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Assalamu’alaikum Warohmatullahi Wabarokatuh (Peace to be to you, and Allah’s mercy and blessing as well)
The honorable ladies and gentlemen and also the students, it is better for us to begin the seminar.
This seminar is going to discuss about the result of a research from PPEP which was written by Mr. Rimawan and friends
entitled On The Inquiry of The Most Optimal Networking for BPD Regional Champion to Support Financial Inclusion and Decentralization.
Such a bombastic title isn’t it?
Well, the key word is “networking” which is very important to make cooperation with those who were “excluded” before.
The other key words are “financial inclusion” and “decentralization”. Those are extremely significant to build Indonesian economy.
Ladies and gentlemen, perhaps some people define Financial Inclusion (FI) in a broad definition.
However, the true meaning is actually derived from “unity” and “diversity”. The two words have represented Financial Inclusion (FI) in Indonesia.
Why? Because long time ago, when Gadjah Mada tried to bring together all the kingdoms in Indonesia,
they needed great spirit of unity, spirit to build a nation or nation building.
In Indonesia diversity, individuality, the difference of ethnic groups and especially religions are truly enormous.
Therefore, we need to “include” them all since “being excluded is hurt”.
So, Financial Inclusion in this case is to include those who are excluded from financial sector in Indonesia.
In conclusion, togetherness is much better than standing alone. Moslems also hold that belief.
Hence, financial inclusion becomes a very interesting topic.
Although the term does not originally come from Indonesia, the roots of the term have close relation to Indonesia: “unity” and “diversity”.
So, the term has been rooted in Indonesia for a long time.
Then, financial inclusion consists of some pillars.
According to Mr. Rimawan’s presentation, there are 5 pillars of financial inclusion.
First is education.
It means to educate civil societies who have not entered financial market in order to embrace them to the financial market.
Second is eligibility.
It means to make civil societies being eligible for financial market.
One of the ways is “certification”.
The idea is how to make certificate for various commodities in order to make the civil societies easier to get loan from bank.
As an example, in a rural area there is a poor man who only has a buffalo as his wealth.
It means that he cannot enter the financial market with his buffalo.
Thus, we need to make a certificate for the buffalo, so that the man can use the certificate to get credit account from a bank.
In the other word, if a buffalo can be certificated, it can be an asset of the rural societies.
Next. Third, clearing the regulation.
Forth, intermediation, from bank to the society, from those who need fund to those who have fund.
And the last is distribution, distribution from the capital owner to the poor people.
So, it should be sharing of fund in the society.
That what we are going to discuss.
Speaking of decentralization, I remember Steve Jock’s speech before his death.
He said that a person or a company will be progressive if the job is given to those who master it in the company or the country
because they actually have brilliant ideas which sometimes imprisoned.
Therefore, delegation is needed, decentralization, and the company will be progressive.
It has been proven by Apple Computer Company.
Its asset is totally 127 digits.
That's amazing
Well, that’s all for the opening of the seminar. Mr. Rimawan will be the first presenter to deliver his research.
Later is Mr. Anwar, then Mrs. Sri, and the last is Mr. Budiwiyono.
Ok, Mr. Rimawan, time is yours.
Assalamu’alaikum Warohmatullahi Wabarokatuh (Peace to be to you, and Allah’s mercy and blessing as well)
Thank you very much for the opportunity to deliver my research.
There is a history related to the reason why we bring out this topic.
There was “call for proposal”, so we submitted 3 research proposals and luckily those three proposals were all approved.
However, there is a problem since the fund is only for 1 institution.
Thus, we combine those three proposals into 1 research proposal.
That is the history beyond this research.
There is also another research proposal related to financial inclusion which is written by Prof. Catur.
He directly relates financial inclusion to the society while I tend to discuss about networking.
After the transfer of monitoring from BI (Indonesian Central Bank) to OJK (Financial Services Authority of Indonesia), some issues related to networking and supervision arises.
That’s why we did this research. There is also another similar research which is done by Mr. Anggito.
Well, ladies and gentlemen, this is the outline we are going to discuss.
I won’t take a long time in giving explanation
Next.
Seeing the background, we know that most of Indonesian citizens are in rural area and live under the line of poverty.
The problem is that most of them are not able to access formal financial institutions.
That’s why there is financial inclusion as an effort
to ease the financial access for the society especially those who are unbankable
So, based on the chart, we see that from the side of financial inclusion there are always supply side and demand side.
Both supply side and demand side will involve trade world and also household.
The problem of the trade world and household is that there is always small and micro skill.
There are also many poor households
which from the view of formal bank procedure are categorized as un bankable.
As stated by Mr. Edi before,
perhaps those people have some precious goods such as Jati woods or may be livestock
which actually can be used as financial capital in order to get fund.
