Large banks asked to help secondary banks

JAKARTA (JP): Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaya has called on the country's commercial banks to cooperate with secondary banks in assisting rural economic development.

"Rather than opening sub-district-level branch offices, I think commercial banks would do better to cooperate with the existing secondary banks," Subiakto said yesterday, after witnessing the sale of 651,000 rights shares by Bank Bali to 26 cooperatives from Java and Bali at the Equatorial Hotel.

Subiakto suggested that the cooperation between commercial and secondary banks take the form of share participation by commercial banks in secondary banks. Under such an arrangement, commercial banks would be obliged to help improve the management of the secondary banks, which mostly operate in rural areas, he said.

However, he cautioned that such cooperation should not lead to the acquisition of secondary banks by commercial banks.

Subiakto said that another form of cooperation would see commercial banks and cooperatives jointly establishing new credit banks.

"Such an arrangement would, in my opinion, result in a more efficient banking system in our country, especially at the village level," Subiakto said. "At the very least, such an arrangement would prevent commercial banks from taking more money from the villages to the cities."

According to some critics of Indonesia's banking sector, large commercial banks, by operating branch offices at the sub-district level, have been absorbing rural financial resources to help finance urban projects.

Subiakto praised Bank Bali's pioneering move of forming 18 secondary banks in cooperation with 91 cooperatives in Java and Bali, saying that the move helped cooperatives to gain access to modern banking management techniques and technology.

He added that Bank Bali's partnership with cooperatives also improves the image of cooperatives as business partners.

Bank Bali Chief Commissioner Djaja Ramli said that the 18 secondary banks involved in the scheme were established in 1992 with a paid-up capital of 1.8 billion (US$790 million), of which Rp 1.03 billion came from Bali and the remainder from the 91 cooperatives.

Ramli said that the 18 secondary banks currently have total assets of Rp 9 billion and that between January and August of this year they posted a before-tax profit of almost Rp 500 million.

"Thus, based on their return on equity, these 18 secondary banks are very, very healthy," he said, adding that, initially, Bank Bali had had to work hard to get the secondary banks off the ground.

Ramli said Bank Bali will soon establish 10 new secondary banks in cooperation with cooperatives. (rid)