

898

1,456

1,593

1,676

1,909

73

62

52

45

35 172

130 389

184 635

171 981

-

-

53

122

30

6

31

63

-

-

13

41

245 58

398 63

558 74

764 148

540

986

1,548

2,290

27

38

48

55

2,579

3,224

4,199

1,996

INDONESIA RURAL CRFDtT SECTOR REVIEW Bank Indonesia

Estimated agriculture (1)

Liquidity

Credits to Agticultutal (Rp billion)

Programtotals March March 1985 1984

March 1983

*. Current BDIMAS KUDs /a lb Sugare-rseries Midi/Kupedes /c Import/distn.lFertilizer KHKP /d KIK /7Tree crops KK/ I/KtELAYAKAN/a Paddy formation

100 70-90 100 22 100 9 28 100 10-15 100

139 306 0 37 35 620 360 134 40 22

1.795

1.693

Total

136 212 8 68 130 621 343 225 29 23

Mar 1986

Lending

Estimatedtotals for agriculture March March March March 1986 1985 1984 1983

Annual change (O

Market Prices 110 205 13 93 184 621 323 324 58 24

29 241 13 193 171 634 307 513 658 24

139 209 0 8 35 56 101 134 6 22

136 208 8 15 130 56 96 225 4 23

110 164 13 20 184 56 90 324 9 24

29 193 13 42 171 57 8S 513 63 24

-40 -3 18 74 70 1 -5 56 219 3

1.955

2.783

710

901

995

1.191

19

62

69

72

65

24 198 11 158 140 52t 252 421 540 20

139 209 n 8 35 56 101 134 6 22

120 184 7 13 115 49 85 199 4 20

93 139 It 17 156 47 77 275 8 20

24 158 11 35 140 47 71 421 52 20

-44 -9 25 64 158 -6 -11 46 205 -3

2.285

710

797

843

978

11

Credits Llquldity 8I Agricultural Credlts as y or total Agrncultnral II. 1983 ConstantValues BIMAS KUDa /a Sugar nurseries/b Midi/Kupedes/c Import/distn.7-Fertilizer KMKP /d KIK tr Tree-crops /a KMK/KI/KELAYAKAN Paddy formation

100 70-90 100 22 100 9 2R 100 10-15 100

Total

139 306 0 37 35 620 360 134 40 22 1.6V3

/a Share estimatedfrom BRI statistics. 7-b From BRI statisticsfor Decemberyears. 77 Based on BRI loans outstandingproportionsDecember1985. 7R Based on nationaldata August 1986. 7e From Bank IndonesiaWeekly StatisticsReport. Source: RI Researchand DevelopmentDivision.

120 187 7 60 115 549 303 199 26 20 1.587

93 174 11 79 156 526 274 275 49 20 1.657

ANNEX 1 25 Tab'le

-26 -

INDONESIA RURALCREDIT SECTORREVIEW

Rural SavingsDeposits,1983-85

1983 % Rp bln BRI Demanddeposits Time dztosits Savings Subtotal Rural FinancialInstitutions Unit Desas Demand deposits Time deposits

Savingsdeposits TABANAS SIMPEDES of deposit Certificates other Subtotalunit desas Secondarybanks KUDs BKK-type institutions Savings and loan associations

Total % totalbank deposits

1984 % Rp bln

1985 z Rp bln

910.5 705.2 256.4

41.2 31.9 11.6

602.4 194.4 148.8

58.8 1*004.4 59.2 364.1 21.5 19.0 8.7 147.7 14.5

945.6

92.2 1,516.2 89.4 1,872.1 84.7

79.7

7.8

180.0

10.6

337.5

15.3

-

2.0 0.7

0.1 0.04

13.8 2.0

0.6 0.1

-

-

38.6 -

-

-

0.8

-

-

0.8

2.3 5.04 0.05 0.05

63.6 5.1 0.1 0.2

2.9 0.2 0.01

_

-

42.9

2.5

86.8

3.8

113.5 23.6

6.7 1.4

212.3 28.2

9.6 1.3

-

-

-

59.7 20.0 n.a. n.a.

5.8 2.0 -

n.a. n.a.

-

5.1 7.1

0.2 0.3

1,025.3 100.0 1,696.2 100.0 2,209.6 100.0 8.5

10.8

10.8

ANNEX I

Table 26

- 27 -

INDONESIA RURAL CREDIT SECTORREVIEW

Ratio of Quasi-Money to GNP in Selected Countries

Indonesia

Malaysia

Philippines

Thailand

1980

0.07

0.34

0.12

0.27

1981

0.07

0.38

0.14

0.29

1982

0.09

0.42

0.16

0.35

1983

0.10

0.43

0.17

0.41

1984

0.13

0.44

0.15

0.47

1985

0.14

0.48

0.15

0.50

Source: InternationalFinancial Statistics,December 1986.

ANNEXI Tbe2

- 28 -

INDONESIA RURAL CREDIT SECTOR REVIEW

Sources and Use of Funds in Rural Credit Sector

1983 Rp bln %

1984 Rp bln %

1985 Rp bln %

Sources BI rural liquidity credit /a 1,456.0

56.7 1,593.0

46.8

1,676.0

41.4

Internallygenerated funds

1,112.0

43.3 1,814.0

53.2 2,373.0

58.6

1,025.0

39.9 1,696.0

49.8 2,210.0

54.6

Rural savings deposits /b Equity

87.0

3.4

118.0

BRI Unit Desas

59.0

-

85.0

-

117.0

-

Secondary banks

26.0

-

31.0

-

44.0

-

2.0

-

3.0

-

2.0

-

BKKs

TotalRural Funds

3.5

163.0

2,568.0 100.0 3,049.0 100.0 4

0

Uses Rural credit /c Surplus (deficit) Ratio of rural credit to rural funds (%)

/a Annex 1, Table 22. /b Annex 1, Table 24. /c Annex 1, Table 12.

2,672.3 (104.3)

104

2,885.7

3,554.0

1,521.3

495.0

85

88

4.0

1.0

-

ANNEX1 Table 28

29 -

INDONESIA RURAL CREDITSECTORREVIEW CombinedBalanceSheetof NationalForeignExchangeBanks/a Percentage Rp Distribution billion (Z) Assets

Reserves Cash Demanddepositswith BI Foreignassets Claimson publicsector Centralgovernment Officialentitiesand publicenterprises Claimson privateenterprises and individuals Otherassets Total Liabilities Demanddeposits Time and savingsdeposits Foreign-currency deposits Foreignliabilities Government deposits Importdeposits Borrowingsfrom BI Capitalaccounts Otherliabilities Total

430 1,901 5,442

1.6 6.9 19.8

638 4,232 13,495 1,331

2.3 15.4 49.1 4.9

27,469

100.0

3,906 7,904 2,392 272 1,743 281 6,293 2,018 2,660

14.2 28.8 8.7 1.0 6.3 1.0 22.9 7.4 9.7

27,469

1.00

/aNetforeignexchangepositionis estimatedby subtracting the sum of foreign-currency depositsand foreignliabilities from the amountof foreign assets.

-30

-

ANNEX2 Table 1

INDONESIA RURALCREDIT SECTORREVIEW BalanceSheets: Bank Bumi Daya and Bank Rakyat Indonesia (in Rp billion)

Bank Bumi Daya Assets Currentassets Term deposits Loans Foreignassets Other assets Total Assets Liabilities Currentliabilities Demand deposits Savings/timedeposits

Borrowings Foreignliabilities Other liabilities Capital Total Liabilities

322 2 1,978 459 76

1982 X disBank X disBank tribu- Rakyat tribu- Bumi tion Indonesia tion Daya

11.35 0.88 69.70 16.17 2*68

349 1,945 52 32

2,838 100.00

2,378

25 747 328 1,064 476 16 162

0.88 26.32 11.56 37.49 16.77 0.56 5.71

69 426 257 1,391 101 78 56

2,838 100.00

2,378

14.68 477 0.00 127 81.79 3,783 2.19 1,259 1.35 156

1985 disBank % distribu- Rakyat tribution Indonesia tion X

8.22 55.95 65.20 21.70 2.69

697 4,199 363 393

12.33 0.00 74.29 6.42 6.95

100.00 5,802 100.00

5,652

100.00

2.41 15.72 26.22 35.04 14.68 1.31 4.62

169 942 974 3,053 87 310 117

2.99 16.67 17.23 54.02 1.54 5.48 2.07

100.00 5,802 100.00

5,652

100.00

2.90 140 17.71 912 10.81 1,521 58.49 2,033 4.25 852 3.28 76 2.35 268

- 31 -

ANNEX 2 Table 2

INDONESIA RURAL CREDIT SECTOR REVIEW

Composition of Bank Bumi Daya Loan Portfolio

1983 Rp bln

Z

1984 Rp bln

z

1985 Rp bln

%

Estate Agricultural Other

818.80 516.00 302.80

34.25 21.58 12.66

937.90 662.00 275.90

29.93 21.12 8.80

1,305.40 912.00 393.40

34.30 23.70 10.60

Production (manufacturing)

453.80

18.98

572.20

18.26

609.50

16.00

Services

678.60

28.38

1,145.20

36.54

1,369.50

36.00

Trade

255.80

10.70

271.30

8.66

242.70

6.40

Working Capital & Investment Credit Agriculture Other sectors

121.60

5.09

117.40

3.75

132.90

3.50

11.30 121.60

0.30 3.20

139.10

3.70

Large investment and working capital Total Loans Outstanding

62.40

2.61

2,391.00 100.00

89.90

2.87

3,133.90 100.00

3,799.40 100.00

- 32 -

ANNEX 2 Table 3

INDONESIA RURAL CREDITSECTORREVIEW Comparative Performance of Bank RakyatIndonesiaand Bank Bumi Daya (Amountsin Rp billionand ratiosin percentage)

1982 BRI BBD Averagetotalassets Averageloansoutstanding Averageborrowings Loansoutstanding/total assets Total assets/net worth Borrowings/total assets Deposits/total assets As a % of loansoutstanding Arrears Provisionfor bad debts Cost of bad debts/average loansoutstanding Profitability As a % of averageloan outstanding Interestincomeand fees Interestexpenses Interestmargin Personnelexpenses Other expenses As % of averageassots Interestincomeand fees Grossincome Interestexpenses Personnelexpenses Otherexpenses Profitbeforetaxes Profitaftertaxes

2,216 1,831 1,913 81.8 42.5 58.5 28.7

2,431 1,727 932 69.7 17.5 37.5 37.9

1985 BRI

BBD

5,417 4,205 4,832 74.3 48.3 54.0 33.9

5,159 3,458 1,803 67.8 22.1 35.5 41.9

10.8 3.5 1*6

19.3 5.0 0.43

10.7 3.4 7.3 4.0 4.0

13.9 7.6 6.3 1.6 5.4

13.0 7.3 5.7 3.4 2.9

10.1 8.4 1.7 1.3 1.8

8.8 9.8 2.8 3.3 3.3 0.3 0.1

9.9 11.2 5.4 1.2 3.9 0.8 0.45

10.1 11.4 5.6 2.6 2.3 0.8 0.43

6.8 9.4 5.6 0.9 1.2 0.4 0.26

ANNEX 2 Table 4

INDONESIA RURAL CREDIT SECTOR REVIEY

Condensed Income Statements: Bank Rakyat Indontoia and Bank Bumi DaYa (Current Rp billion)

1982 Bank X dis- Bank Rakyat tribu- Bumi Indonesia tion Daya

Rievenue Interest, commissions ,Foreignexchange transaction Other Total expenses Interest Forelgn exchange transaction Personnel Other Total Net Profit Before Taxes

1985 I disBank I dis- Bank tribuRakyat tribu- Bumi tion Indonesia tion Daya

I distribution

196 6 14

90.7 2.8 6.5

240 18 1S

87.9 6.6 5.5

549 38 28

89.3 6.2 4.5

349 122 11

72.4 25.3 2.3

216

100.0

273

100.0

615

100.0

483

100.0

63 0 74 73

30.0 35.2 34.8

131 28 94

51.8 11.1 37.1

306 0 143 124

53.4 25.0 21.6

289 67 46 61

62.4 14.5 9.9 13.2

210

100.0

253

100.0

573

100.0

463

100.0

6

20

43

Sources: Annual Reports, Bank Bumi Daya "The Development of State Commercial Banks in Indonesia."

20

INDONESIA

RURALC0DIT Indicators

Performance Bank Dagang Bali 1986

BRI Unit Desa 1986 Loans outstanding(Rp billion) lumber of loans outstanding/ guaranteed ('DM) Percentage of villages serviced (S)

Arrears/loansoutstanding(2) (X) to. of debtors In arrears/debtors Ratio of interest income/loans outstanding(2) loans Savings/outstanding Operattonalexpenses/ (2) loans outstanding worth (2) Net profits/net worth Net savings/net Number of units

313

25.3

Secondary banks Bank Pasars Private banks Total 1986 /c 1986 193

_

-

-

I6

-

-

-

-

28.0 0.29 16.2/a 15.7 1.35 2,272

0.4

7.0Lb

5.1 -

-

33.5 1.47 4.8

23.4/b 1.07b 3.67-;

22.5 1.11 2.9

26.7 9.6

25.2/b

21.8 8.9 122

7.47E

t

175

for bad loans. /a Does not tnclude proviston BRI sa ple of 26 Bank Pasar for First Quarter 1986. C9 BRI sample of 10 private Bank Pasar. 7d Sample of 10 BKD for year 1984. income from BKK sinus to After deductingnet subsidy of BPD (BPO operational are the same. since loan conditions Estimatedfrom BoR Statisttes gF aegls. Based on 11 model KUD under Dutch Government

Institutions

of Rural Financial

1,198 4.3 10.5

SECTORREVIEW

Vll-age BKD W 1984

Banks KPi W. Java

20.6

Pawnshops 42

4.96

m 1985 C. Java 11.9

Nonbank R1ns LPN URK 1985 1986 W. Sam. e. Java

LPK 1986 V. Java

2.5

1.2

0.95

14

398

38

14.0

-

-

31.0

13.0

18.0

-

-

16.0

20.0

-

-

34.0

41.0

42.0 33.7

26.0 0.18 10.4

26.0/f 0.29 15.0

8.3

30.0/ 0.35 497

-

-

-

-

6R -

34.3/t

62

30.0

0.27 MMS970

13.007dw 37.01

~-:6 3.S64

-

23-7 0.82 217

16,500

-

479

2.8 _

1.067

-

32.0

26.0 0.45 -

250

-

Kw//& 198V 0.36 4 -

37.0 -

-

29.0 0.17 -

V0.O 0.69 90

21.1 0.26 23.00 -

1.02 -

7n

operational

expenses)

wbich amaounts to 1.72 of the net worth.

I.!

