Growing Micro Finance Business

IriantoSenior Executive Vice President

Change Management BRI

MICRO FINANCE BUSINESS JOURNEY

THE FUTURE OF MICRO FINANCE BUSINESS

KEY SUCCESS FACTOR

MAIN DRIVERS

2

MAIN DRIVERS

3

4,7 4,7 4,7

5,04,9

Mar-15 Jun-15 Sep-15 Des-15 Mar-16

ECONOMIC GROWTH Q1 2016 FASTER THAN Q1 2015

National GDP Growth

4

If we want to build Indonesia's economy,then we have to build micro and small

business sector. If we solve their problems,

it means 99% of Indonesian business

issues solved

57,19 million Enterprises

(98,79%)

654.222Enterprises

(1,11%)

52.106 Enterprises

(0,09%)

5.066Enterprises

(0,01%)Large

Medium

Small

Micro

Source: Minister of Small, Medium Enterprise and Coorperative, 2012

MICRO CONTRIBUTION

Micro enterprise:- Sales: Rp ≤300 million S$ 31,000- Assets: Rp 50 million S$ 5,200Small enterprise:- Sales: Rp 2.5 billion S$ 260,000- Assets: Rp 500 million S$ 52,000

1 S$ = Rp 9,700

5

Empowering Micro Small Medium Enterprise (MSME) by providing appropriate products and services according to entrepreneurship maturity

Direct Grant

Revolving Funds

(Unfeasible & unbankable)

Subsidized Loans

(Feasible but unbankable)Fully Commercial Loans

(Feasible & bankable)

A

B

C

DFin

an

cin

g m

od

el C

om

mer

cia

l

Commercial line

Partnership LoanKKPE, KPENRP,

KUPS, KUR

Commercial(KUPEDES*, Kredit Ritel &

Menengah)

CSR *microcredit

Tabunganku(Basic Saving

Account)

Tabunganku(Basic Saving

Account)

BRI Simpedes (Saving Account)

Depobri (Time Deposit)

Girobri (Current Account)

Loan

Deposit

6

Enterprise GDP Contribution Banking Loan

December 2015 (Billion Rp)

BRI’s Loan December 2015

(Billion Rp)

5.066

52.106

57.843.615

13,72%

46,62%

39,66%

359.009

380.794

2.287.149

21.673

150.953

266.341

Medium

Corporate

Small & Micro

0,01%

0,09%

99,90% 12,58%

75,56%

11,86%

60,67%

34,39%

4,94%

57.900.787 100% 3.026.952 438.967TOTAL

*) Source: Minister of Small, Medium Enterprise and Coorperative, OJK, BRI annual report

BANKING CONTRIBUTION FOR THE NATION ECONOMY

7

Indonesia is the 4th most populated countries, and 16th biggest economy in the world, but it is at the middle amongst 148 countries in term of ICT

World Economic Forum analysis shows that there is a positive correlation between ICT readiness and economic competitiveness. There is also another research finds that every 10%

broadband penetration will positively impact on 1.21 – 1.38% GDP growth. Other research mentions that every one ICT job will create three employment in other sector. 8

Indonesia has competitive position on main infrastructure and digital content in SEA region, however it is left behind compare to other countries in the world

Source: McKinsey, Laporan Final, Telekomunikasi, Media, dan Teknologi (Maret 2015)

McKinsey proposes ten ideas to maximize socio-economic ICT impacts in Indonesia:1. Develop agenda and national ICT roadmap in-

line with Indonesia economy growth and social development priorities.

2. Remove infrastructure obstacles and improve outreach, cost and bandwidth.

3. Reduce ICT digital gap between urban and rural areas.

4. Make sure regulation and institutional framework are effectively respond ICT sector continuous development.

5. Develop up and down-streams ICT industry6. Grow number of ICT skilled-labours7. Encourage ICT usage for SMEs businesses8. Use ICT to support priority sectors9. Use ICT to improve public services10. Improve public service quality and efficiency

9

A game-changing Strategic Plan, focused on SMEs.

E-Commerce Roadmap, 31 strategic initiatives across 8 Ministries to ensure impactful growth of the Technopreneur sector. USD 130 Bio e-commerce transaction in 2020.

FDI friendly policies to attract Tech investing & founding of stronger domestic base of venture.

Facilitating greater access to funding i.e. KUR for SMEs to digitize, Venture Capital regulations.

Providing an attractive & easier exit strategy by deepening of capital market liquidity for technology listing.