Next.
So, what is the question of this research?
We can see that the main focus of this research is not about BPD (Regional Development Bank)
but it concerns more about the networking to facilitate financial inclusion.
Why we use BPD in this case?
Because it is a pragmatic approach.
There are two possible approaches can be used in this research.
From the household, we ask to every household “where hey borrow money”.
Or, another alternative is asking to the supplier.
Well, those two approaches are top-down and bottom-up.
Top-down tends to be pragmatic.
Bottom-up is more idealistic.
Idealistically, we examine how networking built from the standpoint of household.
We ask to the households
“from where they borrow money” or “where they save their money”
then we investigate it.
Nonetheless, there is a problem here
we do not know if the institutions which lend the money will be cooperative with us or not.
That’s the problem.
That is why we use the first approach, top-down, which is pragmatic enough.
And we choose BPD because there are 25 BPD all around Indonesia.
Private banks can also be an alternative,
but I am sure that it will be more difficult.
In conclusion, what the truly question of this research is
how the form of networking inter-BPD in Indonesia,
and between BPD and the other micro financial institutions related to financial inclusion.
Second, what aspect influence the form of the networking itself.
And how BPD takes its role optimally.
We are asking whether BPD will be consistent to be a development bank or will change to be commercial bank or whatever.
The last, is the available regulation enough to give support for BPD to do financial inclusion?
And if it is not enough, what policy will be applied?
Well, we can see over there…
there are BPD, BPR (Citizen Credit Bank), LKM (micro financial institutions), trade units, and the last user is households.
So, we come to the methodology.
We applied purposive sampling by choosing 13 from 25 BPD all around Indonesia.
At first, we took sampling for 26 banks
but then BJB decided to resign from ASBANDA (The Association of BPD)
and was not willing to be interviewed,
so that we had to look for the replacement.
We can see here that the purpose of the sampling choice
is related to the representation of each region or island in Indonesia
and the representation of BPD’s corporate body.
In fact, there are 3 BPD which have not become Ltd.
one of which is BPD Yogyakarta.
Though the position is in Yogyakarta, it is still difficult for the bank to be transformed as Ltd.
Alhamdulillah (praise be to God),
the research done by PPEP (The Increasing of Women Economic Productivity) can make the politicians of regional assembly sure that
changing BDP to become Ltd. is a certainty
Alhamdulillah (praise be to God),
perhaps... BPD will be transformed to become Ltd. won’t it, sir? -yes
Then, we see from the cultural point of view.
As an example, cultures in Bali and Padang are very supportive for the development of financial inclusion.
On the other hand, in some other places such as Papua,
the condition is quietly different.
Thus, those differences will be accommodated by using the available sampling.
We will also examine the policy in the national level.
It seems that in national level all BPD are treated with the same method.
They are required to accept mandate from PRC.
Then, BI also formulates a policy related to credit proportion.
It is explained that 20% of credit must be given to UMKM (Small and Medium Enterprises).
On the other hand, there will be distribution of productive credit and consumptive credit
which then causes long implication related to the matter of financial inclusion.
Seeing from the coordination of ASBANDA
ASBANDA, the association of BPD, is really huge.
In one side, they will cooperate with the Regional Government, JAMPINDO, PERBARINDO (The Association of BPR) and the other related institutions.
On the other hand, they also have some members who are trusted by BI.
So, what is the basic theory used in this research?
We will apply what it is called as “network formation”.
We will scrutinize not only how the coordination inter-BPD in Indonesia,
but also how the coordination between BPD and the other micro financial institutions.
To cooperate means to play what it is called as “coordination games”.
As an example, there are 2 players in a game: the first player and the second player
If both of the players choose the same strategy, they will get bigger “payoff”.
However, another question appears.
When we are facing this game... how if this game is played by many players?
Does the form of networking influence the speed in doing coordination?
Bala and Guya in their paper on 2001 explained that there are 3 forms of networking.
Those are Roundtable, General, and Star
which will shape the speed of the judgment or the speed of the coordination from each of the networking’s form.
Theoretically, Star is the fastest form to build coordination.
Okay, we will see from many other approaches later.
Does the coordination among BPD tend to use General form?
while the coordination between BPD with BPR and the other micro financial institutions tends to use Star form.
Well, this slide shows how the coordination inter-BPD.
On the surface, the relationship among BPD in ASBANDA is harmonious.
We can see from how many sport events they did together are.
However, in fact there is a fundamental problem happens inter-BPD
which recently takes their attention.
The problem is how the connection of their relationship in ASBANDA for the long-range
especially related to the trend of opening branches in other provinces.
We see that we have 26 BPD operated in certain province around Indonesia.
However, nowadays trend is that they open some branches in the other provinces.
