Rural banks enjoy higher profit: BI
Rural banks enjoy higher profit: BI
JAKARTA (JP): The net profit of rural banks rose to Rp 116
billion (US$12.08 million) last year or 15 times higher than the
Rp 7 billion recorded in 1999, Bank Indonesia said on Wednesday.
Bank Indonesia director for rural bank supervision Abdul Salam
attributed the banks' performance to the rural sector's stronger
resilience against the economic crisis.
"It shows that micro businesses have enjoyed a speedier
recovery compared to those in the large corporate sector," Abdul
said at a news conference on Bank Indonesia's regulation of the
government guarantee blanket on rural banks' deposits.
Unlike public banks, rural banks have shown over the last two
years a healthy increase of channeled credits, coupled with a
drop in non-performing loans, according to a Bank Indonesia 1998-
2000 report on rural banks.
Abdul said the banks' credits and assets grew last year by
about 40 percent compared to 1999.
"Credits channeled to rural economies last year rose to Rp 3.6
trillion, whereas total assets amounted to Rp 4.7 trillion," he
said.
"The improvement of the banks' financial condition shows that
public confidence in these banks has recovered," Bank Indonesia's
report said.
The banks' non-performing loans fell to 16 percent this year,
compared to 22 percent the year before, and 29 percent in 1999,
the report said.
"The drop in non-performing loans was due to debt
restructuring and the write-off of bad debts from banks whose
operations were suspended," it said.
The report also said that the banks' productive assets stood
at more than 90 percent of their total assets, showing this
sector's potential for further profit growth.
"The economic crisis did not hamper investors' interests in
the rural banking sector, as is evident in the continued flow of
applications for banks' establishment," it said.
Abdul explained that the establishment of a rural bank
requires founding capital of at least Rp 500 million.
For banks in Jakarta and the Greater Jakarta area, the minimum
capital requirement is Rp 2 billion, while Rp 1 billion is needed
for banks located in the capitals of provinces.
Abdul said Indonesia owned 2,419 banks in outlying areas,
which mainly channel credits worth less than Rp 3 million.
More than 1,800 banks, or 74 percent, are located on Java.
He said in total the banks serve 1.7 million small and middle-
scale clients, with savings accounts for 2.2 million people.(bkm)