Adoption of Pro Innovation Policies:

National program to create 1000 Digital

Technopreuneurs National, “Safe

Harbour” regulations to protect e-commerce players.

Government of Indonesia Programs Indonesia: The Digital Energy of Asia

10

MICRO FINANCE BUSINESS JOURNEY

11

Raden Aria Wirjaatmaja

PT Bank Rakyat Indonesia (Persero) Tbk. is the oldest bank in Indonesia. Its history was started back on 16 December 1895, when Raden Bei Aria Wiraatmaja founded a small

financial institution with the name of De PoerwokertoscheHulp en Spaarbank der Inlandsche Hoofden. The institution

was a mosque-based association, which function was to manage and disburse trusted fund to community in a very

simple scheme

16 DESEMBER 1895

12

After 120 years, BRI still focuses its business on micro and creating products and services accessible for the undeserved people in Indonesia.

13

MICROFINANCE TRANSFORMATION

BIMAS

1984 2007 2011 2014

COMMERCIALAPPROACH

GOVERNMENTSUBSIDIZED

LOAN

MOBILE OUTLET

AGENT BANKING BUSINESS

Channeling Government loan focused

on agriculture

Kupedes (micro loan)

&Simpedes

(micro saving)

Kredit Usaha Rakyat

(Government susidized loan)

Automobil Channel

(Teras BRI Keliling & Teras BRI Kapal 2015)

BRILink & T-Bank

(Branchless banking)

1969 1984 2007 2011 2014

14

WAKIL

DIREKTUR UTAMA

KONSUMERKOMERSIALKEUANGAN OPERASIONALKEPATUHAN

HUMAN CAPITAL

& MANAJEMEN

ASET

MANAJEMEN

RISIKO KREDIT KELEMBAGAAN

TRANSACTION

BANKING

KARTU KREDIT

KREDIT

KONSUMER

WEALTH

MANAGEMENT

AGRIBISNIS

BISNIS UMUM

BISNIS

BUMN 1

BISNIS

BUMN 2

HUBUNGAN

LEMBAGA 1

HUBUNGAN

LEMBAGA 2

TREASURI

AKUNTANSI

MANAJEMEN &

KEUANGAN

BISNIS

INTERNASIONAL

KEBIJAKAN &

STRATEGI

BISNIS MIKRO

PENGEMBANGAN

BISNIS MIKRO 1

PENGEMBANGAN

BISNIS MIKRO 2

BISNIS

PROGRAM,

PANGAN &

KEMITRAAN

BISNIS RITEL

& MENENGAH

MASS

BANKING

RESTRUKTURISASI

& PENYELESAIAN

KREDIT

ADMINISTRASI

KREDIT

ANALISIS RISIKO

KREDIT

MANAJEMEN

AKTIVA TETAP &

PENGADAAN

PROPERTI

PENGADAAN

BARANG & JASA

JARINGAN

SENTRA

OPERASI

LAYANAN &

CONTACT

CENTER

MANAJEMEN

RISIKO

KEPATUHAN

HUKUM

KEBIJAKAN &

PENGEMBANGAN

HUMAN CAPITAL

OPERASIONAL

HUMAN CAPITAL

PENGELOLAAN

PEKERJA

KONTRAK &

OUTSOURCING

BRI CORPORATE

UNIVERSITY

PERENCANAAN&

PENGEMBANGAN

TI

OPERASIONAL

TSI

SATELIT &

JARINGAN

INFRASTRUKTUR

OPERASIONAL

DIGITAL

BANKING

MIKRO

CHANGE

MANAGEMENT

SATUAN

KERJA

AUDIT INTERN

JASA

INVESTASI

SEKRETARIAT

PERUSAHAAN

DIREKSI & SEVP

DIREKTUR UTAMA

UKM &

KONSUMER

DEWAN KOMISARIS

TERAS BRI

KANTOR

INSPEKSI

KANTOR CABANG KHUSUS

KOMUNIKASI

PEMASARAN

JARINGAN &

LAYANAN

STRATEGI TI &

SATELIT

RAPAT UMUM PEMEGANG SAHAM

PENGEMBANGAN

PERUSAHAAN &

STRATEGI

KANTOR WILAYAH

PERUSAHAAN

ANAK*KANTOR CABANG

KCP KANTOR KAS

BRI UNIT

UNIT KERJA

LUAR NEGERI**

COMMERCIAL

BUSINESS

ORGANIZATION STRUCTURE

15

Microbanking Director

Microbanking Development Policy Division

Monitoring Microbanking 1

Division

Monitoring Microbanking 2

Division

Head Unit

Head Office

Account Officer

TellerCustomer

Service

BRI Unit

simplicity product & process

ORGANIZATION STRUCTURE

16

(S$ Billion)

Micro Loans

(Million)

• Total Micro loans increased 20.4% yoy, with number of borrowers reaching 8.2 million.