We see from this chart that BPD Jakarta is trying to open its branch in Central Java and East Java.
Moreover, mostly BPD outside Java island are trying to make branch in Java especially Jakarta.
So, the next question is... what will happen then?
Since in fact each BPD has the same market segment
and even the strategy used is actually similar.
Thus, if their segment market is same,
their strategy is also same, etc.
and then they open branch in some other provinces,
the next question will be:
won't it create narrower “playing field” for BPD?
because they will compete against each other
Well, the possible alternative is the cooperation between BPD and spar cushion.
Spar cushion is a development bank in Germany
If we go to Germany, there are many spar cushions everywhere
Don't you think that they unite in one management. No.
That their names are same, it is true.
but they are actually the association of some BPD
One thing that is really straight in spar cushion is that
each spar cushion can operate only in its region.
If there is surplus or minus of fund,
they will cooperate to transfer the fund from branch to branch.
So, essentially there are two alternatives for BPD
whether they will go forward to open many branches in many provinces in Indonesia
which then increases the competition among themsemselves
or the other alternative is doing merger
and then build coordination in transferring fund.
from one place to another place
Speaking of merger, what is the advantage?
By merging, they will get the minimum transaction cost.
As an example, LDR of BPD Papua in 2011 was only 40%.
Amazingly, in 2012 its LDR increased to be 70%.
We asked to the banker related to this increase
and they said that their LDR increased because they opened branches at Makassar and Surabaya.
So, what does it mean?
When BPD Papua gets surplus fund,
they will transfer it to Makassar and Surabaya.
And now BPD Papua is trying to open another branch in Yogyakarta.
The opposite strategy done by BPD Jakarta.
It semms that they have surplus fund,
in order to transfer it, they are going to open their branches at Central Java and East Java.
Well, this phenomenon is much interesting to be discussed.
What is BPD going to do then?
Speaking of the relationship among BPD, BPR dan the other micro financial institutions
So, the pattern of this relationship is detemined by this curve
The left side or the vertical line is Y side
It shows the length or the complexity of the networking.
While the right side shows the economic performance.
So, in the game, economic performance is considered to be “nature”.
Nature is for example cloudy and clear, crisis and non-crisis, etc.
There is something unique here
When we go to an area with simple economic structure,
the networking is not quite long.
In Jakarta, which has extremely complex economic structure,
again... the networking is very short.
On the opposite, in-between area such as Yogyakarta
has precisely very long networking.
There is an anomalous side which is very interesting to be discussed
the form of the networking as a function of economic performance or economic structure.
So, if we see further, the case of the short networking can be explained by
taking an example of BPD Central Kalimantan.
They have many branch offices.
Some of the branches interrelate to some cooperatives
or directly to the end customer,
but the other branches function as auxiliary offices.
In this research we try to get information from the head workers
and examine two kinds of branch.
A branch is located in an area with industrial finance
and the other one is located in an area with agricultural finance.
We are going to see if there is difference related to the economic structure.
Well, this structure exists in banks of Central Kalimantan,
South East Sulawesi and also Papua.
We need to give special treatment to the bank of Papua
because of its unique cultures and attitudes.
The society in Papua is much different from the other regions in Indonesia, especially in the matter of finance and banking.
When I was in junior high school, in the first grade
I used to study history related to Neoliticum society
who fulfilled their life by hunting and gathering.
When I came to Papua, my friends from Papua said that
some people there still did “hunting and gathering” activities.
We all here are facilitated by high education and technology such as internet,
in fact there are many people out there who still live in hunting and gathering culture.
Thus, seeing from the cultural point of view, it is difficult to develop financial inclusion in Papua.
It does not mean that they are lazy to work.
However, there is social side, when they get much money,
they easily share the money to the whole family.
This is the difficult part, social principle.
They should use the money to develop their finance,
but in fact they spend it to do some social activities.
Well this cultural point of view will be examined deeply later.
Next, we will see from the medium structure.
From the medium structure, we examine the syariah (Islamic law) branches
There are BMT and BPRS (private bank with Islamic law).
In addition, we also examine some auxiliary office of the banks.
We will also see how the transaction cost occurred between BPD and BPR
and in relation with BPD or BPR and the other financial institutions such as BMT.
This quite complex pattern usually occurred
in in-between areas for example Central Java, Yogyakarta, and Bali.
We can see that there are many players there.
Coming into BPR, we see that there are UKP, LKD (rural financial institution), and KSP.
KSP is savings and loan cooperative.
Then... there is also....
Well, there is an interesting player here who is called as “mendring”.
Mendring is a person who lends money in form of goods.
As an example, let say that I am going to buy a rice cooker or magic jar.
