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)