By Andi Haswidi and Urip Hudiono, The Jakarta Post, Jakarta
Having gone through years of slow, painful and costly recovery since the 1997-1998 monetary crisis, the country's banking sector is now ready to take the lead in supporting economic growth, Bank Indonesia Governor Burhanuddin Abdullah said Monday.
In a keynote speech at the Asian Bankers Summit, being held March 25-28 at the Shangri-La Hotel in Jakarta and attended by hundreds of bankers from across the Asia Pacific, Burhanuddin said Indonesia's banking sector has come a long way since the crisis, when the government was forced to inject huge amounts of public funds into the industry to prevent its collapse.
The central bank, he said, has improved the industry's regulatory framework, having launched in 2004 the Indonesian Banking Architecture (API), a definitive blueprint to create a stronger and more robust banking sector.
He said the API laid out such best practices as good corporate governance and risk management -- the lack of which was partly to blame for the crisis. The API also incorporates a policy road map for mergers and acquisitions, to pare down the country's 130 lenders into fewer banks with stronger capital.
"With all this, the banking industry should now be able to return to its basic function of intermediation, of disbursing more lendings to support higher economic growth.
"This the main challenge now, and the challenge of intermediation is not Indonesia's alone, but also in other countries having experienced a crisis," he said.
Bank lending in Indonesia grew by 14 percent to Rp 792.3 trillion last year, as high inflation and interest rates since 2005 dampened loan demand. Lending had averaged 20 percent growth the previous two years.
Many bankers attending the event acknowledged that Indonesia's banking sector has recovered from the crisis
Summit director Fiona Shaw said the Indonesian banking sector had made tremendous progress since 1997 through a series of mergers, acquisitions, consolidations and fairly successful micro-financing schemes.
"We would like to, in a way, make Indonesia a showcase for other developing countries, to learn from the success achieved by the banking sector here.
"We decided to pick Jakarta (for the summit venue) because we thought it was time to showcase the progress to the rest of the world," Shaw said.
The summit itself is a multifaceted event that involves visits to local banks, an awards ceremony that will bring together bank CEOs from across the region and three key conferences on the different aspects of the industry: risk management and governance, cash, and treasury and trade.
In addition, the technology council will hold its annual meeting.
As part of efforts to showcase the progress of Indonesia's banking industry, all summit participants are scheduled to visit the headquarters of the state Bank Rakyat Indonesia (BRI), to hear about its success with microfinancing schemes.
During the summit's opening ceremony Sunday, BRI small and medium enterprises director Sulaiman Arif Arianto said the bank was committed to allocating 80 percent of its total loans for micro-credits this year, and the remaining 20 percent for corporation projects.
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