35 -

ANNEX 3 Table 1

INDONESIA RURAL CREDITSECTORREVIEW ExternallyAssistedTree Crop Projects: CreditComponent Loan Amount,ProjectCost and Smallholder (US$ million)

Source/project IBRD NES I NES II NES III NES IV NES V NES VI NES VII SRDP I SCDP NES Sugar SRDP II Subtotal CDC Cofinanced with IBRD CDC-NESVI CDC-NESVII CDC-SRDPII Subtotal SFD Cofinanced with IBRD NEs sugar Subtotal ADB "-MS Besitang NES Cotton NECPP NES Oil palm Subtotal

Smallholder % distri- Total projLoan creditcomponent amount bution ect cost

65.00 50.50 92.00 30.00 134.00 55.50 138.90 27.00 25.00 79.20 131.00 828.10

73.11

134.00 79.60 152.50 64.50 268.00 118.70 244.00 70.50 95.20 130.20 221.00

35.5 81.5 50.2 35.0 159.7 77.8 198.0 69.1 93.8 5.2 190.9

1,578.20

996.7

38.70 37.70 105.60 95.00

7.9 19.9 105.6 31.2

277.0

164.6

28.00 30.00 20.00 78.00

6.89

9.35 9.35

0.33

21.00 23.00 63*00 57.00 164.00

14.88

KFW

"--1FRSB NES Ophir Subtotal Total

22.00 31.30 53.30

4.71

1,132.75 100.00

29.30 63.00

29.3 32.6

92.30

61.9

1,947.50

1,223.2

ANNEX 3 Table 2

- 36 -

INDONESIA Rl'RALCREDIT SECTORREVIEW

Loan Approvals,Arrears and Outstanding- KIK/KMKP (No. in thousands,Rp in billions)

KIK No.

Approvals KMKP Rp Rp No.

Rp

Outstandings KMKP KIK Z growth % growth Rp

1974

9.6

15.3

14.5

15.5

13.0

1975

7.1

12.8

9.6

13*2

22.0

69.2

19.0

1976

11.2

21.5

142.0

38.4

36.0

63.6

1977

11.9

24.6

156.2

47.9

50.0

1978

15.2

31.6

98.1

62.2

1979

17.1

57.3

223.5

1980

42.4

150.9

1981

35.0

1982 1983 1984 1985 1986

-

13.0

-

Growth rate in amount of loan approvals KMKP RIK

(X) -

-

-

-

46.2

-16.3

-14.8

41.0

115.8

68.0

190.9

38.9

62.0

51.2

14.4

24.7

65.0

30.0

84.0

35.5

28.5

29.9

127.3

99.0

32.3

154.0

83.3

81.3

104.7

245.8

264.6

210.0

112.1

321.0

108.4

163.4

107.9

147.0

277.0

351.0

353.0

68.0

647.0

100.5

-2.6

32.7

26.6

130.1

97.5

303.2

405.0

14.7

803.0

24.1

-11.5

-14.0

16.0

84.7

78.7

259.9

393.3

-3.0

856.0

6.6

-35.0

-14.0

57.4

39.5 169.9 336.~

928.0

8.4

-32.0 -35.0

90.9

83.0

36.3

24.1 124.5

8.5 12.5 4.7

398.9

337.6 -

-14.0 0.5 -

885.0

-4.6

-

-

58.4 -

134.8 -

~~ 37

~~~~~~

ANNEX 3 ~Tabl 3

INDONESIA RURALCREDITSECTORREVIEW KUPEDESLendingProgram (AmountsIn Kp 31111on) No. of loans 1984: Jan Feb Mar Apr May Jun -Jul Aug Sep Oct Nov DeC Total 1984 1985: Jan Feb Mar Apr may Jun

-

Jul

Aug Sep Oct Nov DeC Total 1985 1986: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Total 1986 TOTAL GRAND

Amount loaned Average Total loans No. of borrowerswith duringperiod loan size outstanding loans outstanding

11,848 33,795 65,400 66,331 60,645 64,300 34,516 49,728 52,913 68,032 *75,429 56,476

2,905 10,425 16,501 16,803 16,443 18,009 9,577 13,720 14,352 15,900 18,592 18,036

0.245189 0.308478 0.252309 0.253320 0.271135 0.280078 0.277546 0.275901 0.271238 0.233714 0.246483 0.319357

639.403

171,263

0.267848

67,978 78,656 76,693 85,284 94,116 71,636 70,577 81,518 83,247 95,422 99,945 86,891

19,337 24,348 25,449 28,956 32,086 25,932 25,465 28,271 28,966 32,142 35,929 31,956

0.284460 0.309550 0.331830 0.339524 0.340920 0.361997 0.360812 0.346807 0.347952 0.336841 0.359488 0.367771

991,963

338,837

0.341582

94,149 102,899 93,362 101,251 112,644 67,804 93,385 91,037 97,827 99,596

33,136 38,329 37,818 41,165 46,734 28,549 37,641 38,836 43,168 45,764

0.351953 0.372491 0.405068 0.406564 0.414882 0.421052 0.403073 0.426596 0.441269 0.459496

953.954

391,140

0.410020

2,585,320

901,240

0.348599

2,917 13,472 29,621 44,492 57,817 71,584 75,369 82,645 88,957 95,526 103,960 111,063

13,104 57,447 161,406 224,519 296,783 359,981 398,974 450,553 498,277 533,971 598,521 640,746

118,772 131,129 142,769 157,076 171,906 180,140 186,215 194,058 200,281 209,028 219,658 228,964

676,646 709,395 743,722 773,909 819,346 854,029 883,584 909,064 931,510 959,545 1,000,705 1,034,532

237,414 250,196 260,071 270,407 285,978 284,944 290,356 297,071 302,517 312,823

1,059,729 1,095,161 1,116,112 1,129,054 1,150,775 1,163,891 1,176,839 1,183,037 1,191,722 1,198,455

-38-

ANNEX 3 Table 4

INDONESIA RURALCREDITSECTORREVIEW BadanKreditKecamatanLoan Types,Maturityand In#-erest Rates

Loan type

Nominal ComrTotal Effective Interest monthly pulsory interest monthly rate for interest savings & savings interest Maturity period rate rate rate rate

Hlarian (daily)

22 days

3.5

4.8

6.5

10.0

10.8

Pasaran(every5 days)

60 days

8.0

4.0

12.0

20.0

6.9

Minguan(weekly)

12 weeks

10.0

3.6

10.0

20.0

6.9

Bulanan(monthly)

3 months

10.0

3.3

10.0

20.0

5.3

Lapanan(every35 days)

175 days

20.0

3.4

20.0

40.0

5.6

Musiman(seasonal)

6 months

12.0

2.0

10.0

22.0

2.2

Source: BPD,CentralJava.

~~~~~~~ANNE 3

39 -

Table 5

INDONESIA RURALCREDITSECTORREVIEW Badan Kredlt Kecamatan Lending Program

No. of units

No. of Growth loans in no. Growth Average during of loans Amount in amount size year annually loaned loaned of loan (X) (Rp mln) (%) (Rp)

1972

200

119,870

-

1973

350

277,860

131.80

1974

432

377,059

1975

465

1976

Cumulative no. of loans

CumuTotal lative loans amount outloaned standing - (Rp million)-

-

3,692

119,870

443

213

1,179

166.14

4,241

397,730

1,622

498

35.70

2,032

72.35

5,390

774,789

3,654

858

360,352

-4.43

2,480

22.05

6,881

1,135,141

6,134

1,096

486

304,909

-15.39

2,632

6.13

8,632

1,440,050

8,766

1,306

1977

486

232,044

-23.90

2,726

3.57

11,748

1,672,094

11,492

1,420

1978

486

212,988

-8.21

2,994

9.83

14,059

1,885,082

14,486

1,581

1979

486

213,746

0.36

3,597

20.14

16,829

2,098,828

18,083

1,886

1980

486

212,391

-0.63

5,437

51.15

25,598

2,311,219

23,520

2,508

1981

486

267,933

26.15

7,70,

41.71

28,758

2,579,152

31,225

3,320

1982

486

311,455

16.24

10,893

41.38

34,973

2,890,607

42,118

4,818

1983

491

385,196

23.68

15,630

43.49

40,576

3,275,803

57,748

6,598

1984

496

475,468

23.44

22,115

41.49

46,512

3,751,271

79,863

9,421

1985

496

533,578

12.22

26,993

22.06

50,590

4,284,849

106,856

11,943

1986

497

398,584

-25.30

22,642

-16.12

56,A06

4,683,433

129,498

14,097

443

ANNEX 3 Table 6

INDONESIA RURAL CREDIT SECTOR REVIEW

Credit Program Outreach

No. of loans/borrowers/ participants('000) Cumulative since inception 1985

Bank-assistedtree crop projects /a

Average loan size (Rp)

105

-

553,000 - 4.5 million

KIK/KMKP

1,707

96

5.2 - 7.7 million

KUPEDES

2,585

942

459,496

BKK

4,683

534

56,806

Total

9,080

/a Number of participatingsmallholders.

41-

ANNEX 3 Table 7

INDONESIA RURAL CREDIT SECTOR REVIEW

Analysis of KIK Arrears - January 1985 (Amounts in Rp million)

Loans affected by arrears Amount X

Arrears Amount

Over 3-6 months

22,487

11.8

2,008

2

Over 6-12 months

33,543

17.5

7,513

7.6

Over 12-24 months

58,919

30.8

28,885

29.2

More than 2 years

76,406

39.9

60,464

61.2

191,355

100.0

98,870

100.0

Total

- 42 -

ANNEX 3 Table 8

INDONESIA RURALCREDIT SECTORREVIEW BRI KIK/KMKP Arrears - August 1986 (Amounts in Rp million)

Loans outstanding Number Amount

KIK KMKP

Arrears Number Amount

Arrears ratio (Z) On number On amount

53,961

113,290

43,516

57,230

80.64

50.52

227,311

442,402

137,024

133,258

60.28

30.12

Total 281,272

555,692

180,540

190,488

64.19

34.28

Source: BRI.

- 43 -

ANNEX 3 Table 9

INDONESIA RURALCREDIT SECTORREVIEW Claims on ASKRINDOInsurance (Amount in Rp million)

Year

Number of claims

Amount of claims

1973 and 1974

69

27.4

1975

166

15.3

1976

12,064

894.9

1977

6,403

2,062.5

1978

6,183

2,445.8

1979

8,030

4,682.1

1980

14,644

6,316.4

1981

15,614

8,599.7

1982

18,173

20,412.3

1983

40,523

58,966.7

1984

70,874

99,288.9

1985

72,816

101,432.6

265,659

305,144.7

Total

Source:

ASKRINDO*

- 44 -

ANNEX 3 Table 10

INDONESIA RURALCREDITSECTORREVIEW KUPEDESDefaultRatios (Rp million)

Loss ratio Amount Amount Amount Loans out- Long- Short- Default loaned repaid overdue standing term /a term /b ratio /c 1984

171,263 60,200

597

111,063

0.98

1.36

0.54

1985

510,100 281,136

4,856

228,964

1.70

3.02

2.12

1986

948,196 623,291 14,042 324,905

2.20

2.94

4.32

/a Totaloverduepaymentsto totalpaymentsdue. /b Paymentsmissedin a month to paymentsdue in thatmonth. ,c Overduepaymentsto totalloansoutstanding.

INDONESIA RURAL CREDIT SECTOR REVIEW Badan Kredit Kec*aatan Loss

Cum.

Repay-

Amount

amount

ment

Amount

loaned

loaned

due

repaid repaid overdue overdue outst. outst. (Rp million) ---

-…-

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

Ratios

443 443 1,179 1,622 2,032 3,654 2,480 6,134 2,632 8,766 2,726 11,492 2,994 14,486 3,597 18,083 5,437 23,520 7,705 31,225 10,893 42,118 15,630 57,748 22,115 79,863 26,993 106,856 22,642 129,498

261 953 1,763 2,306 2,504 2,647 2,846 3,371 4,922 7,008 9,527 14,043 19,651 25,015 20,658

Cum.

amount

230 230 894 1,124 1,672 2,796 2,242 5,038 2,422 7,460 2,612 10,072 2,833 12,905 3,292 16,197 4,815 21,012 6,893 27,905 9,395 37,300 13,850 51,150 19,292 70,442 24,471 94,913 20,488 115,401

Incr.

amount

31 59 91 64 82 35 13 79 107 115 132 193 359 544 170

Total

Incr.

Total

amount

amount

loans

31 90 181 245 327 362 375 454 561 676 808 1,001 1,360 1,904 2,074

Long Short term/ term/

bad

bad

debt

debt

---

213 213 11.88 285 498 7.41 360 858 6.08 238 1,096 4.64 210 1,306 4.20 114 1,420 3.47 161 1,581 2.82 305 1,886 2.73 622 2,508 2.60 812 3,320 2.37 1,498 4,818 2.12 1,780 6,598 1.92 2,823 9,421 1.89 2,522 11,943 1.97 2,154 14,097 1.77

-

Default rate

(%)-

11.88 6.19 5.16 2.78 3.27 1.32 0.46 2.34 2.17 1.64 1.39 1.37 1.83 2.17 0.82

14.55 18.07 21.10 22.35 25.04 25.49 23.72 24.07 22.37 20.36 16.77 15.17 14.44 15.94 14.71 941

ANNEX 3 Table 12

- 46 -

INDONESIA RURALCREDITSECTORREVIEW Sources of Funds of Selected

Credit

Schemes

(%)

External Internalsources Total Total Equity and sources World retained Savings external internal GOI/BI Bank earnings deposits sources sources Tree Crops NES projects

100

0

6

94

6

65

7

93

7

55

25

20

80

20

KUPEDES

53

-

19

28

53

47

BKK

22/a

-

64

14

22

78

100

-

SRDP I and SCDP

24

70

SRDP II

28

KIK/KMKP

.a

Borrowings from BPD.

-

-

- 47 -

ANNEX 3 Table 13

INDONESIA RURAL CREDITSECTOR REVIEW Cost of Financial

Intermediation

Operating

Nominal lending rates (2 p.a.)

Effective lending Cost of rates funtds (2 p.a.) (X)

NES I-VI PhaseI PhaseII PhaseIII

0.0 10.5 10.5

6.4

0.no

NES VII PhaseI PhaseII PhaseIII

0.0 12.0 12.0

7.7

0.no

SRDP I -PhaeI PhaseII PhaseIII

0.0 12.0 12.0

6.5

1.42

3.02/b

0.0 12.0 12.0

Intermediation margin (X)

expensest loans outstanding (2)

Handlingfee 12 of loansoutstanding 6 2.52 of loansunder repayment

Intsirest rate subsidy to borrower (2 p.a.)

n.e.

0

n.a.

0

5.08

n.a.

PhaseI - 14.5 PhasesII & III - 3.5

1.62

1.38

n.a.

Phase I - 3.85 Phase II - 7.35 PhaseIII - 1.35

6.5

8.30

-1.8

n.a.

PhaseI a 14.5 PhasesII & III - 3.5

12X for 8 years., 4-yeargraceperiod

12.0

7.20

6.3jd

n.a.

0

12Xfor 4 years, 1-yeargraceperiod

12.0

7.20

6.31/d

n.a.

0

22.0 32.0

5.80 12.20

14.2 19.8

26.0 c 129.6 82.8 82.8 63.6 67.2 26.4

12.20

13.8 117.4 70.6 70.6 51.4 55.0 14.2

SCDP

PhaseI & II PhaseIII 8RDP II PhaseI PhaseII PhaseIII RIK/KMKP K1K KMKP

0.0 6.0

RUPEDES Basedon orig.ant. Investment 12 per month Workingcapital 1.5Zper month BRK /a DaT1Ty Every5 days Weekly Monthly Every35 days Seasonal

57.6 48.0 43.2 39.6 40.8 24.0

/a Includesforcedsavingsfesturein the estimation of effective rate. /b 20 yearswith 8-yeargraceperiod. /c Ratiosof actualinterestincometo loansoutstanding In 1985. /d Including 1.52 p.a.GOI subsidyto the banks.

1f.2

0

10.4

0

INDONESIA

RURALCREDIT SECTORREVIEW FinancialAssets Available to Savers in Indonesia Rp minimum

Maturity

Rates

of Return 'taxability Withdrawal

0 to St p.a. 12 to 15% p.a. 12 to 151 p.a. 9% p.a. 0 to 12% p.a.