So, a Mendring lends me a magic jar,
so I have to pay him some money
every day or perhaps every week on credit.
Mostly people who use Mendring’ service said that
transaction is based on the religion law
since they do not deal in money but in form of goods
which then will be returned in money.
Those are the exciting things.
There is a general pattern that money which is transferred or transacted in
the “plecit” bank or “thithil” bank can be called as money laundry.
Usually these banks are forbidden and will not get fund from both BPD and BPR.
This is the interesting thing.
Anyway, for Mendring, it is okay somehow.
Well, this is the curve of Jakarta bank...
the end of the curve is the extreme point where the networking is very short.
Why is it?
Because in Jakarta, it is easy to get fund and to distribute it.
Thus it does not need long networking.
Briefly, the networking tends to be not too long in the two extreme conditions:
in very simple economic condition and very complex economic condition
How about the rate of interest and the transaction cost in the networking itself?
It is interesting that the rate of interest from BPD to BPR is not merely high.
It is only 2% or 3%. It seems conservative.
However, when the fund comes to Micro Financial Institutions (LKM),
the rate of interest will be so high.
On the other word, when the fund is in BPD and BPR,
the rate of interest is under control
but then, when the fund is transferred into Micro Financial Institutions (LKM)
and LKM transfer the fund to the customers,
the rate of interest will be very high.
Second, it seems that there is bigger inclination for BPD to make networking with BPR
than with the other LKM.
Why? Because BPR is in the same supervision with BPR: in BI (Indonesian Bank).
There is a problem related to the rate of interest
since in Indonesia there is a culture which is called as “nelulasi”.
Well, I get some difficulties to translate “nelulasi” anyway.
Nelulasi means when someone takes out a loan, he/she has to pay 130% of the loan: borrow 100% but pay 130%.
What about the time period?
It depends on the private bargaining.
It can be in one night (overnight).
However, if we can make a good deal, we may pay it in 2 years
and it becomes our luck.
So, when someone takes out a loan from money launders,
he/she will not talk about the interest rate anymore
since everybody has been understood about “nelulasi”.
Well, if I have to write in English, what is nelulasi?
I call it The Law of Thirteen.
It seems that “nelulasi” is a part of local wisdom.
Everybody knows this law
Thus, everyone who deals with the money launders, who open transaction in 24 hours,
they will not ask about the interest rate.
They know that they will use “the law of thirteen”.
This is the problem. Why?
The opportunity cost is that when many people still use “the law of thirteen”,
there won’t be an incentive for the micro financial institutions to decrease their interest rate.
Logically, when many people can accept 30% charge of interest,
it will be easy for the micro financial institutions to set 25% charge of interest
and everybody will easily accept this policy too.
There is incentive compatibility system here.
That is the problem.
Then, how about the transaction cost for the networking?
It is related to the monitoring system
in BPR, BPD and the other micro financial institutions.
Well, this is the monitoring structure pre-OJK (Financial Service Authority).
We can see that there are totally 203 BPR
and the other banks which are controlled by BI.
On the other side, it is showed that non-bank financial institutions, for example assurance,
are controlled by BAPEPAM (Indonesia Capital Market and Financial Institution Supervisory Agency).
There is something interesting in the State Minister for KUKM (Cooperatives Small and Medium Enterprises).
It consists of cooperative, saving and loan cooperative, BMT (a bank using Islamic law) etc.
From the data have collected, those financial institutions are 78.035.
Yet, the number is far less from the real number.
In fact, ladies and gentlemen, I am sorry ...
since doing my research relate to OJK in 2010, I never know the exact number.
It can be said that the data of BMT, for example, are in God’s hand.
Even the State Minister for KUKM does not have the data.
The last data we have is for 2006
and can we imagine the data now?
So, ladies and gentlemen, if you go to Kaliurang street for 1km,
you can see that there are many BMT on the left and right of the street,
but ironically the data related to BMT are not consolidated well.
After the delegation of authority from BI to OJK,
there is unification of bank financial institutions and non-bank financial institutions.
And the State Minister for KUKM supervises cooperative, saving and loan cooperatives, BMT etc.
We should remember that KUKM in national or central level is a ministry,
but in the regional level the function will be handled by the regional service especially regional government.
And because of the decentralization concept, it is sometimes not connected to the State Minister for KUKM anymore.
The next problem comes from the legalization of the law of Micro Financial Institutions.
The law states that all of Micro Financial Institutions included BMT and saving and loan cooperatives
will be supervised by OJK.
It means that OJK will supervise so many financial institutions.. so many..
The question will be:
is OJK able to handle the huge number of financial institutions in Indonesia?
In my opinion, there is mix feeling in the law of Micro Financial Institutions (LKM).
