BI moves to strengthen BPR
The Jakarta Post, Jakarta
The central bank inaugurated on Monday a certification program for rural banks (BPR) as part of its efforts to build a sound, robust industry able to provide additional benefits to the nation's small and medium-size businesses.
The program, mandatory for directors and prospective directors of rural banks, aims to improve the management competence and professionalism of the bankers -- notably their risk assessment skills, Bank Indonesia governor Burhanuddin Abdullah said.
"The certification complements other efforts to build a strong foundation in support of accelerated recovery of soundness in the national banking system," he said.
Burhanuddin was speaking while opening a training session in Malang by a consulting arm of the Association of Indonesian Rural Banks, which is serving as a pilot project. The central bank is working in cooperation with the Financial Institutions Project of German Technical Cooperation on the project.
Rural banks, of which there are 2,148 at present, play a crucial role in the economy as the main lenders to small and medium-size businesses (SMEs) in the country.
And while the government has begun to provide more help to SMEs -- as seen in various programs aimed at improving the competitiveness of the sector -- Burhanuddin said the empowerment of the BPR would be of major significance.
"This needs to be done simultaneously so that both sectors can complement and benefit each other," he said.
Key aspects of the program include: accounting management, credit management, legal aspects of credit operations, assets and liabilities management, assessment of market potential and marketing of products/services, regulations and external supervision, and internal control and examination.
The target of the program is to have at least one certified director in each rural bank by Dec. 31, 2006, and for all directors of rural banks to be certified by Dec. 31, 2008. Directors will be required to resign if they fail to meet the certification requirement.
The urgency of the program is apparent as some rural banks have begun to suffer capital deterioration.
Sri Mulyati Tri Subari, a deputy director for BPR supervision, said the central bank had closed down two rural banks and put four others under special surveillance as their capital adequacy ratios worsened.
"This month we have liquidated two BPRs, one of them I think was located in Kupang. We have also asked the rural banks under special surveillance to inject fresh capital," Sri said, adding that the capital adequacy ratio of the closed down BPRs was negative, or far below the 4 percent minimum requirement.
She said the two rural banks were not included in the government's blanket guarantee scheme.
Indicators of National Rural Banks
-------------------------------------March 2004 ------------------------------------- Number of BPRs 2,148 Business Volume Rp 13.4t Credit extended Rp 9.4t NPL 8.2% LDR 76.9% ------------------------------------- Source: Bank Indonesia