Strategi Perusahaan

ASIAN INSTITUTE OF MANAGEMENT
EUGENIO LOPEZ FOUNDATION
BANK W I D Y A KARYA
ASIAN INSTITUTE. O F MANAGEMENT

CERTIFICATE OF APPROVAL
in partial fulfilment of the
requkmmt for the degree of
MASTER IN MANAGEMENT
I
1
this managememt research rqwrt emtitled
A CORPORATE STRATEGY F O R
has been prepared arrd submitted by
ACHMAD E.FFE.NDY ABDURACHMAN

and has ?xmnaccepted following a
successful defense before a duly
ccrnztituted pame1 whose signatures
appear b l o w
Date
Chairman
..............................
DEAN HORACIO M. BORROMEO JR.

Adviser
---------- ------------------MR. A. A. SIDARTO, Ph.D.

External Panel Member
----------Dete
Date
D u e t o t h e B a n k i n g A c t 1P&7
t h e name
c3F
t h e company, p c o p l e ,
p l a c e s and f i g ~ . ~ r c ~
h a v e b e e n disguised f o r - s e c u r i t y r e a s o n .
W i t h t h e completion o f
t h i s thesis,
I would l i k e t o
express
"
my s i n c e r e s t : g r a t i t c t d e t o t h e f o l l o w i n g :
1.
Board
of
giving
skill
2.
Planayiny D i r e c t o r s o f
Bank
the upportunity t o
develop
me
.in
Indonesia,
my
i n t h e A s i a n I n s t i t u t e o f Pianagement,
Pfanagement and S t a f f af
Jakarta,
far a l l
1I
for
managerial
Pianila.
vetri.acts p r i v a t e n a t i o n a l
'
banks
the assistance i n information
and
data gathering.
3,
F r o f . Gabino &#, Mendara,

PiRR Cha i rma n
A s i a n I n s t i t u t e o f Management
Dean Uur-acio M - Borromeo J r . , PIRR A d v i s e r and
A s i a n I n s t i t u t e o f Management
M r . Amal Abadi S i d a r t u F h D., T h i r d P a n e l i s t ,

S e n i o r P r u j e c t Ecanumist, A s i a n Development Bank,
f o r t h e i r invaluwble time,
4.
All
help
guidance,
u t h e r s who d i r e c t l y o r i n d i r e c t l y
in
f i n a l i z i n g t h i s t h e s i s and
m e n t i o n them
and a d v i c e .
had
not
of
I
great
pussible
all,
Fiztnila, 3 A p r i l
1989
Achmad E f f e n d y A.R
ta
II
EXECUTIVE SUMMARY
The b a n k i n g i n d u s t r y
i n Indonesia start.ed i n
l a t e 1 9 4 0 ' s w i t h t h e e s t a b l i s h m e n t o f t h e Javasche
S t a t e banks o f n a t i o n a l o r i g i n - B a n k
and
Negara,
likewise
established.
number o f
p r i v a t e banks opened b u s i n e s s a t t h e
and
I n the private
savings
Bank.
Negara I n d o n e s i a ,
Industri
a postal
the
Bank
bank-were
sector,
large
o f t h e 1950'5.
By t h e end o f
1987,
beginning
t.here were 65
private
banks c o n s i s t i n g o f 1.0 f o r e i g n exchange p r i v a t e banks and
55 nan-f a r e i g n p r i v a t e hanks.
f r o m t h e l a t e b O ' s u n t i l mid 1983,
Beginning
interest
rate
on d e p o s i t s and l o a n s a s w e l l
c ~ e i l i n gwere p r e s c r i b e d by t h e government.
as
the
credit
Meanwhile,
i n
June 1983 t.he government i n t r o d u c e d a m a j o r r e f o r m i n t h e

financial
sector.
Indonesi.a,
The
Monetary
t h e C e n t r a l Bank,
banking
system,
control,
and
Board,
partially
ttirough
deregulated
removed c r e d i t . c e i l i n g ,
began
1i.quidity credits,
to
phase
out
Bank
interest
Bank
the
rate
Indonesia's
e x c e p t f o r c e r t a i n p r i o r i t y programs.
i
~
However,
some
banking
on October 1988,
and
monetary
t h e government
regulations
relaxed
thus
further
opening some o p p o r t u n i t i e s t o t h e banking i n d u s t r y .