In our research related to OJK, we estimated that
the cost for forming OJK and operational cost of OJK would be very high
since all of the financial institutions would be supervised by OJK.
However, when the law of LKM was legalized and it was stated that OJK only supervised LKMand BI,
I realized that our estimation was wrong.
Surprisingly, in 2012 the Forth Commission approved the law of LKM,
which stated that all financial institutions will be supervised by OJK.
So, our estimation turns to be the true.
Well, this is a great challenge for OJK anyway.
Another question appears.
Bi has proved that its monitoring standard related to BPR and the other banks can minimize the transaction cost.
Will the monitoring standard be transmitted to OJK?
related to the relation of BPR and the other banks in general,
and also banks in general and the micro financial institutions.
This is certainly a great challenge, Mrs. Sri.
If we see the data which show the number of financial institutions from Sabang to Merauke
I cannot imagine how to handle this huge number of institutions.
May be we can consider the possibility for OJK to make coordination
with university as institution in handling the cooperatives and the micro financial institutions
since there are so many universities especially state universities spread in Indonesia.
so, it is possible for OJK to coordinate with universities related to monitoring LKM
In addition, it will be good for the students as they will learn
to understand the complexity condition in the micro financial institutions.
Then, we will see… what factors which actually support financial inclusion?
And how is the map?
The most influential factor, ladies and gentlemen, is cultural factor.
As being stated by Mr. James, cultural factor in one and another area is divers.
It becomes a problem because we cannot make a policy
which is able to be applied across the board.
This is the difficulty.
In fact, differences in culture will influence NPL.
As an example, NPL in NAGARI Bank is almost zero,
even in BPR is also the same.
Why does it happen?
Because they have rule of thumb.
The rule of thumb is that...
“We will not give loan to those who have just moved here”.
Okay, first, the new comers will not get loan.
Second... who won't be given loan?
the original citizen who used to live in another area
and then back home again, will also not get loan.
Why? Because for the bankers,
those who come back home after leaving it for a long time must be losers.
If they are not losers they will not go home. So, the bankers will not give them loan.
Well this kind of “rule of thumb” works out in many places.
And it is very interesting
Bali also applies this rule.
Why are there many complains in Bali? And why is NPL in Bali zero?
It happens in relation to their custom.
The great fear of Balinese people is that
when they cannot be buried in their own village when they die
which means that they are not accepted customarily.
This is the problem.
However, for Javanese people, there is no problem where they will be buried.
Again, different place, different culture.
In Makassar, there many cultures which become its characterictic
and it becomes a challenge for BPD and BPR there.
but , in fact, these cultures can be used by BPD and BPR to solve their problems.
Well, many bankers complain that people in their regions are difficult.
“Difficult” here means: those people take a loan, but then it is difficult to make them pay their loan.
But in different place is the condition of society in different
For example, in Bukittinggi
Culturally, people of Bukittinggi will feel that they are inferior if somebody knows that they have a loan.
What is the good point then?
It means that all people have consciousness to pay their loan.
Sadly, this condition only exists in a certain region. In the other region, bankers will get “difficulties” to get their money back.
So, what method will be used to solve the problem?
Consequently, the bankers will try to approach the society by playing chest together etc.
That is what truely happen. Bearing uneasy feeling.
This method will bring the relationship between bankers and the society closer. As a result the society will feel uneasy and then pay their loan.
Nevertheless, this method is difficult to be applied in a formal bank.
Well, seeing from the formulation of 5C... collateral, etc.
the main focus of both BPD and the other micro financial institution is about Character.
So, it does not matter whether someone is bankable or not,
the important thing is that he/she is a good person.
Especially for the micro financial institution, the rule of thumb is the Character.
So, from the C5, they use the last C
Perhaps this approach is quite different from the conventional financial institution.
Last, our conclusion is that the problem in the networking is determined by the nature.
This is the problem. If networking is determined by the nature...
Like what is stated by Ross Child in her paper said that we cannot do many things to fight the nature.
It means that in order to lengthen the networking
or to make the networking more complex,
we need many kinds of regulations, to make the networking longer
For example in Sumatra, there are many cooperative,
but for BPD and BPR having cooperation with cooperatives is too risky.
Why? Because they do not know the health of the cooperatives.
On the side, the relationship between BPD and BPR is relatively good since the information related to the two banks is available in detail.
Therefore, they can get the minimum transaction cost.
Well, related to OJK’s mandate,
is OJK able to minimize the transaction cost for networking?
If OJK is able to minimize the transaction cost, it will prove that the length of networking
is not only influenced by the nature but also the other factors.
In fact, until now the transaction cost is merely controlled by the nature.
The second is related to the role of culture.
BPD and the other LKM are trying to develop an approach to deal with the culture.
Every region has its own culture.
which then used by BPD and LKM in order to decrease the business risk.