500,000 250 50 250 1,000

on demand on demand on demand 12 months on demand

1,000 /a 1,1M

1 to 20 yrs loan period on demand

Time deposits

100,000

I to 24 no

10 to 17% p.a.

Cert. of deposits

100,000

I to 24 no.

10 to 17.4% p.a.

5 years n.a. n.a. n.a.

15.75 to 16.52 15.75 to 16.5% 17% p.a. 13 to 14% p.a.

Demand deposits TABANASgeneral TABANASspecial TASKA SINFEDES savings Contractual Compulsory savings Other savings

Bonds (b) DanareksaIncome (b) Danareksageneral (b) Shares (b)

1 million 1 million I million I million

12 to 15% p.a. 0 to 10% p.a. 12 to 212 p.a.

Availability

Other features

Cheque writing All banks anytime Lottery { State banks { per no. eI guaranteed ( BRI unlt desas B I per mo. { No tax investigation Post offices penaltv Lottery aRI unit desas anytime Gov't bank protected Some lotteries Some banks emergencies Exempt Condition of loan Rural lenders /a Exempt Some lotteries Some banks anytime Exempt Secondary banks All banks emergencies Exempt Secondarybanks 8I guaranteed Some banks resalable Exempt No tax investigatlon InterestA capitalrisk Varles Ac resalable Interest& capitalrisk resalable Taxahle Dividend& capitalrisk resalable Taxable Dividend& cavitalrisk resalable Taxable

Taxable Exempt Exempt Exempt Exempt

/a The minimuma'-ountdependson the size of the borrower'sloan. Most require10% of the initialloan amount be wetd on deposituntil In some cases,mainly cooperatives,not all the funds are then withdrawable. Interestmay o may not the loan Is repaid in full. be paid on these deposits. /b The minimumamount varieswith each Investment. Figuresbased on an averagesecurityprice of Rp 10,000 and a minimumtrading lot size of 100 shares or certificates. It could be possibleto purchaseone share but it would not be easy to resell. The first bond issuewas fully tax exempt,and the second and third issueswere subjectonly to a flat 10% Interestwithholding Tc tax. Interestpaid on all subsequentissues have been fully taxable.

@

X

INDONESIA RURALCREDIT SECTORREVIEW

Indonesian Rsak Deposits.by Type.1981-86 'I81 Rp bln Demanddeposits/b

1982

1983

1984 Rp bln

IRp bMn

384.20

/c

0.20

SIIPROES /d

-

Othersavings/e

693.10

4.84

445.90

-

3.08

0.30

-

-

6.74

994.50

540.70

4.50

935.60

-

0.50

-

0.40

-

98la

I

Rp bHn

Is Xg982

-

-

0.30

-

5.13

4.55 0.02

1,094.00 13.79

691.00

7.933.60 100.00 8.776.10

4.89

0.40

-

15.54

0.07

3,212.80 20.52 5,107.80 24.84 5,507.30 25.78

1,406.00 16.02 2,289.00 19.05 2,944.00 18.82 3,378.00 16.43

11.52

1,044.90

1983 7.00

7.87 100.00

778.00 12.013.20

6.48

t,397.00

100.00

15,643.20

8.93

1,884.00

100.00 20.562.70

9.16 100.00

3,369.00 15.77 1,849.00 21,366.70

50.00 -

1.00 15.00

33.00 -

65.00

25.00 -

19A6

15.00 -3.00 40.00 -20.00

12.00 -

1,600.00 203.00

58.00

42.00

13.00

1

20.00 134.00 24.00

59.00

7.82

4P

29.00

15.00

-1.00

13.00 80.00

35.00

-2.00

37.00

31.00

8.65 -24.00 100.00

Growth rate 1984 1985

16.00 21.00 24.00

11.33 1,641.70 13.67 2,602.00 16.63 3,691.77 17.95 4.174.56 19.54 43.00

Foreign currency deposits

914.00

4.28

0.40

1,001.10 12.62 1,104.40 12.58 2,586.40 21.53

Governmentdeposits

669.60

-

Time depositsIf

Total Deposits

18 Rpbln J

3,847.00 48.49 4,134.00 47.11 4,177.00 34.77 4,817.00 30.79 5.560.00 27.04 5,406.00 25.30

TAANAS /c TASA

Rpbln

X

11.00

63.00

29.00

30.00

4.00

/a Figures are for end of June 1986. b

Demanddeposits

e

Inetudes

all

with deposit

moneybanks.

commercial and savings bank deposits.

/d Deposits with SRI Unit Deaes. Net of TASANAS,TASKA. SINPEDES and state tf Time deposits Sources

bank time deposits

subtracted from deposit

n state banks only leas government and nonresident

Sank Indonesisa, Indonesia Ftnancial

Statistics,

moneybank time and savings deposits

plus savisgs banks savings.

deposits.

October1986.

II!9

- 50 -

ANNEX 4 Table 3

INDONESIA RURAL CREDIT SECTOR REVIEW

Distributionof BI Liquidity Credits by Bank

March 1983 March % distribuRp bln tion Rp bln

State commercial banks 3,550

1984 March % distribution Rp bln

1985 March % distribution Rp bln

1986 % distribution

80.0

3,565

75.0

5,916

78.0

6,640

77.4

BAPINDO

326

7.3

445

9.4

510

6.7

564

6.6

National Savings Bank

245

5.5

398

8.4

561

7.4

767

8.9

Regional development banks

110

2.5

117

2.7

138

1.8

158

1.8

other banks

208

4.7

232

4.8

463

6.1

455

5.3

4,439

100.0

4,757

100.0

7,588

100.0

8,584

100.0

Total

INDOlISIA RURALCUEDIT StCTOR REVw Iboen's

Progr*m or lnstitution

2 of loans to noavI (by no. of loans)

.

Approximate ave. loan size (in Rp)

80X

Pawn shop

in Credit

Participation

5.000

Proaram

Collateral required Y

and institutions Effecttve monthly Interest rate 3-42

Level of operation Kabupaten

Sources at one Gomernment Pawn Observatlons Shop, Pandaan, E. Java; Ministry of

Finganc Credit to Goldmark and Rosegard, euiTlAITsessEntrepre Indonesian went of cue aaan HreMPt leeauatan D.C. Developwasnington, lypgrcpu. 1983; BMMrecords. 3iietAlternatives.

N

571

n.a.

N

291

736.000

Y

2.5-3.0S

Provincial city

Limted

251 loans to woen women 75 of coseineus

330,000

Y

1.7-2.62

Keeaatan

CPIS (Center Iuplemetation

23.41 30.RX) (transport 30.51) (other services

5,000

Y

Kabupaten

CPHU "Economic Impact of UIKRW Bank (SEOP I and II)" Jakarta: 1966. Indonesia.

approximately population (Denpasar Largely urban clientele is not In rural areas. Much of KIK/IWCP lending

150,000).

Bank Pasar

Usaha takyat

(Denpasar)

KUPEDES (SRI Unlt KEI/UlKP (state banks) lb

/a

Kecamatanl vlllage

55,000

KUMI (Kredit East Java

7t

2.G-4.8S

602

Keeanatan)

MMK(Sadan Kredit Java Central

/a

Desas)

and private

Kecil)

3.31

3-4S

Village

Dirk van Book, 14; Evaluation. records. sauple

1USEand Iadura IUSEIsPD Java

from Dank Pasar for Policy Studles),

and Jakarta

Timor

books

L

- 52 -

ANNEX 5 Table 2

INDONESIA RURALCREDITSECTORREVIEW Characteristics of Loansby EconomicClassand Sex of Borrowers: West Java Studyof Three Villages

No. of loans Women Low Medium

% of loans % of used for loansin consumption cash

11

63.6

27.2

20

60

15

High

0

All

31

61.2

Men Low

25

64

35

31.4

High

5

All

65

Medium

-

Average loan amount (Rp)

39,555

281

32,325

136.5

-

19.4

Averageannual effectiverate (Weightedby no. of loans)

-

34,510

187.8

68/a

24,788

34.7

65.7/a

110,616

151.5

0

80

840,000

58.8

41.5

67.7

161,989

99.6

/a Includesone loan in gold. Source: Jensen,Karl F. "RuralCreditin Banten,W. Java: A. Shapshot, "1986 , mimeo.

- 53

ANNEX 5 Table 3

INDONESIA RURALCREDITSECTORREVIEW Self-Employed and Employersin RuralAreas by Sex and IndustryL-ruX ---

Men Women Total Womenas % of total

00-0)-

Agriculture

Secondary

Tertiary

12,566

1,317

3,054

16,937

3,648

842

2,196

6,686

16,214

2,159

5,250

23,623

72.5

39.0

41.8

Source: 1980 Censusof Population, Biro Pusat Statistik,Jakarta.

Total

28.3

-54

ANNEX 6 Page 1

FINANCIALINSTITUTIONS IN INDONESIA 1. Bank of Indonesia(BI). The financialsystemin Indonesiaoperates under the supervision of BI, the centralbank. BI howeveris not exclusively a centralbank; it also operatesas a governmentbank, receivingfunds from centralgovernment, and depositsfrom state banks,and othergovernmentor privatenonbankdepositorsand lends these resourcesthroughits liquidity loans to banks. At the end of 1985,BI fundsamountedto 39% of all bank credit. 2. StateCommercialBanks. There are five largebanks that control about 73% of the assetsof commercialand development banks. Althoughall five banksoperateas commercialbanks,they have specificareas of responsibility: Bank Bumi Daya - estate financing; Bank Dagang Negara - trade

financing; Bank Expor ImporIndonesia- export credits;Bank NegaraIndonesia 1946 - industrialfinancing; and Bank Rakyat Indonesia - credit for agricul-

ture,fisheriesand cooperatives.The government(BI)subsidizedcredit programsflow throughthe statebanks accordingto theirareas of specialization.In additionthe governmentoperatesa NationalSavingsBank that collectsdepositsthrough14 branchofficesand approximately 2,700 of Indonesia's 3,000post offices. 3. PrivateBanks. Privatebanks accountfor 23Z of all commercialand development bank assets. There are 10 nationalbanksauthorizedfor foreign exchangetransactions, and 11 foreignbanks. Additionally there are 59 small and medium-sized banks that operateat the localprovinciallevel. BI restrictstheirexpansiondependingon theirabilityor willingnessto merge with otherbanks. No bank licensesare being grantedunder the present bankinglaw. With few exceptions,privatebanks operatein urban centersat the provincial level,althoughthere is some bank activityat the district level. 4. Development Banks. These are 27 regionaldevelopmentbanks (BPDs) ownedby the provincialgovernments, one publicnationaldevelopmentbank, and one privatenationaldevelopment bank. These banks specializein project financing.In some regionsthey operateas coordinators and supervisors of BKK-typecreditnetworks. 5. Non-bankFinancialInstitutions.Of the 14 non-bankfinancial institutions, threedeal with developmentfinance,9 with investmentfinance and two with other activities.Their assets,which weve over Rp 2,000billion in June 1986,are comparableto thoseof the foreignbanks (7% of bank assets). Most operatein Jakartaand are not involvedin rural lending. 6. Pawnshop. Thereare 479 government-run pawnshopswhich operateat the districtlevel. They lend amountsrangingfrom Rp 2,500 to Rp 300,000, againstthe securityof householdgoods such as bicyclesand TVs or valuables such as gold and jewelry. For loansunder Rp 20,000the interestin 3% p.a. with maturitiesup to six months;largerloansare given at 4% with up to sevenmonths. Loan amountsare 84% and 89% of the value of the collateral. The borrowersare farmers(36%),fishermen(6%),rural traders(24%)and

- 55

~

ANNEX6 Page 2

others (34Z). Althoughpawnshopsare very active (in FY85/86they processed 16.5millionloans),theirtotal assetswere only Rp 61.4 billionin June 1986,barely0.2X of totalassetsof the moneybanks. Pawnshopsare managed directlyby the Departmentof DomesticMonetaryAffairsof the Ministryof Financeand fundedby BI and the centralgovernmentbudget. They do not mobilizesavings. 7. Petty-Trader Banks (BankPasar). These are market banks,specializing in trade loans. Of the 175 Bank Pasars,about 56% are private(99) mostly ownedby commercialbanks, 10% are cooperatives (17)and the remaining34X are public(59). They are limitedto one branchand may receivedemand or time deposits,with a maximumperiodof threemonths. Lendinginterestrates are subjectto a ceilingof 5% per month and loansare boundto a 12 monthmaximum maturity. However,the currentmarketrate for Bank Pasarlendingis only 3.3-4%per month. The three-monthlimiton depositsis not honored,and the bankersenter agreementsto extenddepositsto periodsup to one year. Borrowersmust make a compensation depositof 5% of the loan which is placed in a specialsavingsaccountand receivesno interest. Despitethe 12-month maximummaturity,Bank Pasarmay lend for longertermsby rollingover the facility. Loans are basedon collateralwith a minimumvalue of 150% of the loan amount. This collateralmay be tradinginventory,fixedassets,such as a market stall,or even durableconsumergoods. The Bank Pasarsare supervised and auditedonce a year by BRI underdelegationfrom BI. This supervision usuallyconcentrates on the accountingsystemand proceduresof the Bank Pasar. 8. Villageand Paddy Banks. Thereare 3,338 villagecredit institutions (BKD - Badan KreditDesa), an institution inheritedfrom the Dutch government, with survivinghealthyremnantsin some regions(EastJava) but ailingin others. There are also 2,065paddy banks (lumbungdesa), 26 village banks (BankDesa) of which 23 are private,and 217 productionbanks (BKPD-Bank KaryaProduksiDesa). With the exceptionof the BKPD, these institutions are locatedat the village(desa)level and are supervisedby BRI on behalfof BI. The BKPD are basedat the subdistrict(kecamatan) level,and operate weeklyposts at the desa level to conductcredittransactions.The BKDs, at the end of 1985,had outstandingloans amountingto Rp 19 billion,only 0.08Z of the totalcreditmarket. They are operatedby the villagechief, and have two staffmembers(komisi),a cashierand an accountantwho earn salariesamountingto 2.5% of the valueof the loans disbursed. The resources of the BKD are kept with BRI in a giro (demanddeposit)accountthat earns 1.6% interestper year. Loans are grantedfor trader'sworkingcapitalup to 10-weekperiods,at 23% for the 10-weekperiod (whichimpliesa 194% p.a. effectiveinterestrate). BKDs operateout of the villagepublicbuildingone day per week and are ownedby the localgovernments.They reportmonthlyto the BRI branches. Paddybanks are similarbut are also authorizedto lend rice in kind. 9. BRI-UnitDesa. At the end of December1986 therewere 2,272unit desasand 1,226villagepostsoperatedby BRI. This systemoriginatedunder the subsidizedrural creditprogram(BIMAS). When theseprogramswere phased out, BRI undertookthe pioneeringstep to offermore standardbankingservices at the kecamatanlevel. Throughthe unit desa system,BRI operatesprograms

