Prospect of microfinance remains strong in Indonesia
Indonesia is expected to sustain significant growth as banks and other financial institutions tap into unbanked entrepreneurs that make up 60% of small businesses July 05, 2011 | ResearchMicrofinance in Indonesia continues to grow in 2010 (12%YoY), driven by the increased demand from the underserved 50 million entrepreneurs (60% of total small businesses). Although microfinance has seen impressive growth of 75% in the period 2008-2010 to $31.2 billion, the proportion of total loans to GDP in Indonesia has remained the lowest in Asia, at 30% of GDP. Figure 1: Microloans in Indonesia (2006-2010) Please click to view enlarged image
Microfinance remains one of the most lucrative businesses of banks with three times the net interest margin of bigger corporates and two times the net interest margin of the retail lending business (9.8% for microfinance vs 3.4% for corporates and 5% for retail loans). Additionally, the revenue stream from microfinance has been more stable than corporate loans, which saw a decrease in demand in 2008-2009. To save on operating costs, microlenders in Indonesia have opted to focus on rural markets where hundreds of businesses congregate, as opposed to their counterparts in other countries that focus on dealing with inaccessible villages. The two largest players in Indonesia are Bank Mandiri and Bank Danamon. The former expanded its microfinance network through the establishment of numerous small simple branches (manned by 5 staff as compared to an average of 20 for a conventional branch). In addition, these branches have differing characteristics from their conventional counterparts such as:
Microfinance Bank Danamon Bank Mandiri
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