As we can see that usually NPL of development banks is less than the commercial banks.
Last, how about BPD’s position?
I see that the position of BPD is on the intersection of the lines.
Will BPD be like it is now?
I mean it opens branches in the other regions. And they will IPO etc.
which then creating a bank like BJB.
As we know that BJB now cannot be categorized as development bank.
It is completely a commercial bank; even it has built a branch in Hong Kong.
Another alternative is making coordination or doing merger
which enable among BPD to cooperate and making a holding company.
The advantage of this alternative is minimizing transaction cost for all BPD.
But then the question is...
are the managers of BPD willing to do that?
I think BPD needs to consider the spar cushion system
for the long term development.
Of course, there is a problem in it: how to minimize egoism among BPD?
As a matter of fact, problem of coordination in Indonesia is very difficult to be solved due to the egocentricity.
From the logical side, it needs to increase the quality
especially on how to develop the standard (made by BI)
not only in bank institutions but also in the micro financial institutions.
Next, it needs special fund allocation
for the socialization and problems of education: education for the citizen.
Last, perhaps it can be an evaluation for BPD that...
the indicator in PRC and the indicator in BPD as the agent of regional development sometimes overlap.
I think it needs further examination.
That’s enough from me. Thank you.
Ladies and gentlemen.
I am always envious to the Economics Faculty of Gadjah Mada University (FE UGM).
Every time I come here, there is always a new pretty room.
When I came here before, this room has not been built.
I think it is something good to do:
how to build our university in order to reach global quality.
This research is very crucial.... very crucial...
as I think our institutional problems have not been solved.
Mr. Rimawan I have a comment for the introduction of the report.
It is stated that...
“this study aims to investigate the networking of commercial bank
to reach potensial customer who are questioned to be non-bankable”.
What is this? What happend to BPD?
Is this the development bank or commercial bank?
Well, people in general call development bank (BPD) as the cashier of regional officer.
In my opinion, it is the institutional failure.
BPD was built around 1960.
At that time, development bank was very popular in the world.
Every country built development bank,
including our country.. Besides BAPINDO, every region builds development bank
Development bank is a bank which gets fund by producing long term obligation
to do long term investment.
Ladies and gentlemen, BAPINDO (Indonesian Development Bank) was shattered
and now becomes a part of Mandiri Bank.
Now, BPD… Though it is not stated in the report…
BPD becomes not more than just the cashier of the regional government
we can see in Semarang, it was shattered in 1997,
why?
Real estate owned by governor and the family, and the officials
In North Sumatra is the same The other places are the same
As long as I was in Bank of Indonesia (BI), my only problem is this matter.
Wondering, why can it be bankrupt? Yeah, this is the problem.
So back to the question, what is it in this institution?
We have to search for the answer.
and.. does it have future?
We all know that BPD is trapped only in its own province.
How could it happen?
Well, those are what you haven't examined.
How the implication... Remember! We need to see the future.
Second, related to financial inclusion
We have an inheritance from the Netherland: BRI (Citizen Bank of Indonesia)
At first, it is said that the purpose of this bank is to serve the cooperatives, small entrepreneurs, farmers, and fisherman,
but in fact it never happens.
BRI has no interest in giving loan for the small entrepreneurs.
Then we built BUKOPIN (Indonesian Cooperative Bank).
It is just the same
it has no business with the small entrepreneurs.
If you ask me about the solution…
well, in order to do financial inclusion, it is better to rebuild the Postal Saving Bank.
When I was in elementary school, I had savings in the Postal Saving Bank.
It was a must
in the hope that everybody could save in the bank since in elementary school.
However, what we know is competing, civil war, high inflation,
and as a consequence the economy was not managed then is shattered.
Well, it must be built.
Don’t think that it is only possessed by the poor people. No!
Take a look at Japan. Postal Saving Bank in Japan is very great.
Most of the SUN (government securities) are absorbed from the post saving bank.
In Indonesia, 34% of SUN (government securities) and SBI (The Certificates of BI)
are owned by the foreign capitalists.
Well, in short time the foreign capitalists are like ducks on the farm...
go in the morning, back in the evening
When they come to you, you will be rich,
the value of the SUN increase,
KAR of BPD and the other banks increase,
NPL decreases.
However, when they go out of Indonesia, you are shattered.
We see, how many times Mutual Fund financial institution is shattered.
It happens because the transaction is only stock and share trade.
And in fact we only have SBI, SUN, no other.
There are few, from private company...
That’s why we easily collapse.
Those are what we need to be examined.
So, it does not answer: what is the activities of BPD?
What is the difference between BPD and the commercial bank?
What is the difference among the province?
Those are what we need to be considered
To answer those three questions, we need to see the balance.