- 56 -

ANNEX 6 Page 3

for rural credit(KUPEDES)and mobilization of savings(SIMPEDES)aimed at a segmentof the market that is not being servedby the largefinancialinstitutions. At end 1986,loans outstandingof the unit desa systemwere Rp 325.0billion,and savingswere Rp 165 billion. Given the broad coverage of the unit desa networkand the institutional strengthderivedfrom its dependenceon a largenation-widebank, it will undoubtedly have a crucial role in the development of rural financialmarkets,and serveas a model for the expansionof the bankingsystemto the rural sectors. 10. BKK-typeinstitution.Since 1972,the provincialgovernmenthas been operatingsubdistrict credit institutions (BKK-BadanKrtditKecamatan)in CentralJava throughthe regionaldevelopment banks (BPDs-BankPembangunan Daerah). Similarinstitutions have been established in East Java (KURK-Kredit UrusahanRakyatKecil),West Sumatra(LPN-Lumbang PitihNegara),Bali (LPDLumbangPerkreditan Desa),and in West Java (LPK-Lumbang Perkreditan Kecamatan).USAID has providedtechnicalassistanceto the BPD for the development and expansionof this program. Under theseprograms,the loan typesare usuallybased on the maturityof the loan and has a forcedsavings provision. Effectiveinterestrates rangedfrom 29% p.a. for a 48-weekKURK loan and 1302p.a. for a 12-weekBKK loan. The provincialgovernmentusually providethe capitalfor these institutions and additionalfunds are secured from governmentfundsor soft loansfrom the Ministryof Finance,throughBI, or the BPDs. The BKK-typeinstitution are supervisedby a representatives of the provincialgovernment, and at the technicallevel,by the BPD.. In general,localpeopleidentifywith these institution and their loyaltyis seenas a factorthat may help containbad debts and increasesavings,given propermanagementscheme. 11. Rural CreditCooperative(KUDs). The KUD (KoperasiUnit Desa) is the basicunit of the rural cooperative system. Over 6,000KUDs operateat the subdistrict levelunder a provincialcooperative(PUSKUD-Pusat Koperasi Unit Desa) that offerstechnicalservicesthroughcenters(PKK-PusatKelayanah Koperasi).The purposesof KUD are: (a) to organizemembersfor financial self-helpthroughsavingsand loan (Simpam-pinjam); (b) to providecommercial marketsto member'sproducts;and (c) to buy inputsand materialsfor members. The Departmentof Cooperatives statedthat 36.7%of ruralfamilies were affiliatedin 1983while the CentralBureauof Statisticsplacesthe coverageat 13.3%. In eithercase, KUDs have largemembershipsorganizedinto groupsof 30-50members. The servicesof the cooperative are primarily offeredto its members. The usual staff is five peoplebut may go as high as ten. Most of the staffare employedby the government. 12. BRI providesthe resourcesfor the creditfunds of KUDs and is also responsible for supervision and auditing. The loansof BRI to KUDs are funded with BI resources(100% for food procurement loans to KUDs) and other governmentsources(90% of the loans to KUDs for other programs).Loans from BRI to KUDs are insuredby the Cooperative DevelopmentFund Corporation(PPKK) for about 90% of theirvalue. Most of the creditprogramsrun by the KUDs are conceivedat the centralgovernmentand imposedon the KUDs, as is the case of food procurementfor BULOGor cooperative creditfor buyingof dairy cattle. Theseprogramshave very high arrears. In October1986 BRI estimatedthat Rp 72.2 billionof their Rp 289.2billionoutstanding loans to KUDs are bad

- 57 -

ANNEX 6 Page 4

debtsthat must be coveredby PPKK. Fundsobtainedfrom BI at 3% p.a. are lent by BRI to KUDs at 9X p.a..which are then onlentat 12% p.a. to KUD members. 13. Thereare three classesof cooperatives basedon performance.Class "A" KUDs which are self-sufficient and financiallysoundnumberonly 922. Class "B" KUDs,which are consideredsolvent,but are deficientin termsof profitability or management,and are dependenton governmentfundsnumber 2,930. Also, there are 1,272class C KUDs, which cannotbe considered solvent,but are not entirelyhopeless,and 1,658unclassified KUDs, which may be consideredcandidatesfor dissolution or liquidation.The savingsand loan programsof the KUDs (simpam-pinjam) had loans outstanding at the end of 1985 of Rp 28.2 billion. Their governmentsponsoredcreditprogramfor very small borrowers(KCK-Kredit CandakKulak)had loansoutstandingof Rp 14.3 billion in September1986 and arrearswere 291 of loansoutstanding.The total loans of KUDs fundedby BRI exceptthe simpan-pinjam, amountedto Rp 266 billionat the end of 1985,and arrearswere 22%. InformalCreditMarkets 14. Informalprivatecreditmechanismsoperatingin Indonesiainclude: (a) money lenders,(b) savingsand loansassociations; (c) trade-linked lending;(d) land relatedcredit;and (e) labor relatedcredit. Institutions and associations of particularinterestare brieflydescribedbelow: 15. Arisan (rotatingsavingand creditassociations).A numberof individuals regularlycontributea fixedamount to a commonfund which is then allocatedas credit to each member in a rotationdeterminedby drawinglots. In Indonesiathe arisanarrangementis commonlycomposedof women who use part of theirhouseholdsavingsto contributeto an arisan. The amount can vary from a few thousandrupiahstotal to Rp 100,000each, dependingon the economicstatusof the participants.Arisansare importantelementin the villagesociallife in Indonesiawhere self-help(gotong-royong) traditions are deeplyseated. They are indigenousin origin,flexibleand simplein operation, and capableof evolvinginto valuablelinks with formalbanking institutions.

16. Simpan-Pinjams (savingsand loan associations). Simpan-pinjams are arisansthathave takenon lendingfunctionsbut credit is givenat explicit interestrates and vary accordingto demandat a point in time. Furthermore, lendersand borrowersdo not coincideas in the arisan. Simpan-pinjams can be for a particularpurposedependingupon the activitiesof the village. Thus farmers,tradesmenand cottageindustryoperatorsform simpan-pinjams.One variantof the simpan-pinjams is for emergencies(for example,to defray funeralexpenses). A committeeof villageeldersor other economicleaders administerthe association, in contrastto formalinstitutions that dependon the villageheadmanappointedby the government(lurah). The most significant attributeof theseassociations is that group pressureand communityspirit ensurea degreeof successnot found in the formalarrangements.They are thereforeindigenous,closeat hand and run by the villagesthemselves.The availableevidenceindicatesthatmost villagesdo not have simpan-pinjams, since they requiresophistication, disciplineand organization beyondthat of

- 58 -

ANNEX 6 Page 5

an arisan. Yet, simpan-pinjams offer good prospectsfor futuregrowthof financialintermediation, given the increasingmonetization of the rural economy,and the need to hold savingsand to apply them profitably.The fast turnoverof funds is an importantsourceof liquidresources. 17. An advancedsimpan-pinjam is the veteransloan fund,Koperasi simpan-pinjam (KOSIPA),found in Java. It lends in the village,but the savingsare generatedin both urban and rural areas. Loans vary in maturity from 4 to 30 days and carry interestratesup to 4-52 a month. KOSIPAagents operatein many locations,thus diversifying the risk by village. One distinguishing featureis that it is externalto the village,but the army's influencein the village(fromwhich the KOSIPAcadre is ultimatelydrawn) ensuresgood organization and ease of collection. 18. Usaha Bersama(self-reliance group). The usaha bersamaarrangement is a step above the simpan-pinjam in the ladderof informalrural financial arrangements.About 300 usaha bersamasare known to exist in Java. In additionto savingand lendingactivities,these arrangements functionas a jointentrepreneurs for production,processingand marketingof products. A uniqueattributeis that creditlimitsare set at a multipleof the savings held by the borrower. Repaymentsratesare high among the usahabersamas, well above90%. Loans are made only to membersand guaranteedby another member,and group pressureis broughtto bear for promptrepayment. 19. The usahabersamaand sinpim-pinjam have come underpressurefrom the Departmentof Cooperatives to registeras KoperasiUnit resas (KUD)but many of theseassociations are resistingin order to keep the voluntary association from becominga bureaucracy and to avoid the regulations which governKUDs. To date they have resistedinspiteof some benefitsof KUD statussuch as an automaticcreditguarantee. 20. Grumpjungan(laborrelatedcredit). Found in Centraland West Java, grumpjungans are groups of landlesslaborerswho had primarilyjoined to negotiatecollectivelabor contractswith landowners.Usuallyeach grumpjungan consistsof about 15 households.Out of the earningsof group activities, at least 15% is saved in a commonfund. These fundsare then used to financeoff-farmactivitiessuch as trade,the productionof household goods,and purchasesof animalsfor improvingthe productivity of joint labor leasingoperations.Grumpjungan are voluntarysavingassociations that permit the use of fundsfor financingworkingcapitalof off-farmactivitiesand investments in animals. In this function,they substitutefor both formaland informalfinancialintermediaries.While as individualstheyare not eligible for formalcredit,they combinea labormarketoperationwith a savings function,which is the basis of the group savingand investmentactivity. This couldbe extendedto collectiveor joint liability.At present,land is the most importantcollateral; thereforethe landlesshave littleaccess to credit. Substitution of jointor group liabilityfor land collateralcould improveaccessto creditfor the landlesspoor.

- 59 -

ANNEX 7 Page 1

SELECTEDSPECIALCREDITPROGRAMS A. WORLD BANK ASSISTEDTREE CROP PROJECTS Background 1. Many of the GOX specialcreditprogramsinvolvetree crops as part program. Some overalltree crop planting/rehabilitation of the Government's to loans amounting with tree crop projectshave been externallyassisted totaling US$828 million, represent over 73Z US$1.1billion. World Bank loans, of the totalwhile the Asian DevelopmentBank providesUS$164millionor 14X. The Commonwealth Development Corporation and the Saudi Fund (SFD), with the World Bank, and KfW (Germanbilateralagency)are the cofinancing other externalfinanciers. The Bank projectsfall under two major schemes,the nucleusestate 2. unit (PMU)systemsof implementa(NES)and projectman4igement and smallholder of both schemeshave been camponents smallholder credit While the tion. through BRI, under the NES scheme BRI acts as a channelingbank implemented and as an executingbank in the PMU projects(SRDPI, SCDP,and SRDP II). The have differencesin the sourceof channelingversusexecutingarrangements affect the incenlocal (nonbank)fundsand risk sharing. These differences in achievingthe goalsof the and effectiveness tivesfor BRI participation project. Objectives The main objectivesof the GOI tree crop projectsinvolvingsmall3. holdershave been to increaseIndonesia'sforeignexchangeearningsfrom tree many of whom cropsand to raisethe incomeand welfareof the srallholders, are poor. GOI uses a handlingbank, BRI, to deliverand collectthe credit throughits extensivepresencein the ruralareas but also to use some of its own resourcesespeciallywhen GOI's resourcesare constrained.It has also been argued that the creditis more efficientfor cost recoverythan taxesor cesses. CreditFeatures of the tree crop projectsare brokeninto three 4. The implementation phases: Phase I is the construction or plantingperiod(about3 years);Phase II is the loan conversionperiod(2-4years);and Phase III, the repayment period. NES Under the NES schemes,the publicenterprise(PTP/PNP)plantsan 5. employedas laborersfor Phase I. At area in blocks,with the smallholders enter into a credit the beginningof Phase II (after3 years)the smallholders agreementwith BRI after they have provisionaltitleto theirtwo hectare by the PTP/PNPduring farms. The agreementincludesall creditexpenditures

- 60 -

ANNEX 7 Page 2

Phase I, and provisional estimatesduringyear four after planting,for oil palm and coconutestablishment and duringyears four and five for rubber establishment.The agreementsare amendedbetweenyear 5 and 6 to includethe actualcredit expenditures to bring the trees to maturity. 6. As a channelingbank,BRI does not have any of its resourcesin theseloans. The fundsare from the Bank (and cofinancing institutions, when applicable), and OI counterpart funds from the budget. Until early 1984 these fundswere channelledthroughBRI to the PTP/PNPs,but sincethen they have been given ("dropped") directlyto the PTP/PNPSby GOI. As mentioned above,BRI's activitiesbeginafter conversion, at which time it is paid a 1% fee of the loan converted.BRI also receives2-1/2Zof the loansactually collected. The Ministryof Financebears 100X of the repaymentrisk. 7. The smallholder loan term and conditionsvary with type of crop and/orproject. The maturityof the loans for rubbervariesfrom 20 years (NES VIII) to 23 years (NESVI); most of the other orojectsare for 21 years. The rubbeV/loan; have a grace periodof six years,exceptunderNES VII with 5 years.- Oil palm loans (NES IV and NES V) are for 17 yearswith 5 years of grace,exceptfcr thoseunder NES VII whichare 20 yearswith 5 years grace. 8. The interestchargedto the smallholders is 0% for the first three years (PhaseI) and 10.51from year 4 (afterconversion) to maturityexcept for loansunderNES VII which bear 12% (Table2). The interestcharged betweenconversionand the repaymentperiodis capitalized and added to the principaland is paid duringthe repaymentperiod. 9. In contrastloansunderprojectsfinancedwithoutexternal assistance(PIR)had shortermaturitiesfor oil palm and coconuts(10 years with 3 years grace). Rubberunder PIR has 10 yearswith 7 years'grace. The smallholder interestratesunder the PIR projectsare higherat 121,but under the old schemethe grace periodinterestwas paid by governmentwho also shouldered 4.51 duringthe repaymentperiod. The smallholder paid no interest for the first 3 years (non-rubber) or 7 years (rubber)and thereafterpaid 7.51 for 7 years (non-rubber) or 13 years (rubber). Under the new schemethe smallholder pays the total121 after conversionwith interestcapitalized betweenthe conversionand repaymentperiod,as in NES projects,exceptthat the interestcharge is higher (apartfrom thoseunderNES VII). 10. BRI activitiesunder the NES projectshave beenminimalto date becauseof the lk of the physicaland, therefore,financialconversionunder almostprojects._ As of November1986,only two of the projectswere shown on BRI'sbooks. They were 387 loansfor aboutRp 1.4 billionunderNES I, and 224 loansfor Rp 1 billionunder NES V. None of these loanswere due for

1/

Grace from paymentof interestand principal.

2/

The conversionissuesare detailedin a separatepaper,CreditConversion Issuesin NES Projects,AEPA4.

- 61 -

ANNEX 7 Page 3

repaymentsince they had been recentlyconverted.About Rp 7 millionin handlingfees was due BRI from MOF on NES, but had not been paid. PMU 11. BRI acts as an executingBank underthe PMU schemes(SRDPI, SCDP and SRDP I1) with its own resourcesbeing part of the smallholder loans,and bearingpart of the defaultrisk. Funds for the smallholder creditare providedto BRI throughfinancingarrangements betweenGOI and BRI. Under SRDP I and SCDP, 70% of these loansare from the World Bank at 0. cost, 24% from liquiditycreditsat 3%, and only 6X from BRI's own resources. Under SRDP II, however,the ratiosbetweenthe Bank,BI, and BRI, respectively, were 65% at 9.9%, 28% at 3X and 7%. 12. DuringPhase I, the creditfor the tree crop developmentis technically in the form of a loan from BRI to the Directorate Generalof Estates(DGE),the governmentagencyresponsible for treecrops. At the end of the three years,the loan to DGE is supposedto be convertedto individual smallholder loanaccountswith 8RI. 13. The interestchargedon the smallholder loansand the portionborne by the smallholder vary. Under SRDP I and SRDP II, the interestrate to the smallholder is 12% p.a. for 20 yearswith sevenyearsof grace. The interest is waivedfor the firstthree years,compoundedin years 4-7 (PhaseII) and capitalized at the end of the grace period. MOP pays BRI an interestsubsidy (on behalfof the smallholders) of 14.5%from year 1-3 and 3.5% from years 420, which bringstotal interestpaid to BRI of 14.5%in years 1-3 and 15.5% untilmaturity. Under SCDP,however,the smallholder interestrate is 6X p.a. for 10 to f0 yearswith a grace periodof 3 to 8 yearsdependingupon type of activity.3 The lower interestrate is waivedfor Phase I and II, during whichGOI pays an interestsubsidyof 3.85% (PhaseI) to 7.35% (PhaseII). The GOI subsidyis reducedto 1.35%duringthe repaymentperiod. Total interestpaV to BRI under SCDP then is 3.85%in Phase 1, and 7.35% for Phases II and III.Z' GOI (MOF)bears 100% of the risk on loan principaldefault duringPhase I, and 75% (splitequallybetweenMOF and BI) for Phases II and III. BRI's risk is 0% for Phase I, 25% for Phase II and III on principaland 100% on interestthroughoutthe life of the loan. The risk sharing arrangement is the same for SRDP I and II, exceptthat underthose projects, the 75% sharefor PhasesI and II are bornedisappropriately by MOF (70%)and BI (5%).