•New KUR support the micro loan growth. With outstanding reaching Rp 29.2 trillion and 1.9 million borrowers to compensate declining Micro KUR and Kupedes Rakyat

1,19 1,09 1,04 1,12 1,13

1,56 1,54

2011 2012 2013 2014 2015 Mar'15 Mar'16

3,4 3,4 3,9 4,3 4,4 4,4 4,2

1,5 0,5 1,3

1,9 2,2 2,7

3,0 1,1 2,5 0,7

0,0

0,9 1,9

5,3 5,6 6,5

7,3 7,9

7,48,2

2011 2012 2013 2014 2015 Mar'15Mar'16

New Micro KUR

New Retail KUR

Micro KUR

Kupedes Rakyat

Kupedes

Micro Loan

NPL – Micro Loans (%)

MICRO FINANCE BUSINESS - LOAN

Micro Borrowers

8,14 9,45 11,48

13,28 15,00 13,61 15,00 1,15

1,56

2,14 2,53

1,56 0,69 1,19

0,58 1,93 0,35

1,31 - 0,27

2,74

9,30 11,01

13,63 15,80

18,44 16,23

19,55

2011 2012 2013 2014 2015 Mar' 15Mar' 16

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Kupedes Micro KUR

(government subsidized loan)Plafond <= Rp 200 million <= Rp 25 millionInterest 20% 9%Minimal business experience more than 2 years more than 6 months

Tenor 1-5 years 1-5 yearsCredit Insurance/Guarantee No Yes

KUPEDES & KUR DIFFERENTIATION

18

MICRO FINANCE BUSINESS - DEPOSIT

Micro Deposits Micro Deposits Composition

(S$ Billion)Mar’15 Mar’16

• Micro deposits grew 13.4% yoy, lead by saving with 12.0% YoY

• Savings, with composition of 83.7%, still dominates micro deposits

0,8%

84,8%

14,4% 0,9%

83,7%

15,3%

0.8%

84.8%

14.4%

Demand Deposit Saving Time Deposit

11,0813,05

15,0717,13

19,80

16,82

19,07

2011 2012 2013 2014 2015 Mar'15

Mar'16

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TerasBRI - Performance TerasBRI - Contribution to Micro Loan & Deposit

Loan Deposit

• TerasBRI continuously shows strong performance with loan growth of 31.5% and deposit growth of 29.2% yoy.• Contribution of Teras BRI to Micro business performance keep

increasing, in Mar’16 reached 9.9% and 4.5% of total micro loan and deposit

0.9%

1.8%

3.5%3.8%

4.4%

4.0%

4.5%

2011 2012 2013 2014 2015 Mar'15 Mar'16

Deposit in Teras

3.2%

5.0%

7.6%

8.8%

9.8%9.1%

9.9%

2011 2012 2013 2014 2015 Mar'15 Mar'16

Loan in Teras

MICRO FINANCE BUSINESS – TERAS BRI

S$ Billion

2.95.3

10.0

13.5

16.9

14.3

18.8

1.02.3

5.16.3

8.5

6.5

8.4

1304

2128

2671

30673179

30783179

0

500

1000

1500

2000

2500

3000

3500

0

2

4

6

8

10

12

14

16

18

20

2011 2012 2013 2014 2015 Mar'15 Mar'16

Loan Deposit # of Teras BRI

0,3

1,03

0,55

1,39

1,74

1,47

1,94

0,10,24

0,530,65

0,88

0,67

0,87

20

# of Agent # of Transaction

(in Million)

Transaction Volume

(in S$ Billion)

32.4

83

35.9

55

50.2

59

27.6

43 5

9.3

18

Jun'15 Sep'15 Dec'15 Mar'15Mar'16 Jun'15 Sep'15 Dec'15 Mar'15Mar'16

# of Agent - Distribution # of Transaction - Distribution Transaction Volume - Distribution

In Mar’16, Java (55.0%) dominates the Agent

distribution

In line with the Agent distribution, Java dominates the total BRILink transaction