That is unexplained here
From where is the source of the fund?
I guess the fund source of BPD is the transfer from the central office to the regional offices.
Put to BPD.
recycled again to the central office, for buying SUN and SBI
may be some parts are for foreign exchange
Does BPD need this?
Well, this is the problem.
Then, what is the purpose of the loan?
In this report, it is stated that BPD give loan only for the regional officers…
for buying motorcycles, houses, etc.
Thus, I think it has no business with the poor people.
What's the business with...
I have a new project in Gunung Kidul
about rural electricity using wind energy.
It is lack of fund. It needs high cost and is lack of fund.
Sadly, there is no access to BPD
So, is it a development bank?
Well, it should be implemented.
If it is possible... I hope BPD can shows its balance
Next, what can we learn from the phenomenon of financial crisis in Indonesia on 1997,
which cause another crisis on two years ago?
Is BPD still relevant for the present and future period?
Seeing from the characteristic of BPD as a development bank,
what advantages can be grasped?
What is the difference between BPD and the commercial banks?
What is the characteristic? It must be clear.
In fact, BPD never produces long term obligation in order to do long term project
like what has been hoped since 1960 in creating this BPD.
What can be learned from the collapse of BAPINDO?
I guess it becomes a part of Mandiri bank now.
Then, what is the impact of the law in article 3 for BPD?
Since in the article 3 it is stated that banks need very big capital
and the market competition will be more competitive
In addition, at the same time we will enter the Asian Community in 2015.
How can BPD of Indonesia compete to BPD of Singapore?
Have BPD of Singapore built its office here? Oh, yes.
How can BPD of Singapore build the office here
while our banking is unclear?
The increasing of capital has been stated.
Then, regional companies are still limited.
The range of authority zone, interference in the management...
...of the company
In Semarang (Central Java) and North Sumatra
the causes of financial crisis in is KKN (Corruption, Collusion, Nepotism).
By who? The governor.
Come on, don’t do KKN anymore. The bank will be shattered.
In actual fact, the other places are the same, KKN.
I don't know... According to TEMPO newspaper, West Java is also the same.
It is problematic.
So, it is not the fault of the banks.
Too much political interference also happens in Europe.
In Spain, there is KAHA.
KAHA is like BPD in Spain and there is too much political interference there.
It gives loan to the constituents so the bank becomes bankrupts. Until now.
Well, we learn from this. And it can be checked in IMF's report.
So, what is the function of BPD which operates in its outer province?
Who is the customer base?
Now, there are many BPD from the other province in Jakarta.
What are the activities? Is there any customer base?
If the purpose is only to transfer credit link access, they actually do not need to open any branches.
Like what I have said before, debit link access is usually applied in SBI, SUN, and inter-bank.
Who owns the interbank?
BPD and the other government banks are able to stand only because the market segment is guaranteed by the government.
For example, the salary of UGM lecturer cannot be paid by BCA.
All salary of the lecturers must be paid by BRI (Citizen Bank of Indonesia) as the government bank
It is stated in the law of 1997 that the finance of central government must be saved in BI and BRI
while the finance of regional government must be saved in BPD.
It is not a competition somehow.
The matter of market segment should be evaluated.
Is BPD Yogyakarta able to face the free market?
Well, this is what we have to do now
Furthermore, to go abroad...
Furthermore, to make a branch in other country. Please open the slide.
Even the government banks are not able to do that.
You can see over there
Mandiri Bank and BNI (National Bank of Indonesia) open some branches in Singapore, Jeddah and Kuala Lumpur.
What is their activity?
It is doing transfer of Indonesian blue-collar workers only.
As a matter of fact, Mandiri Bank, BNI and BRI are not able to compete with the government bank of Malaysia.
Look, what does happen?
Why? Why? Why?
Until now we never have a good Minister for State Owned Enterprises (BUMN)
who understands about how to transfer our government bank to become competitive like what it is in Singapore.
Development Bank of Singapore is Singapore’s bank, but how can it be everywhere in Asia?
Well, if there is a project from Singapore, there are many big businesses in Lucky Plaza.
BNI handles remittance business.
Yesterday, I sat with an Indonesian blue-collar worker.
comes from abroad.... from Bantul (a region in Yogyakarta)
He saves his money in BNI and he said that there is not any local customer of BNI in the country he works for
The same thing also happens in Development Bank of Singapore.
Well, if BPD opens a branch in the other province, can it compete to the local BPD?
It can be said that we are essentially segmented.
As an example, BPD Yogyakarta will never get fund from East Java.
Segmented. This is what really happends.
I never heard that BPD Yogyakarta give loan to PNS in Central Java
to buy motorcycle or hand phone. It never happends.
This is what we need to do.