3/

Plantingtalls: 20 yearswith 8 yearsgrace;developingtallsand planting/replanting with hybrids: 15 yearswith 6 yearsgrace;and rehabilitation:10 yearswith 3 yearsgrace.

4/

MOF on September6, 1985 changedtermsof SRDP I to the same as undeSRDP II, with effectfrom April 1, 1986. Until then SRDP I terms were the same as SCDP terms.

- 62-

ANN-X7 Page 4

14. There is quite an elaborateset of proceduresfor the flow of funds from the differentsourcesthroughBRI to DOE and finallyto the PMUs. The proceduresunder SRDP II bear this out. For a particularyear'sactivities, on the WorldBank's65X of the smallholder borrowings: (a) (b) (c) (d) (e) (f) (g) (h) (i)

DGE appliesto MOP; MOP givesWorld Bank shareto DGE (Prefinances); DGE "drops"to PMU; PMU reports to DOEafter use of funds; DOEreports to MOP; MOF appliesto World Bank for reimbursement; World Bank "drops"to MOF; MOP debitsBRI accountat BI; and BRI debitsDOE account.

For the BI and BRI portionof 35%: (a) (b) (c) (d) (e)

DOE appliesto BEI for the 35Z; BRI appliesto BI for its 28% share; 8I drops its 28X to BRI; BRI adds its 7Z and drops the 35X to DCE and debitsDOE; and DOE drops to PHU.

The droppingto the PMU from DOE from all sourcesare supposedto happen simultaneously; however,the ProjectCompletionReport(PCR)of SRDP I by the governmentreportsthat under that project,"the releaseof BI/BRIfunds to the projecthave generallybeen much delayed." 15. The PCR also reportsthat due to some technicalproblems,therehas been no accountconversionand, since conversionis a precondition for farmer repayment,the cost recoveryfunctionof BRI has not yet begun. As of November1986,only SCDP (underthe BRI executingarrangement) showsloans outstanding to 94 smallholders of Rp 52 million. These loansare not yet in the repaymentperiod. Of the COI interestsubsidiesdue of Rp 348 millionand Rp 93 millionfor SRDP I and SCDP respectively aboutRp 302 millionand Rp 52 millionhave been paid. Interestsubsidyand handlingfee paymentsto BRI were reportedto be not as promptas BRI would want. B. KIK/KMKPCREDITPROGRAMS Background 16. BI, in 1969,established a KreditInvestasiBiasa (KIB)to provide investmentcreditof up to 10 yearsmaturity(15 years in the case of BAPINDO) at interestrates of between10.5%and 13.5% (depending on loan size)through all the commercialand developmentbanks. The loansunder the programcarried a BI rediscounting facilityof 65% to 80% at 4% p.a. The KIB programwas originallyintendedto coversmall,medium,and large scaleenterprises.The statecommercialbankswere, however,reluctantto lend to small-scale enterprises due to the higher risk and administration costs,and the lack of collateralrequirements and requiredoperational/financial data. Consequently, BI introducedtwo new creditprograms--KIK and KHKP--in1974 specifically designedfor small-scale enterprises.

- 63 -

ANEX 7 Page 5

Objectives 17. The objectiveof KIK (KreditInvestasiKecil- Small-Scale Investment Credit)and KMKP (KreditModalKeria Permanen- PermanentWorking CapitalCredit)was to provideterm financingto indigenoussmall-scale enterprises in any sectorengagedin labor-intensive activities, but incapable of raisingtheirown funds. As theirnames imply,KMKP providesshort-term financing, while KIK provideslongerterm financing.Specificobjectives include:(a) creationand sustenanceof employment;(b) geographicdispersion of productiveinvestment, development of entrepreneurial opportunities and technicalskills;and (c) provisionof marketsfor local smallscale enterpriseproductsand raw materials. Participating Banks and Sourcesof Funds 18. The implementation of the two programsis handledby the five stateownedcommercialbanks,BAPINDO,selectedregionaldevelopmentbanks (who enter into co-financing arrangements with BAPINDO),and certainprivate nationalcommercialbanks (whichenter into cofinancing arrangements with the statecommercialbanks). Banksare allocatedsectorsfor programlending operations, but these allocations are flexibleto take into accountparticular localconditions. 19. The participating bankswere requiredto financefrom their own resources20% of KIK loansand 25% of KMKP loans. The remainingfundscome from BI liquiditycreditsat 3% p.a. Thesearrangements have been revised since 1979under the World Bank fundedSmall EnterpriseDevelopment Projects (SEDPI to III). Under SEDP I and II the World Bank loansand credits financedpart of only KIK loans,while it coveredboth KIK and KMKP under SEDP III. Under SEDP I World Bank fundswere used to replacepart of the BI 80% of KIK loans. Under SEDP II (1981-1984), however,the World Bank loan was to financethe 20% participating banks'contribution at 9.6% p.a.,while BI continuedto provideliquiditycreditsfor 80% of the KIK loansat 3% p.a. This meant 100% financingby GOI at a blendedcost of funds Lo the banksat 4.32%. Under SEDP III (since1984)World Bank fundscover both KIK and KMKP. It replaces25% of the BI liquiditycreditsat 10.1%. Therefore,the currentsourcesof funds for KIK and KMKP are: BI, 55% at 3% p.a.;World Bank,25% at 10.1%p.a.;and Participating Banks,20%. The currentblended cost of fundsto the handlingbanks for 80% of the KIK/KMKPloans is about, 4.175%p.a. Terms and Conditions 20. Thereare two eligibility criteriafor participation in KIK/KMKP. The enterprises financedmust have "pribumi"or indigenousmajorityownership and be registeredwith the authorities with less than Rp 40 millionin net worth (excludingland and buildings).KIK loansare for eightyears at 12% p.a. with a grace periodof four years on the repaymentof principal. The maximumloan amount is Rp 15 million. The handlingbank holdsa lien on the assetspurchasedwith the loanand requiresan additional50% of the loan as collateral.KMKP loans are for five yearsat 12% p.a. with a one-yeargrace period. The loan ceilingand collateralrequirements are the same as under

- 64-

ANNEX7 Page 6

KIK loans. The handlingbanks receivean additi3nal1.5%annualdirect subsidyon the totalamountof KIK/KMKPloansfrom the Ministryof Financeto increasetheir spread. InsuranceCo erage 21. KIK/KMKPloansare insuredagainstthe risk of defaultby P.T. Askrindo,the governmentowned insurancecompany. A 3Z up-frontpremium, sharedequallyby BI and the handlingbank,covers75% of potentiallosses. On loansexceedingfive years (KIK loans),the insurancepremiumis 5Z, twothirdsof which is paid by BI and the remainderby the handlingbank. KIK/KMKPLending 22. The KIK/KMKPprogramsgrew emarkablyfrom their inceptionin 1974 to 1980,with a period*Inualgrowthratesof 582 for KIK and 732, respectively, for KMKP._ Since then,however,both programshave declinedin numberand valueof loansexceptfor 1985. The valueof annualKIK loan approvalshad a perioddeclineof about 30% from Rp 130 billionin 1982 to aboutRp 91 billionby the end of 1985. AnnualKMKP approvalswent down 442 from Rp 303 billionin 1982 to Rp 170 billionin 1984with a big increaseof more than 1002 to Rp 399 billionin 1985. The averagesize of KIK loans increasedfrom about Rp 4.9 millionin 1982 to Rp 7.3 millionin 1985. Consequently, the growth in KIK/XMKPloansoutstanding has declinedover the period. The 1985 loansoutstandingfor KIK and KNKP were Rp 338 billionand Rp 885 billionrespectively. 23. BRI is the largestlenderfor both KIK and KMKP,accountingfor 38% of KIK loans outstanding in 1985,18% of the 1985KIK loan approvalsm, 44Z of the 1985KMWP loan approvals,and about 54% of the KMKP cumulativeapproval. 24. The sectoraldistribution of the 1985 approvalsshowstradeas the major sectorbenefitingfrom the KIK and KMKP programswith sharesof 412 and 71%, respectively.The next major sectorfor KIK/KMKPloanswas industry, with agriculture accountingfor only 8% of KIK and 62 of KMKP approvalsin 1985. C. KUPEDESCREDITPROGRAM Background 25. The KreditUmum Pedesaan(KUPEDES)or GeneralRural CreditProgram, run out of the villageunits (UnitDesa)of Bank RakyatIndonesia(BRI),has its originsin the now defunctBIMAS creditscheme. BIMASwas part of a GOI programaimedat improvingagricultural productionand practicesthroughthe provisionof physicalinputs,technicalassistanceand short-termcredit facilities.The BRI unit desaswere set up to facilitatethe creditpart of the programat subsidizedinterestrates (12%p.a.). The sourceof fundsfor

5/

World Bank, "Indonesia: Rural CreditStudy,1983".

- 65 -

ANNEX 7 Page 7

the BIMAScreditprogramwas BI liquiditycreditsat 3% p.a.;GOI/BIbore up subsidyto BRI to to 75X of the creditrisk and providedan administrative cover the operatingcosts of the Unit Desas. GO announcedthe collapseof the programdue to massivedefaultsin 1984with effectfromApril 1985. 26. BRI throughthe Unit Desas,established the KreditMini (1973)and KreditMidi (1980)programsprovideterm financeto borrowersoutsidethe BIMAS programbut too small for the KIK/KMKPprogram. The loanswere for all productiveactivities, but mainly for off-farmeconomicactivities.Loan sizeswere betweenRp 10,000and Rp 200,000for Mini and Rp 200,000and Rp 500,000for Midi credit. Bothprogramswere financed100% by BI liquidity creditsat 0% for Mini, 3% for Midi investmentloansand 4% for midi working capitalloans. Mini and Midi workingcapitalloanshad maturitiesup to 3 yearsat 12% p.a., and Midi investmentloanshad up to 5 yearsat 10.5%p.a. Unlikethe BIMAS program,BRI Unit Desa staffwere solelyresponsible for the selectionof borrowers,and BRI bore 1001 of the risk. These two features plus the fact that the mini schemegave BRI its biggestspread(121)of all the GOI programswere responsible for the good repaymentperformance of these programs. 27. The collapseof the BIMASprogrammeant that BRI would lose the administrative subsidyfor the Unit Desas. BRI had the optionof abandoning the Unit Desas or making them profitable.The Mini and Midi creditschemes had shownthat therewas a largedemandfor workingcapitaland, to a smaller extentfor investmentcapitalfor ruralenterprises.The problemwas the interestrate ceilingwhich requireda largeloan volumeto break even and make profit. With the financialsectorreformsof 1983,the banksare able to chargemarketrates on their non-priority loans. BRI with the supportof the MOF replacedthe Mini and Midi creditschemes(andBIMAS)with KUPEDES,a new genera-purposecreditprogramas the main creditfunctionof the Unit viable Desas.Y BRI'sgoal was to developthe Unit Desas into financially entitiesto mobilizesavingsand make loans in the ruralareas of Indonesia. A decisionwas also taken then that the Unit Desas wouldno longerparticipate in administered creditprograms. Termsand Conditions 28. Eligibility.KUPEDESloansare made for any productiveactivity (non-targetedas long as a letterfrom the borroqvers' villagehead (kepala desa)certifiesthat the activityis productive._>With the knowledgethat most ruralfamiliesderive theirfamilyincomefrom severalactivities, and that loanscan be repaidfrom activitiesotherthan the one specifiedby the borrower,the enterpriselistedfor the loan is mainly to provethe borrower's abilityto repay. The Unit Desa staffreviewthe cash flow of the listed activityand recommenda repaymentschedulethat fits the activity. All loan

6/

KreditMini and Midi were terminated at the end of 1984and KUPEDES operationsbegan in February1984.

7/

Borrowingfor consumptionis not permitted.

- 66 -

ANN%% 7 Page 8

applications requirea cosigner,usuallythe applicant's spouse,and collateral. 29. Collateral.The value of the collateralmust be at least 1001 of the loan in the form of land,buildingsor any property. Tks experienceto date is that most KUPEDESborrowersuse land as collateral.- Since the legal systemfor foreclosure and collateralis complicated and expensive,collateral documentation is reallyto establisha borrower'sabilityand willingness to repay. 30. Loan Types and Sizes. KUPEDEShas two typesof loans,working capitalloans and investmentloans. While the minimumis Rp 25,000,very few loansgf less than Rp 100,000have been made. The maximumloan of Rp 2 million,.9is availableonly to repeatcustomerswith good repaymentrecords. All borrowersare classifiedon the basis of theirrepaymentrecords,which determinestheir limit for subsequentloans. A borrowermay use the same collateralfor subsequentloansprovidedthe value is 100l of the new loan. 31. Term Structure. Variousmaturitieswith or withoutgrace periods availableunder KUPEDESfor workingcapitalloansrange from 3 to 24 months, and thosefor investmentloansgo up to 36 months. Singlebaloonpayments for 3 to 12 month maturitiesare also availablefor workingcapitalloans. Possiblerepaymentschedulesare shownin standardillustrative tablesfrom which the Unit Desa loanofficerand the borrowercan read corresponding installment paymentsfor any loan sizeup to Rp 2 million. These tables eliminatethe need to calculateloan termsfor each borrower,speedup the lendingprocessand minimizescalculation errors. The averagetimebetween loan application and disbursement is about two weeks for first-timeloansand about two days for repeatloans. 32. InterestRates. The interestrate on KUPEDESworkingcapitalloan is 1.5% per month,and 1% per month for investmentloans. Both are calculated on the originalloan amountnot on the decliningbalance. The corresponding annualeffectiveratesare about 32Z for workingcapitalloansand about22% for investmentloans. In additionto these interestrates,thereis an InsentifPembayaranTepatWaktu (IPTW)or Incentivefor PromptPaymentof

8/

Any proofof land ownershipsuch as a statementsignedby local governmentofficial may be used for loansup to Rp 400,000. Land certificates are requiredfor loansabove Rp 400,000.

9/

UntilApril 1986 the maximumfor KUPEDESloanswas Rp 1 million.

