Wed, 29 Sep 2010

From: The Jakarta Globe

By Muhammad Al Azhari
Singapore’s DBS Group, one of Asia’s largest financial services providers, is planning to ramp up its business in Indonesia and the rest of Southeast Asia, its executives said on Tuesday.

Though it has typically looked to home and Hong Kong as its primary sources of revenue, DBS - which operates commercially through DBS Bank - is apparently intrigued by the high margins offered by small- and medium-sized enterprises in the surging economies of the city-state’s neighbors, and has set a multiyear plan to expand its interests in the region.

DBS Bank is the biggest bank in Singapore.

According to Bernard Tan, a commissioner at Bank DBS Indonesia, the lender’s local unit, its parent company is looking to shave the proportion of revenue it draws annually from Singapore from 65 percent to 40 percent within the next five years.

Over the same period, it’s aiming to increase Southeast Asia’s revenue contribution from 15 percent to 30 percent. The bank also aims to lift its share of revenue from Greater China to 30 percent, up from 20 percent.

Indonesia figures significantly into the expansion plans, and Piyush Gupta, chief executive of DBS Bank, said the returns offered by Indonesia’s banking system are the best in Asia.

“We are very bullish about Indonesia,” said Gupta, who was Citibank Indonesia’s country corporate officer from 1998 to 2000.

DBS has had a presence in Indonesia since 1997, but its stature was minor until a rapid expansion in 2004 beefed up its network to 40 branches in 11 major cities. Among them are Jakarta, Surabaya, Medan and Bandung.

Bernard said DBS Bank Indonesia now plans to use those branches to reach more customers. The plan hinges on a special loan scheme available to SMEs.

“Within the next three months, we will launch a program for loans to SMEs,” Bernard said. “We are going to target customers who want to borrow between Rp 2 billion and Rp 5 billion [$240,000 to $560,000].

“We will make it easier for these customers to access our loans,” he said.

At the moment, DBS Bank Indonesia’s loan portfolio is dominated by corporate loans, with SME loans constituting only a small share.

In the first half of this year, the bank booked a total of Rp 18.7 trillion in total outstanding loans, of which corporate loans took the lion’s share of the total at 90 percent.

DBS Bank Indonesia intends to loan Rp 4 trillion to SMEs through the end of the year. According to Bernard, the lenders plans to double SME loans to Rp 8 trillion next year.

“We are trying to tap more customers in industries such as shipping and equipment,” he said. “People still complain there is not enough credit [in Indonesia]. I suppose there is enough space for a new entrant.”

Indonesia still has a huge population that has been untapped by lenders.

A 2009 survey by Bank Indonesia found that some 43 million Indonesians did not use a bank, and a 2008 BI survey found that 82 percent of the rural population did not have bank accounts.

The central bank blames difficult access to bank branches, a non-saving culture and a lack of aggressive lenders for slow banking penetration.