Next, how does BPD become the central bank or the apex for DPR (Indonesian Legislative Assembly)?
Again, we have failed.
Seeing from the history of cooperative
in Netherland and Germany for example,
a cooperative, like BUKOPIN should be a central bank for saving and loan.
But it is not what it should be.
In addition, BPR should be monitored and managed refers to BRI.
But until now BPR has been monitored by BI through OJK.
When I was in BI, I lost in voting.
I said that it is not good.
How million of Mulyawan’s employees can monitor BPR?
BPR is spread out entire Indonesia.
I think we back to Netherland.
There is a bank which becomes the central bank for cooperatives and BPR.
As a client it gives credit as well as does monitoring.
We do not have such bank.
As a central bank, does it accept deposit from BPR,
offer reaccredit, apply reaccredit or reaccredit access,
monitor and manage, do transaction inter-BPR?
It is stated that BPD’s accessibility is only given to the other BPD, no.
to make it clear, open an offers from City Bank.
Why does not BPD Yogyakarta give credit to City Bank?
like in Papua... This is the problem.
Well, the interaction inter-BPR is usually done by BI.
.... as the banker's bank This is what BPD should do as an apex.
Next, how far active is BPR which becomes BPD’s partner?
As I remember, all LPD (Rural Credit Institutions) which were built in Central Java by Mr. Supardjo Rustam
with the help of HID and President Obama’s mother
are conversed to be BPR.
Like what has been said by the presenter that we are different.
LPD in Central Java made by Mr. Rustam is really great.
Why is it?
It is because Mr. Rustam involves the village administrators.
And luckily, people in Central Java believe in the village administrators.
However, in East Java no one believes in the village administrators
and so does in West Java.
Yeah, every region has its own characteristic.
In Bali, non-performing loan is 0%.
Why? Because Balinese people believe in reincarnation.
It means that if someone does not pay his loan in the first life, he will be a goat in his second life.
Therefore they always pay their loans.
As a moslem, Mr. Rimawan can ask for forgiveness to his God before his death.
As a Christian, Mr. Budiono has the Christ who will always forgive his faults.
Well, Balinese people do not have such belief, they believe in reincarnation.
Hence, they have to pay their loans before they die.
They also have a promise that everyone who does not obey the custom in his entire life will be thrown away into a trench.
Those are Balinese customs.
However, for moslems in Yogyakarta,
in the speech of a death ceremony, people are required to plead for forgiveness for the death person
and the loan of the death person is authorized by the family.
Balinese people do not use this custom.
It is important to understand the cultures.
Next, regional business, cooperative business.
In this regional autonomy era, the authority is given to the regional government
what is BPD’s participation in developing cooperatives?
I have just gone to Kudus. There are big cooperatives there.
The law of cooperative is different from my opinion.
I think the new law of cooperative is unclear.
Who is the leader?
Cooperative minister? Does he have capability?
Even to make OJK is very difficult and expensive.
Looking for a supervisor is very difficult. We need to pay in high salary in order to cooperate with.
Is cooperative minister able to do that?
The deposit in cooperatives is not guaranteed by LPS (Deposit Insurance Agency)
whereas LPS was built in order to increase the societies’ trust if their money is saved.
Well, that policy does not exist in the law of cooperative.
Will the cooperative department make its own assurance?
It is definitely unclear.
As a result, there is dualism.
It has been stated that BPR is guaranteed by LBS and monitored by OJK.
On the other hand, it is unclear whose deposit is taken by the cooperative, while the cooperative is monitored by cooperative official.
How can banks trust the cooperative?
So, OJK is built in order to omit the dualism which used to happen
between bank and non-bank financial institutions.
Again, Sir, the matters of institution is very crucial.
Does it have future or should we end this now?
Since it can be a burden for us. Burden. Burden. Burden.
What we will face are free market and monopoly of deposit.
We cannot stand on this condition: the government’s entire fund is saved in the government banks
and the regional government’s entire money is saved in BPD. Thank you.
In conclusion, everything must back to the original function.
BPD which has “development” element must implement its element clearly and immediately.
Then, there have been some cases stated that BPD should open branch in its outer province or even abroad.
We need to rethink whether it is needed or not.
Why don’t we try to dominate the national market segment in order to strengthen ourselves
and then compete to the inclusion from foreigners?
Like what have done by China.
Agriculcure Bank of China has around 350millions customers.
The number is bigger than the citizen of America.
Penetration to agriculture in China is very strong, which cannot be done by the foreigners.
Commercial Bank of China is the same.
Perhaps Indonesia needs to have a very strong bank too.
Well, the next discussion will be delivered by Mrs. Sri Rahayu from OJK.
Like what have said by Mr. Anwar that the cost in forming OJK is very high.