- 67 -

ANNEX 7 Page 9

0.5Z, which is collectedalong with the monthlypaymentand E6turnedto borrowersif they pay all installments in full and on time.' 33. Unlikeits predecessors (BIMAS,MINI, MIDI) and other government creditprogramswhich emphasizedcheap creditto the finalborrowers,KUPEDES focusedon two tenets: (i) promptdeliveryof credit,and (ii) the financial viabilityof the Unit Desas. The underlyingassumptionis that accessto creditis more importantto small borrowersthan the interestrate charged. To achieveits goalswithoutrelyingon governmentBRI had to mobilize voluntarysavingsand set depositrateshigh enoughto attractsavings. The higher cost of fundsalso meant that the Unit Desashad to set lendingrates high enoughto cover theiroperatingcostsand risksand earn a reasonable profit. With the TABANASinterestratesthen set at 15% p.a. (for amounts less thanRp 1 million),the aboveKUPEDESrateswere set at levelsto give the systema spreadof 15X p.a. betweencost of fundsand onlendingrates) and to breakeven when total loanslotstandingreachedaboutRp 200 billionwhich was reachedin.September1985, LendingOperations 34. Volumeof Lending. The volumeof KUPEDESlendinghas grown remarkablyfast. The numberof loans increasedfrom about640,000in 1984 to about 992,000in 1985,an increaseof about 552. With almost100,000loans added from Januaryto October1986,the total was about Rp 2.6 millionat the end of October1986. The value of these loans increasedeven fasterfrom fp 171 billionin 1984 to Rp 339 billionin 1985,or 98% and over 15% from 1985 to October1986.The valueof loansfor the 10 month periodwas Rp 391 billion. Cumulativeloans from the beginningof the programto end October1986was aboutRp 901 billion. The averagesizeof a loan, therefore, has increasedfrom aboutRp 268,000in 1984and Rp 342,000in 1985 (a period increaseof 28%) to Rp 410,000by end October1986 (20%from 1985). The contrastwith the maximumloan limitof Rp 2 millionpossiblyreflectscaution on the part of the Unit Desas. The volumeof loans outstanding was at about Rp 111 billionby the end of 1984, increasedby 1062 to Rp 229 billionby the end of 1985and by 372 to 313 billionfrom 1985 to end October1986. 35. Type and Maturity. Workingcapitalloans accountfor about 932 of loansoutstanding as of June 30, 1986. Surveyfindingsshow that for the periodJanuary-June 1986workingcapitalloanswith a 12 month maturity accountedfor 57% of the numberof loansand 45% of the value. Eighteen monthworkingcapitalloansaccountedfor another162 of the numberand 18% of

10/ Where the loan is for more than one year, the IPTW is refundedat the end of each year. In all cases it iq depositedin the borrower'ssavings accountto be withdrawnat will. 11/ The risk cost or loan lossesassumedwithin the spreadwas 4.5% or approximately twicethe loss ratioof the KreditMini.

- 68 -

ANNEX 7 Page 10

it

the value and, respectively, month workingcapitalloansfor 142 of the numberand 212 of the value.- At mid 1986,69Z of the loans outstanding were listedfor tradingand only 271 for agriculture. 36. Geographicand GenderDistribution.At end June 1986, 751 of KUPEDESloans outstanding were in Java, which has 622 of Indonesia's population and 641 of BRI Unit Desas. (BRIhas Unit Desas in 14 of the 15 provincesin which it has branches.) Samplesurveyshave also fouytthat 251 of all borrowersand 75% of cosignersare women., approximately Sourcesof Funds KUPEDESfundscome froma governmentgrant,BI liquiditycredits, 37. and savingsdeposits. The Governmentgrantto BRI for the KreditMini program at the end of 1983was Rp 66.7 billion. When KUPEDESreplacedKreditMini in early 1984,GOI turnedthis grant over to KUPEDESto distributeequallyamong the Unit Desasas equitycontribution of Rp 19.0millioneach. This grant represented about 19% of KUPEDESresourcesat the end of June 1986. 38. Total BI creditsto BRI for KreditMini at its termination, were Rp 43 billion. BI agreedto converttheseto generalliquiditycreditsfor KUPEDES. MOF directedBI to give an additionalRp 100 billionin liquidity creditsto supportthe programat 151 for those onlentas workingcapital loansand 31 for the fundsonlentas investmentloans. With an assumed blend of 75/25,the averageinterestrate on BI workingcapital/investment of MOF) liquiditycreditswas 12X. From February1986 BI (at the instruction agreedto supplyadditionalliquiditycreditsof Rp 50 billionfor each Rp 75 billionincreasein KUPEDESloansoutstanding.The agreementensuresthat BRI resourcesrequiredfroi its own providesat leasta thirdof the incremental funds. The KreditMini and otherBI liquiditycreditsaccountedfor about 531 of KUPEDESresourcesat the end of June 1983. Undera proposedWorldBank project- BRI/KUPEDESSmallCredit 39. Project- Bank fundswould replacethe BI liquiditycredits(fromJuly 1987 to September1989). Bank fundsof US$100millionwould be onlentto BRI at an interestrate equal to the averagecost of BRI's customerdeposits(excluding non-interest - bearingdepositsfrom GOI or GOI owned entities). 40. SavingsMobilization.The Unit Desas mobilizesavingsunder the (BI)TABANASsavingsprogramand theirown SIMPEDES(Village Government's SavingsProgram). TABANASaccountedfor about 19X and SIMPEDESfor 4.5% of KUPEDESresourcesat the end of June 1986. With other depositsrepresenting about 4% of resources,the totalof savingsand otherdepositsaccountedfor 27% of the June 1986resourcesof KUPEDES.

Small CreditProject. 12/ IDF, YellowCover SAR, BRI/KUPEDES 13/ Ibid.

- 69 -

ANNe Page 171

RepaymentsPerformance and Sustainability 41. The defaultratio,totalamountoverdueas a percentageof total loansoutstanding, was 4.31 at the end of November1986. While relatively small,it has been increasingover time, from 0.5% in December1984 to 2.1Z for the sameperiodin 1985. More relevantare the long term bad debt ratio which is totalamountoverdueas a percentageof all paymentsdue aridshort termbad debt ratiowhich is paymentsmissedin a particularmonth as a percentage of paymentsdue in thatmonth. Thesewere low at 2.2% for the longterm and 2.9% for the short-termin November1986. These ratioshave also been increasingfrom less than 1% and 1.41, respectively, in December1984. The 2.2% long term bad debt ratio is less thanhalf the 4.51 risk cost assumed in the initialderivationof KUPEDESinterestrates. Despitethis good repaymentperformance, BRI has been concerned. A reviewshowedthat over 50% of all arrearsare concentrated in 22 branches. SpecialBRI teams,with both head officeand regionalstaff,have been formedto examinethe 22 branchesto identifythe reasons. The teams'findingsare expectedto be instrumentalin identifying and adoptingstandardized proceduresfor futureoperations. 42. If KUPEDEScan maintainthis repaymentperformance, Indonesiahas a model for a non-subsidized, self sustainingcreditprogram. This point needs emphasizing becausethe KUPEDESprogram,whileclearlya success,is only threeyearsold. D. BADAN KREDITKECAMATAN(BKK) Introduction 43. The BadanKreditKecamatan(BKK)141programwas begun in 1972 by the CentralJava ProvincialGovernment(CJPG)in order to make capitalavailable to the ruralpoor to raisetheir incomesand standardof living,protectrural dwellersfrom usuriousmoney lenders,createemploymentopportunities in the ruralare, and educatevillagersabout the benefitsof financial savings. At presentthereare 497 BKKs, coveringall Kecamatansand 2,69 villageposts,where the BKK employees(threeyoung schoolleaversper BKK)_H/ lend and collectloan repayments, usuallyon marketdays. Organization 44. The governorof CentralJava is the titularhead of the BKK program, with coordinating functionsof the programinvestedin a ten memberprovincial BKK Coordinating Body and a four memberDistrictBKK Coordinating Body at the

14/ Sub-district CreditBody. 15/ The BKK programhad a projectstatusuntilwhen the CJPG and the Central Java ProvincialAssemblyturned intoa CJPG institution via Decree No. 11 of 1981. 16/ Consistingof a unit chief,bookkeeperand a cashier.

-70

ANNEX 7

-

70

12 ~~~~~~~Page

head (c..mat) of the sub-district districtor Kabupatanlevel. Operationally, for the BKKs in his Kecamatan. The Central each kecamatanhas responsibility Daerah (BPD),advisesthe Bank, Bank Pembangunan Java RegionalDevelopment functionsof the BKKS for the BKKs and performsthe technical/supervision provincial government.The programalso receivestechnicalassistanceunder the USAIDProvincialDevelopmentProject(PDP),throughwhich 65 BKKs in five poorerdistrictshave receiveddirect support(includingcapitalinjections) have receivedindirectsupport The remaining30 districtsand municipalities includingtrainingand equipment(computers). Sourcesof Funds 45.

The external,sources

of funds for the BKKs, outside the PDP funds,

from the CJPG throughthe BPD, loans from the have been initialcapitalization from borrowers. Each BKK, which is financially BPD,and forcedsavings receivedRp 1 millionloan from CJPG at one percentper month with autonomous, a one year grace periodon principalrepayment. The one percentmonthly and supervisory interestwas to go to the BPD to cover its administrative expenses,with the principalrepaymentgoing into a provincial/development budget. Subsequentto this, ten BKKs receivedadditionalloansof' while some of the weakerones, througha Rp 1 millionfor good performance, program,receivedRp 350 millionbetween1981and 1983. As rehabilitation and upgradingexercise,in 1981,GOI throughthe part of this rehabilitation MOF made an interestfree Rp 3 billionloan to the CJPG throughthe BPD which were then lent to the BKKs at the usual one percentper month. Unlikeother funds,however,only 0.6% of this interestwent to the BPD for administrative expenses. The other 0.4% was to go into a BKK programdevelopmentfund. It shouldalso be noted that unlikethe funds from GOI and CJPG, the USAID PDP fundswere grantsset up as a revolvingfund withinthe BPD which enablesthe BPD to relendthe principalrepaymentsto the BKKs. Funds lentby the BPD to any BKK dependsupon the BKKs performance 46. classification.For this, BKKs are classifiedby the BPD into five categories on the basis of six factors,namely: total equity,a ratioof semi-annually villagesto villageposts,numberof new borrowers,portfolioquality,total savings,and capitalcirculation.Fifty percentof the totalweight of the performance classification is placedon the BKKs'equity,which is definedas minus loansoverduemore than six cash on hand plus total loansoutstanding, months,loans to the BKK and borrowersavings. The remainingfive factorsare weightedequally(10%each) in arrivingat the weightedaverageof the six which determineseach BKK'sabsorptivecapacityfor workingcapitaland profitability.The currentcreditceilingsfor BKKs in class I to V, respectively, are Rp 12 million,Rp 10 million,Rp 9 million,Rp 7 million, and Rp 5 million. Regardlessof class or category,BKK borrowingsfrom the head (Camat),who signs BPD are releasedin tranchesthroughthe subdristrict for all BKK borrowings.BKK borrowingsfrom governmentand the BPD about 20 percentof BKK sourcesof funds at the end of 1985, and represented 22 percentin September1986. The thirdexternalsourceof BKK funds is the forcedsavingsfrom 47. borrowers.A portionof a BKK loan to a borrower(6.5% to 20%, dependingupon the typeof loan - is retainedby the BKK as forcedsavingsfor the borrower

- 71 -

ANNEX7 Page 13

to be paid back to him after full repaymentof his or her loan. It has, however,been reportedelsewherethatmany BKKs do not allow or encouragesuch withdrawals.The BPD informedthe missionthat whilethe purposeof the forcedsavingelementwas to encouragevillagers'financialsavings,they plan to replaceit with voluntarysavingsmobilization.Borrowersavings constituted about 161 of BKK sourcesof funds in 1985 and 141 in September1986. 48. More than 501 of BRK loanablefundscome from the BRRs' own internal retainedearnings. The BKK system'sannualprofitplus accumulatedearnings have increasedfrom less than 601 of sourcesof fundsin 1984 to 62Z in 1985 and 1986 (September). Loan Typesand LendingProcedures 49. The BKKs onlendthese fundsthroughone of six differenttypesof loans. The maturityof these loans range from 22 days (Harianor daily repayments) to a six month seasonal(musiman)repaymentwith nominalinterest rates for the periodsof 3.51 and 121, respectively, or nominalmonthly equivalents of 4.5Z and 21 respectively.The above nominalinterestratesare on the originalloan amounts(not on a decliningbalance)and, with a commitmentfee of 11, yield effectivemoyiglyinterestrates of 10.81 (on 22 day loans)and 2.21 (on seasonalloans). 50. The weekly repayment(minguan)systemis the one used by most of the BKKs. Under this systemthe borrowerrepays 10% of the amountborrowedeach week for 12 weeks. The firstpaymentgoes towardsinterestrepayment,the secondfor forced savingsand the remainingten paymentstowardsprincipal repayments. 51. BKK lendingproceduresare designedto be simpleand fast to minimizecost and risk. A borrowerpicksup an applicationform at the nearestBKK officeor villagepost,whicheveris convenientfor him or her. After the borrowerreceivesthe requiredcharacterreferencefrom his village chiefthe form is returnedto the BRK for approval. The BKK staffcan approve loansunderRp 25,000;amountsover Rp 25,000requirethe approvalof the subdistrict head. No collateralis requiredfor BKK loans;however, subsequent loansare basedon a borrowersrepaymentrecord. Each borrower beginswith a small loan and graduallyincreaseshis loan size as he repays and demonstrates that he is a good risk. 52. The only departurefrom the above BKK procedures,termsand conditions was in the mid 1970swhen a special(Khusus)programwas initiated throughwhich the BKKs actedas collectionagenciesfor the Provincial Government's specialtechnicalserviceagencies.

18/ One percentof loan principalis usuallysubtractedfrom each loan as a commitmentfee.

- 72 -

ANNEX 7 Page 14

Performance 53. Coverage. The numberof BKKs has grownfrom 200 in 1972and 486 between1976 and 1982 to the current497 BKKs. With a BRK in every Kecamatan and over 2,6001village posts,the BKK systemcoversabout312 of the 8,455 villagesin CentralJava. 54. Loans. The numberof loansgrantedhas increasedfrom about 120,000 in 1972and 300,000in 1982 to over 500,00 in 1985. Growth in the valueof theseloans have been evenmore spectacular fromabout Rp 400,000in 1972 to Rp 11 billionin 1982 and more than doublethis amount,Rp 27 billionby the end of 1985. The averagesize of loan,consequently, has increasedgradually to aboutRp 50,000in 1985;this is still smallcomparedto othercredit programs. Total loans outstanding which were about Rp 200,000in 1972 and thenmore than doubledfrom aboutRp 5 billionin 1982 to 1985when it stood at aboutRp 12 billion. 55. RepaymentPerformance and Sustainability.The defaultratio, definedas all loans overdueover total loansoutstanding appearshigh at about 16% by the end of 1985. The rate actually started out high - 151 - in

1972,increasedto more than 251 in 1978 and has declinedto the 1985 level of 16%. However,given the very shortterm natureand high turnoverof BRK loans thismeasuredoes not accuratelyreflectthe repaymentperformance of the BRK system,especiallyin the lateryears of the program. 56. Other indicatorsof repaymentperformance are the long term and shortterm bad debt ratios. The long-termbad debt ratio is definedas the totalamountof loansoverdueover the totalamountdue and the shortterm is the increasein amountoverduein any year over the repaymentsdue in that year. The shortterm bad debt has declinedfrom 121 in 1972 to about 2% in 1985. The long term bad debt ratios,which can be lookedat as long term loss ratiosunder the assumptionthatall loansoverduewould not be repaid,has declinedfrom 12% in 1972 to lessthan 2% by the end of 1985. 57. In fact, the repaymentperformance of the BKK systemhas been remarkable.The bad debt is mainlyfrom the early yearsunder the RKK Khusus program, The BKK systemdoesnot have a write off policyyet. The supervisors of the programreportedthat an estimated40% of the loansoverdue are deemedunrecoverable, and that plansare underwayto find a mechanismto writeoff the bad debts. 58. The viabilityand therefore,self-sustainability of the BKK program is evidentin their profits. The BKK net profitfor 1985 was about Rp 2 billion (revenuesof Rp 3.5 billionand expensesof Rp 1.5 billion). If the interestexpenseis increasedfrom the statedRp 228 millionto Rp 841 million (thelatterbeing 12% of liability), personnelexpensesincreasedby 50% (to almostRp I billionto reflecta thirdof staffbeing civil servantsand paid slightlyhigherby the CJPG),and bad debt of Rp 239 million,(2% of loans outstanding) added, then totalexpenseswould increasefrom fp 1.5 billionto Rp 2.6 billion. This stillleavesa systemwide profitof aboutRp 900 million.