Java with 38%, dominates the

transaction volume

6,8

13,2

23,6

2,3

15,1

Jun'15 Sep'15 Dec'15 Mar'15Mar'16

MICRO FINANCE BUSINESS – AGENT BANKING BUSINESS (BRILINK) PERFORMANCE

Java

55%Sumatra

22%

Mid &

Eastern Part

23% Java

45%

Sumatra

29%

Mid &

Eastern Part

26% Java

38%

Sumatra

33%

Mid & Eastern

Part

29%

1,0

7

2,1

0

3,7

0

2,1

6

0,3

8

21

BANK WITH THE LARGEST NETWORK IN INDONESIA

22

KEY SUCCESS FACTOR

23

ACCEESSIBILITY

Outreach means the bank capability to serve more people. BRI provides widespread delivery channels in all over Indonesia to reach the unreachable.

Micro business communities are spreading all over Indonesia (more than 17.000 island). Most of micro businesses are located in rural and remote areawhile the infrastructur is very limited.

The presence of BRI provides financial solutions for the community that instill values are becoming competitive advantage to run the micro finance business sustainably.

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SUSTAINABILITY

The bank should be self-sufficient to generate sustainable profits so that the bank can maintain its commitment to continue to serve micro segment.

In addition, the bank's profits can continuouslysupport to develop innovative products in order to improve the quality of service or even to help micro businesses improve their performance.

1960’s

2011’s

2014’s

25

SOCIAL IMPACT

Source: University of Indonesia Research

1,21

24,72

38,4

84,84

2009 2012

Asset Sales (IDR Million)

Micro Credit Impact(Rp Juta)

2.2x

20.4x

The existence of microfinance should be able to provide a significantly positive effect, both on the financial aspects and social aspects.

Recent research conducted by independent research (University of Indonesia) in 2012 showed that the presence of micro-credit has a significant impact in terms of the increase in sales (2.2x) and assets (20.4x). In average each debtor creates job opportunity for 1,17 – 2 workers.

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THE FUTURE OF MICRO FINANCE BUSINESS

27

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

L A S Mobile

L A S

BRI’S INNOVATIVE PRODUCT & SERVICE JOURNEY

28

BANKING IS CHANGING

BANKING CHANNEL JOURNEY

29

BANKING LESS, LIVE MORE ...

30

Strengthen the traditional market community through digital service. BRI Teras Digital provides digital facilities and services for both traders and buyers to reach information about commodities & products and to conduct market

transactions digitally.

TERAS BRI DIGITAL

31

Conventional Frontliners

Transform to DigitalTeras BRI Pasar (Existing)

Self service banking (banking assistant)

TERAS BRI DIGITAL

32

Backdrop Logo Teras BRI DigitalSmart TV LED 40”

All in One (AIO) PC Touchscreen21”

EDC

TERAS BRI DIGITAL - DESIGN

33

Teras BRI Digital Pasar Bringharjo Teras BRI Digital Pasar KrangganTeras BRI Digital Pasar Gede

TERAS BRI DIGITAL

34

Product and price real time information Connecting sellers and buyers Traditional market database

TERAS BRI DIGITAL

35

ACCESSIBILITY – INNOVATION FOR FINANCIAL INCLUSION

1. Balance Information

2. Transfer

3. Top up Mobile Phone Voucher

4. Payment Points

BRILink Features:

CASH

BRILink Advantages:

Real time online Fast and easy transaction Safe by using customer PIN Variety of transactions (features and facilities) Can be accessed by any other bank ATM card users who are members

of the LINK, ATM Bersama and Prima Network

1. Cash Deposit

2. Payment Loan

3. Cash Withdrawal

1. Balance Info2. Payment and Purchase3. Transfer4. Electronic Access Code

(electronic token)5. Check Agent Validity6. Registration7. Top Up

Banking Services in BRILinkAgents

Cash Deposit & Cash Withdrawal

Payment Point (electricity, phone, loan, etc)

PurchaseTop up mobile phone voucher & electricity voucher, buy goods, etc.

Transfer (to intern al bank & outside the bank)

No need bank saving account to do transaction

36

LAS MOBILE

Loan Approval System (LAS) MobileAccount Officer is using Laptop on the spot to analyze potential customer (time & process efficiency)

37

BRI Digital Village

The concept of installing Wifi to provide high speed internet in the middle of the village. Internet would help rural people to easily reach more information

and knowledge. Moreover, various information such as education, health, agribusiness, economics, etc. would improve their productivity and even

increase their standard of living. By encouraging others to prosper, BRI actually is working to sustain and even increase its performance.

BRI DIGITAL VILLAGE

38

THANK YOU

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