- 73 -

ANNE 8 Page 1

SAVINGSINSTRUMENTS IN INDONESIA 1. This sectionprovidesdetailson the varioussavingsinstruments availablein Indonesia. These includedemanddeposits,TABANAS,TASKA, SIMPEDES,contractual or goal savingsplans,compulsorysavingsaccounts, othersavingsaccounts,time deposits,certificates of deposit,foreign currencyaccounts,and securities. A. DemandDeposits(Giro) 2. Demanddepositsare interestbearingaccountsavailableat all commercial and development banks.Most banks requirea minimumdepositof at leastRp 500,000for accountswith a checkwriting facility,but requireno subsequent minimAmbalance. However,interestis dependenton the lowest monthlybalanceand, in some cases,fees may be chargedon smalleraccounts. Some examplesef the interestrate scalingincludet Bank DagangNegara,no intereston balancesof less than Rp 1 million,then 4% p.a. on Rp 1 up to 10 million,5% on Rp 10 up to 50 million,6% on Rp 50 to 500 million,and 8% p.a. on balancesover Rp 500 million;Bank NegaraIndonesia1946,no intereston balancesof less than Rp 1,000,000and 6% p.a. on largeraccounts;and the regionaldevelopment bank of East Java,no intereston balancesof up to Rp 250,000,then 1.8% p.a. on Rp 250,001to 50,000,000, and 3% p.a. on over Rp 50,000,000.Unlikea savingsor time deposit,any interestearnedon demanddepositsare subjectto normaltaxation. B. TABANAS(TabunganPembangunan Nasional) 3. TABANASwas introducedby BI on August 20, 1971 to promote individualsavings.It has traditionally offereda high interestrate for smalldepositorsand accountbalancesare guaranteedin full by BI. Conditions 4. In recentyears interesthas been paid on a slidingscalewith a higherrate paid on lowerbalances. The currentrate is 15% p.a. on balances of Rp 1,000to 1,000,000and 12% p.a. on any additionalamounts. This interestis calculatedon the minimummonthlybalance,paid annually,and exemptfrom taxation. Since 1977,accountholderswith activeaccountsand balancesof Rp 1,000or more have also been eligiblefor lotterydrawingsat both the nationaland regionallevel. Balanceswith less than Rp 1,000,if inactive,may be subjectto specialserviceschargesand eventuallyclosed. 5. NormalTABANASaccountsrequirea minimumdepositand balanceof Rp 250 and subsequentdepositsof at leastRp 50. Withdrawalsare not availableduringthe account'sfirstmonth and then are limitedto twice monthlyexceptin an emergency. The minimumwithdrawalis Rp 250. Both withdrawals and depositscan be made only at the branchthat opened the account. 6. As shownin Table 1, a number of specialTABANASsavingsschemesare availablefor children,studentsand scoutingorganizations.Specialaccounts

!

-

74 -ANNEX 74

8 Page 2

~

requireonly Rp 50 to open,have a minimumdepositof Rp 25, and allow only one withdrawalper month. The youth and cub scout schemesmay also allow a depositor's parentor guardianto withdrawthe funds. These programsare activelypromotedin the schoolsand at scoutmeetings. Table 1: TABANASACCOUNTCLASSIFICATIOYJS

Type

Purpose

TABANASUmum TABANASPelajar TABANASPramuka TABANASPegawai

Generalaccounts Students ] Scouts 1 Employeror group savings

Total

Numberof accounts '000

Deposits Rp million

13,258 1,340

1,002,370 12,029

1,327

44,567

15,925

1,058,966

Source:Bank Indonesia,January,1987 7. The employeror group savingsaccountsare a form of payrollsavings deductionsand are organizedby eitherthe employeror the employees themselves.They differfrom a generalTABANASaccountin that the deposits are set for a fixedamounteach pay period. Then the scheme'scoordinator depositsall of the fundsat the same time with a list of the respective accounts. Althougheach depositorhas his own passbook,any withdrawals must firstbe approvedby the scheme'scoordinator.These plansare used primarily by governmentdepartments/agencies and in practiceparticipation is almost mandatory. Indeedin someagenciesthe paymasterroundsthe pay down to the nearestthousandrupiahand depositsthe extraamountdirectlyinto the employee's account. While the schemesensurea high numberof accounts,such frequenttransactions of less than Rp 1,000are hardlyprofitablefor the banks. Mandatorygroup savingsmay also explainwhy governmentowned banks have loweraverageTABANASbalanceparticularly at the provinciallevel. Lottery 8G Each passbookreceivesan accountnumberand a lotterynumber. However,accounts,are not eligiblefor the lotteryif the balanceis under Rp 1,000or with Rp 1,000but with no transactions for two years. The TABANAS lotteryis conductednationallyevery six monthsand at the regionallevel oncea year. The nationallotteryhas one firstprize of Rp 5,000,000,nine secondprizesof Rp 500,000,ninety thirdprizesof Rp 100,000,nine hundred fourthprizesof Rp 25,000and one thousandfifth prizesof fp 5,000each. The regionallotteriesin each of TABANASsix regionshave one first prizeof Rp 2,000,000,nine secondprizesof Rp 200,000,ninetythirdprizesof Rp 25,000,nine hundredfourthprizesof Rp 2,500 and one thousandfifth prizes of Rp 1,500. Thesewinningsare automatically creditedto the winner's

_ 75 _ -

-

i~~~~~NNEX 8 -5AM ~~~~~~~Page 3

TABANASaccount,providedit was eligiblefor entry. Not all prizesare awarded,and in 1986/87Bank'Indonesia budgetedonly Rp 1,274millionfor the lotteryprizesand drawings. Availability accountsand 9. Banksmust be speciallylicensedto offerTABANAS/TASKA applications are currentlylimitedto Class I or II institutions under BI's five prudentialcategories.As of January,1987,therewere only 38 handling bankswhich includethe five statecommercialbanks,the NationalSavingsBank banks, 9 private and its Post Officeagencysystem,20 regionaldevelopment banks, and 3 private non-foreign exchange banks. The foreign exchange relative importance of these institutions is shown in Table 2. Table 2:

BY TYPEOF BANK TABANAS/TASKA DEPOSITSANDACCOUNTS JUNE 1986

No. of accounts Statebanks Privatenationalbanks Development banks Totals Source:

Amount Billion Rps

Average Account Balance fp

13,293,000 1,085,000 1,000,000

888.7 110.5 46.1

66,854.74 101,843.32 46,100.00

15,378,000

1,045.3

67,973.00

Bank Indonesia, IndonesianFinancialStatistics, October 1986,pp. 82-83.

It is surprisingthat more privatebanksare not active in TABANAS as thereis no chargefor the governmentguaranteeon TABANASdeposits. The freeguaranteeprovidesan effectivesubsidyfor privatenationalbanks; all depositswith the state banksare alreadygovernmentguaranteed. In privatebankersindicatedthat this guaranteewas not importantin interviews, depositraising. Promotion 10. The TABANASsavingspromotionis organizedat the nationallevel by the NationalSavingsDrive Committee(GerakanTabunganNasional)which is made up of representatives from the Ministriesof Home Affairs,Education,amd Information, BI, Bank NegaraIndonesia1946,BRI, PrivateNationalBanks Association, and nationalscoutingorganizations.The NationalCommitteeis then duplicatedat the provinciallevelwith the provincialcounterparts from BI, BRI and/orBankNegara Indonesia Home Affairs,Educationand Information, 1984,regionalscoutingbodies,and sometimesthe provincialdevelopment bank at this for that area. The privatenationalbanksare not represented

- 76 -

ANNEX 8 Page 4

level. There are also similarcommitteesat the districtlevelwith local governmentrepresentatives. The BI (or BRI where there is no 8I Branch) representative chairseach of thesecommittees. 11. In termsof promotion,the NationalCommitteeuses a range of methodsincludinga 15 to 30 minuteTV drama shownnationallyon the 4th Sundaymorningof each month.These playshave a simplestory line that emphasizesthe value of savingsand typicallyends with the hero winninga major TABANASprize. This TV show is supplemented at the nationallevelwith a rangeof bookletsand other promotional materials. The NationalCommittee also operatesa specialstandat the annualJakartaFair and major scouting events,sponsorsa floatin the Independence Day parade,and is active in other similareventsat the regionallevel. It also broadcastsTABANASdramas on regionalradio in locallanguages. All of these promotionalexpensesare paid by BI and amountedto an estimatedRp 800 millionin 1986. The National SavingsDrive Committeealso meets with the TABANAShandlingbanks at least once a year to considerchangesto TABANASand betterpromotionalefforts. The handlingbanksalso activelypromoteTABANASfollowingthe Committee's directions.These instructions are usuallyvery specificand includeeven the sizeand exactwordingfor banners. While the Committeeto date has concentrated almostexclusively on TABANASpromotion,in 1987 it might expand its effortsto includetime depositsand certificates of deposits. RecentDevelopments 12. As shownin Table 3, TABANASaccountsand depositshave grown at fairlyconstantrate,but this may changeover 1987. In Januaryone military districtand some stateenterprisesin Sumatrabegan payingsalariesvia TABANASaccounts. While these additionswill greatlyincreasethe transactions for the handlingbanks,they shouldalso gain greatersavingsand other formsof bankingbusiness. Table 3: TABANASSAVINGSACCOUNTSAND DEPOSITSBY YEARS Average

No. of accounts

1981 1982 1983 1984 1985 1986(June)

9,480,000 9,952,000 10,887,000 12,425,000 14,712,000 15,362,000

Amount billion Rps 384.2 445.9 540.7 669.6 935.6 1,044.9

Source: Bank Indonesia,IndonesiaFinancialStatistics, October,1986,pp. 80-81.

account balance (Rp) 40,527.43 44,805.06 49,664.74 53,891.35 63,594.35 68,018.49

--

77

ANNEX 8 Page 5

13. In early 1987, the governmentwas considering liftingthe current interestrate controlson TABANASaccountsand allowinghandlingbanks to set theirown rates,termsand conditions.The firstphasemight allow handling banksto offer theirown lotteries,in additionto the Bank Indonesia efforts. The secondstep might be to set a maximumor possiblya range of interestrates ratherthan requiringa uniformone. Other possiblechanges includepermittingwithdrawalsfour timesa month, increasingthe minimum depositto Rp 1,000,using one interestrate ratherthan the currenttwo step interestrate (possibly12%),and perhapspayingthe interestfour times ratherthan once a year. differencesin 14. Interestingly, interviewsrevealedconsiderable opinionaboutTABANAS,but no one spokefavorablyabout the existingsystem. Some felt TABANASdepositsare too expensive,given the interestrate and the costs. If free to do so, theywould limitwithdrawalsto once administration a month,raise the minimumdepositto at leastRp 1,000,and reducethe currentinterestrate from 15% and 12% to one rate of 9% or 10X. In contrast otherswantedto allow more frequentwithdrawals and to pay a higherrate of 141 to 15% on all savings. C. TASKA (TabunganAsuransiBerjangka) 15. TASKA is a nationalinsurancesavingsschemedesignedto provide individuals with a combination of savingsand life insurancecoverage. Under this programdepositorsreceivelife insurancecoverageequal to 12 timesan agreedmonthlypayment. The depositsearn 9.0% p.a. if the programis successfully completed,but only 6.0% with an early withdrawalor failureto meet all payments. TASKA accountholdersare also includedin the lotteryfor TABANAS. As with other life insurancepolicies,TASKA'sattractionis limited becausemany Indonesians believethat it is unluckyto purchasedeath related insurancecoverageand, as shownin Table4, it has not grownmuch in terms of eitherdepositsor accountnumbers.

-78-

ANNEX 8 Page 6

Table 4: TASKA ACCOUNTNUMBERSAND OUTSTANDINCS No. of accounts 1981 1982 1983 1984 1985 1986/a /a

Rupiah (billion)

13,000 16,000 16,000 16,000 18,000 16,000

0.2 0.3 0.4 0.5 0.4 0.4

Figuresas of June, 1986

Source: Bank Indonesia,IndonesiaFinancialStatistics, September,1986,pp. 80-81. D. SIMPEDES(SimpananPedesan) 16. The SIMPEDESprogramwas developedby BRI to attractsa ings for theirunit desa ruralbankingsystem. It is a convenient, safe and liquid savingsinstrumentdevelopedfrom marketsurveysof local villagesand then adjustedto its presentform from pilot studies.SIMPEDESwas first introduced at one BRI branch (Sukabumiin West Java)with 16 u-iitdesas in November 1984. An additional12 pilotbranchesfollowedand furtherexpandedin late April 1986 to becomenationallyofferedby June, 1986. Thoughdevelopedby BRI head office staff,8IMPEDESis availableonly throughBRI unit desa system and not throughthe BRI branchoffices. 17. A SIMPEDESaccountrequiresa minimumdepositand a minimumbalance of Rp 1,000. Interestis paid on a slidingscale so that accountswith a minimummonthlybalanceof Rp 25,000or less receiveno interest,Rp 25,001200,000earn 92 p.a.,and over Rp 200,000earn 12X p.a. The interestis postedmonthly(TABANASis annually)and paid roundedto the nearestmultiple of Rp 10. To limit inactiveaccounts,a unit desa may close any SIMPEDES accountthathas had no transactions for threemonthsand a balanceof only Rp 1,000.In practice,though,most SIMPEDESaccountsare activewith an average of 1.26transactions per month (.99 depositsand 0.26 withdrawals). 18. In additionto interest,SIMPEDESaccountsreceiveone lottery chancefor every multipleof Rp 5,000 in theirminimummonthlybalance.This couponis issuedto accountholderson a monthlybasis (one couponwith as many lotterynumbersas multiplesof Rp 5,000). The lotteriesare conducted everysix monthson a districtor BRI branchlevel. The prizesare decidedby the localbranch. One branchin Bali offereda motorcycle, TV, and radioas the firstthree prizesand 10 fourthprizesof clothingmaterial.

- 79 -

ANNEX

19. Due to the scalingof interestratesand depositand withdrawal activityduringthe month, the real interestrate costsaveragearound0.82 p.m.comparedto the 1% p.m. rate offered. The totalcost of SIMPEDESsavings 14.51or 16.11Zif Bank is confidentially estimatedby BRI at approximately Indonesia's reserverequirements are considered. This percentageincludes interestcostsof 9.54Z,prizesof 1.25%,taxeson prizes0.16% (nowpaid by the prize recipient), the couponissue of 0.12%,and the promotionof 0.5%. The laborcostswere 2.94X. 20. While TABANASis availableonly to individuals, a SIMPEDESaccount can also be in the name of an organization or business. Many local schools, villagefunds,professional bodiesand religiousgroupshave alreadyopened SIMPEDESaccountsand BRI believesthat thereis considerable potentialfor more throughoutIndonesia.Businessaccounts,too, shouldprove importantand 60% of its SIMPEDES one unit desa in Bali estimatedthat approximately accountswere held by small localbusinessesand providedan even higher percentage of its totalSIMPEDESdeposits. 21. In the villagein question,an estimated70% of SIMPEDESdepositors weremale comparedwith some 60% femalesfor TABANASaccounts. Balancesof Rp 25,000or lessaccountedfor some 26.28%of accountnumbers,but only 0.99%of deposits.In contrast,balancesin excessof Rp 200,000comprised18.61%of accounts,but 84.83%of deposits. Middlerange balances(25,001to 200,000) were 55.1 and 14.18Xrespectively. 22. As shownin Table 5, SIMPEDESaccountshave increasedsignificantly both in termsof accountnumbersand totaldeposits.The latterexceededthe BRI unit desa system'sTABANASbalancesfor the first time in October,1986. Thisgrowth shouldcontinuefor the immediatefutureas there is still considerable untappedpotentialsavingsoutsideJava/Baliwhere SIMPEDEShas stillnot been well promoteddue to the lack of promotional materialsat many unit desas. The programalso suffersfrom poor marketingskillsat the BRI branchand unit desa leveland from confusionover the recentunit desa rationalization programand the role of unit desa villagesavingsposts.

ANNEX 8 Page 8

- 80 -

Table 5: SIMPEDESACCOUNTSAND DEPOSITS,1985-86

1985 January February March April May June July August September October November December

Deposits (Rp'000)

Account balance (Ave.Rp)

3,564 4,550 5,376 6,921 8,132 8,822 14,889 20,925 25,852 33,353 33,786 36,563

279,766 277,372 320,366 283,092 415,627 481,947 1,077,586 2,031,179 2,713,705 3,629,067 4,436,793 5,134,179

78,497.76 60,960.88 59,581.89 40,903.34 51,110.06 54,630.13 72,374.64 97,069.49 104,970.79 108,807.81 131,320.45 140,420.06

39,312 42,127 44,978 54,028 80,889 105,104 145,454 198,934 244,428 306,504 358,352 418,945

5,462,719 5,858,286 6,829,061 8,060,202 10,951,588 15,541,639 23,485,557 30,746,137 42,445,085 55,542,744 69,943,000 82,405,000

138,958.05 139,062.50 151,831.13 149,185.64 135,390.32 147,869.14 161,463.80 154,554.46 173,650.66 181,213.76 195,179.59 196,696.46

No. of accounts

1986 January February March April May June July August September October November December

Source: Bank Rakyat Indonesia,January,1987 E. Contractual or Coal SavingsPlans plans As yet Indonesianbankshave made limiteduse of contractual 23. While these requirements. savings special customer to meet whichare designed programsmay have a limitedpotentialwithin the ruralmarket,nevertheless they may appeal to certainclientsand generallyhelp encouragethe savings habit. Some goal directedsavingsplansare a RetirementSavingsAccounts, Savingsfor SavingsAccounts,Savingsfor ReligiousCeremonies, Scholarship Home Purchases,and a Down PaymentSavingsSchemefor HousingLoans.

- 81 -

ANNEX8 Page 9

RetirementSavingswith Lottery(TabunganHari Tua Berhadiah) 24. The RetirementAccountis a specialpurposeaccountintroducedby Bank DagangBali for retirementsavings. It earns interestof 15% p.a. paid monthly(1.25Xpm) on the minimumbalance. In additionto interestthe accountis also eligiblefor the Bank'smonthlylotterywith one chanceper each Rp 1,000of the month'sminimumbalance. 25. Underthe RetirementAccountthe customerchoosesan end savings targetand agrees to make a set regularpaymentof at leastRp 1,000per month untilage 55. While the customermay laterdiscontinue the payments,the accountbalanceis stillonly availablefor withdrawalat age 55 exceptfor emergencies.On retirementcustomersmay stillmaintainthe fundson deposit and receivea monthlyinterestpaymenton the remainingbalance. Since the Retirement Accountwas introducedon 4 December1982,it has been well receivedby the Bank DagangBali'scustomersand, as shown in Table6, has been a small,rapidlygrowing,sourceof regularlong term deposits. Table6: RETIREMENTSAVINGSSCHEMEACCOUNTNUMBERAND DEPOSITS

1982 1983 1984 1985 1986

No. of accounts

Total savings Rp

112 3,599 7,319 10,144 13,899

406,000 66,481,900 224,507,925 477,758,763 857,163,675

AverageRp balance 3,625 18,472 30,675 47,098 61,671

Source:Bank DagangBali, January,1987 Scholarship SavingsPlan (TabunganBea Siswa Berhadiah) 26. The Scholarship SavingsPlan is anothergoal savingsscheme introduced by Bank DagangBali on April 12, 1983 (Table7). Customersset a targetdate and monthlyamountto some for highereducationof their children. Like the retirementplan, once the cuistomer determinesthe monthly payment(Rp 1,000minimum)and the maturitydate, he cannotwithdrawthe funds until that date exceptin an emergency. There is no penaltyif a paymentis missed,but, as with the retirementplan, the end benefitis reduced accordingly.Interestis paid at 15% p.a. on the minimummonthlybalance.

- 82-

ANNEX 8 Page 10

Table 7: SCHOLARSHIP SAVINGSSCHEME

1983 1984 1985 1986

No. of accounts

Total savings Rp

AverageRp balance

21 3,726 6,447 9,306

65,000 68,422,623 215,912,013 483,105,688

3,095 18,364 33,490 51,913

Source: Bank DagangBali, January,1987 Savingsfor ReligiousCeremonies(TabunganUpacaraAgama) 27. This programwas introducedby Bank DagangBali in January1987 to help Bali residentspreparefor funeralexpenses. Customrequiresan elaboratecremationceremonywhich,if not providedfor in advance,could place the familyinto considerable debt. While no accountshad been accepted in early1987, tne programis expectedto have more appealthan life insurance sincethe marketingemphasisis on the ceremony. Outsideof Bali there is a similarpotentialfor burialsavingsamongTorajanpeopleof SouthSulawesi. There the traditional burialceremonyincludesthe sacrificeof a buffalo which cost Rp 1 to 3 million. Villagersmust make a substantial savings effortto meet the costs. Savingsfor Home Purchase(TabunganPembclianRumah) 28. Savingsfor Home Purchaseis anothergoal savingsplan recently introduced by Bank DagangBali. It operateslike the bank'sscholarship or retirementplan the amountof monthlypaymentand maturityset when opening the account. Down PaymentSavingsSchemefor HousingLoans (TabunganUang Muka KreditPemilikanRuman) 29. This plan was introducedby the NationalSavingsBank in 1985 to encouragepotentialdepositorsto save for the down paymentrequiredfor their plannedhome purchase. The customermust save a set amounteach month equal to approximately one thirdof his normal salaryfor a periodof 24 to 36 monthsdependingon the paymentsize and the end housingloan lesired. These depositsearn interestat 12% p.a. calculatedon the lowestmonthlybalance and paid annually. Underthe plan thosecompletingthe termsand conditions will then be eligiblefor the bank'shousingfinance.

- 83 -

ANNEX 8 Page 11

Haj PilgrimageExpensesSavings(TabunganOngkosNaik Haji) 30. The Raj Piligrimage ExpenseSavingsplan is a form of compulsory savingsplan designedto financethe expensesof a pilgrimageto Mecca.The customerdesignatesthe amountof paymentfor eithera weeklyor monthly basis. Most plansare relativelyshort-termand seldomfor more than a year. In 1985 therewere 34,554accountsoutstanding with a total savings balanceof Rp 108.1billion. These plansare presentlyofferedby Bank Rakyat Indonesia,Bank Negara Indonesia1946 and Bank EksporImporIndonesia,and are likelyto be offeredby other banks in future. F. CompulsorySavingsAccounts 31. Thoughnot significant in termsof totaldeposits,compulsory savingsaccountsare importantto some secondarybanksand smallerrural financialinstitutions.These depositsare not compulsorysavingsrelatedto establishing a savingsrecordwith the bank beforebeinggranteda loan (some multipleof deposits). They are insteada form of compensating balance whereby,with a Rp 10,000loan the applicantwill actuallyreceiveRp 12,000 with Rp 1,000for the flat interestchargedand Rp 1,000 for the compulsory savings. In some cases the savingsamountis returnedafterthe loan is fully repaid,but not always. These compulsorybalancesmay or may not receive interestdependingon the institution. G. Other SavingsAccounts 32. In additionto the TABANASand goal savingsaccounts,some banks offer their own ordinaryor specialpurposesavingsplans,each with their own terms and conditions.More banksare considering such plansand among the secondarybanks,the BKKs plan to acceptdepositsin the near future. OrdinarySavingsPlans 33. WhileTABANAS/TASKA accountsare limitedto only 12 of Indonesia's privatenationalcommercialbanks and are not availablefor the secondary banks,the secondarybanksoffer their own savingsaccountplans in competition to the TABANASscheme. Most allowmore frequentwithdrawalsthan TABANASand pay much higher interestrates. Indeed,some Bank Pasar in tste 1986 were payingup to 21% per annumfor such funds. 34. One of the more interesting examplesof privatebank savings accountsis offeredby Bank DagangBali. It offersa monthlylotteryand a competitiveinterestrate of 1.0% p.m. on the minimummonthlybalance. While this interestrate is less than TABANAS,thereare no restrictions on withdrawalsand the lotterychancesare based on the accountbalancerather than one chanceper account. In contrastto SIMPEDES,the lotterydrawings are made monthlyratherthan twice yearlyand the couponnumbersare basedon the numberof multiplesof Rp 1,000 ratherthanRp 5,000 in the account's minimummonthlybalance. The prizesare also largerwith a Rp 10 million houseawardedevery six months,a Rp 6 millionmini van every threemonths, and a Rp 81 millionmotorcycleeverymonth.

-84 -

ANNEX 8 Page 12

CashierGuaranteeSavings 35. At leastone statebank requiresthat all tellersor cashierspay 21 of theirsalaryinto a specialsavingsaccount,the balanceof which cannotbe withdrawnuntilafter retirement.This requirementis intendedto guarantee againstpossibletheftand in returnthe bank pays an attractiverate of interest,15% p.a. Save and BorrowAccount(RekeningSimpanPinjam) 36. This is a form of overdraftaccountofferedby Bank Dagang Bali throughwhich the customerhas accessto an automaticcredit facility(Rp 5 millionmaximum)equalto 25 times the agreedmonthlysavingspayment(Rp 40,000per month for an overdraftfacilityof Rp 1,000,000).There is no set time requirement for repayingthe loan,but the agreedmonthlysavingsmust be continued. The savingscomponentearns 0.025%per day on depositbalances over Rp 1,000.Alternatively the customeris charged0.11 per day on any negativeaccountbalance. 37. As additionalincentive,save and borrowaccountcustomerscan pay a Bp 10,000fee and receivean AutomaticTellerMachine(ATM)card. The ATM introduced by Bank DagangBali on May 1, 1986,was the first in Indonesia. Therewere 180 ATM cardsoutstanding as of December,1986 and the ATM had only a half dozen transact4.ons per day totallingapproximately Rp 100,000. The bank is very selectiveboth in the openingof theseSave and Borrowaccounts and in issuingATMs. ProposedCommercialBank OrdinarySavingsSchemes 38. In interviews, state commercialbanks suchas Bank DagangNegaraand Bank NegaraIndonesia1946,indicatedthat they were considering the introduction of their own ordinarysavingsaccountsto competewith their currentTABANASaccountprogram. The Bank DagangNegara schemewould not have a lottery,but would allowwithdrawalsfour timesa month and pay 14Z interest on all savings. The bank hopes to attractlargersaversas smallerones would find the 15% plus lotteryofferedby TABANAS(on depositsup to Rp 1,0,oo000) more attractive.The Bank NegaraIndonesia1946 savingsaccountwould require an openingbalanceof Rp 5,000 and a minimumbalanceof Rp 2,500. The terms might allowup to five withdrawalsper month and would pay intereston the lowestmonthlybalanceof 15% p.a. ProposedBKK SavingsScheme 39. In January1987 the BKKs couldnot acceptvoluntarysavings,but a savingsprogramwas in the planningstagewith a pilot programexpected sometimein 1987.Unlikeotherrural savingsschemes,this programis intended to work on a couponbasis insteadof a passbook. The couponswill be availablein varyingdenominations with the amountof interestdependenton the numberof monthsheld. The back of each couponwill have a schedule showingthe interestper month and the issuedate will be stampedon the front. Those redeemingthe coupon in betweenmonthswould receiveinterestup to the previousmonth. Interestwould be paid only on redemption. Each

- 85 -

ANNEX 8 Page 13

couponwould be numberedand the name of the holder indicatedon the coupon book stub as well as in an index. The couponwould be redeemableonly at the issuingBKK and on each redemptionthe numbercheckedagainstthe recorded holderand his nationalidentification card. The controlsseem adequateto precludefraudand some provisionsare includedfor the redemptionof lost coupons. The BKK'smain incentivefor a couponsystemratherthan a passbook is to reduceis the labor cost and secordkeepingassociatedwith posting intereston customerledgerbooks. UnlikeSINPEDES,the BKK savingsplan hopes to competestrictlyon an interestbasisand wil' offer a higherrate (probably15% p.a.) insteadof a lottery. BKK wantedto avoid the high administrative costsand supervisionthat a monthlylotterybasedprogram entails. H. Time Deposits 40. Time depositsare attractively pricedshortto mediumterm (1 to 24 months)savingsvehicleswith the interestrate fixed over the periodand the interestpaidmonthly. The intereston one month to 24 monthdepositsis exemptfrom taxationand since 1983, the sourceof fundsused for these depositsare free from TaxationDepartmentinvestigation. 41. Prior to June 1983 all interestrates,were set by BI. While state banks are now free to set their own rates,BI imposesa minimuminterestrase of 12% p.a. on the 24 month time depositsacceptedby governmentowned banks. BI also limitsthe secondarybanks from offeringtime depositswith a maturityof over threemonths. 42. As shown in Table 8, thereare substantial differencesin time depositrates. There are also differencesin the minimumdepositsizes,and price competition is encouragedsinceretaildepositrates are collectedand publisheddaily in the Indonesiapress (Kompas).Among the statecommercial banks,however,there is a gentleman's agreementas to the maximumadvertised interestrates,but thesebanks,may provideup to an additional0.5% to their betterclients. Table 8:

RANGEOF TIME DEPOSITINTERESTRATESBY TYPEOF BANK (5 January, 1987) State Banks

Private FX Banks

1 month 3 months 6 months 12 months

13.0-13.50 13.5-14.25 14.5-14.50 15.0-15.00

12.5-14.50 13.5-15.00 14.0-16.00 14.0-16.00

24 months

14.0-15.00

15.5-17.00

OtherPrivate NationalBanks

Source: Interviewswith Bank Indonesia,1987.

Foreign Banks

13.0-15.0 9.50-14.00 14.5-16.0 9.50-14.75 15.0-17.0 10.00-15.50 15.0-18.0 10.25-16.00 -

86 -

ANNEX 8 Page 14

43. Statecommercialbanks and regionaldevelopment banksuse a lower minimumdepositsize than the privatebanks. The RegionalDevelopment Bank of East Java, for example,requiresa minimumof Rp 100,000for time depositsas does Bank DagangNegara. In contrast,Bank DagangBali requiresa minimum depositof Rp 500,000,and Bank CentralAsia, a minimumof Rp 1,000,000.The privatebanksalso offer a more limitedrange of maturities,Bank Dagang Bali, for example,will acceptonly up to 12 months. As showuin Table 9, the 12 month maturityis also the most populardepositmaturityamong state commercialbank customers,but priorto the 1983 interestrate liberalization, 24 month depositswere the most popular. Table 9: TIME DEPOSITSWITH STATE BANKS BY MATURITY (billionsof rupiah)

24 months 18 months

12 6 3