regulation
offices,
scheme f a c i l i t a t e t h e opening o f
e s t a b l i s h m e n t o f new p r i v a t e banks,
new
1I
This
branch
expansion o f
I
foreign
joint
exchange p r i v a t e banks,
the
15
parties
r e s e r v e d e p o s i t s r e q u i r e d by
percent t o 2 percent o f
f o r . demand,
time,
also
Central
Bank
liabilities
and s a v i n g s
and/or
It
v e n t u r e w i t h f o r e i g n banks i n I n d o n e s i a .
lowered
from
and o p e n i n g o f
to
,I
third
deposits.
15
I
percent
t a n i s imposed,
however,
on income
earned
from
the deposits.
These
with
rates
regulations,
coupled
t h e e x i s t e n c e o f many banks o f f e r i n g h i g h
interest
further
changes
i n banking
spurred the competition
in
the
banking
II
1
industry.
I
I
I n spite of
s t i l l
t h i s keen c o m p e t i t i o n ,
leading w i t h i n the industry.
For
s t a t e banks a r e
instante,
their
deposits,
percent
time deposits,
i n
and s a v i n g s d e p o s i t s ,
was
63.6
1987. 'This i s because s t a t e banks
not
only
have a l a r g e r t o t a l , a s s e t s base,
branch n e t w o r k s .
b u t t h e y a l s o have w i d e r
On t h e o t h e r hand,
t h e share o f
private
banks i n t . o t a l d e p o s i t s f o r t h e p a s t f i v e y e a r s i n c r e a s e d
frum
17.5
was
p e r c e n t i n 1983 t o 23.2
p e r c e n t i n 1987.
mainly a t t r i b u t e d t o aggressive
such
funds
This
mobilization
a s o f f e r i n g h i g h i n t e r e s t r a t e on t i m e d e p o s i t s
i n
t h e market.
W i t h i n t h e p a s t f i v e years,
Bank Widya Karya (BWK)
has been i n c r e a s i n g i t s t o t a l a s s e t s ,
In
t h i s new b a n k i n g environment,
strengthen
banks.
advantage o f .
In
not
all
and l o a n s .
t h e need f o r EWK i s
i t s b u s i n e s s i n o r d e r t o compete
However,
objectives,
deposits,
opportunities
to
with
other
be
taken
can
BWK s h o u l d match t h e o p p o r t u n i t i e s w i t h i t s
i t s strengths,
and i t s weaknesses.
o r d e r t o strengthen i t s business,
the
writer
proposed t h a t BWK s h o u l d improve i t s s e r v i c e s i n
savings
d e p o s i t s and p r i o r i t y l o a n s .
provide
This strategy w i l - l
BWK new s o u r c e s o f f u n d s a t cheaper c o s t .
iii
Enhancing
through
the
training
graduat.ed
for
quality of
prngram
cevgain
the
and
present
employees
recruiting
c o l leges
managerial
positions
was
also
recommended. T h i s i s because p r o f e s s i o n a l . i s m i s e s s e n t i a l
f o r s u r v i v a l i n a h i g h l y competition.
On t h e l o n g term,
the
branch
exchange
operations.
network
private
The
i t was suggested t h a t BWK expand
a s w e l l as
bank
so
that
operate
it
implementation o f t h e
as
foreign
widen
its
strategies
w i l l
can
t a k e f i v e years.
In
doing
so,.
bWK w i l l be a b l e
to
survive
compete w i t h i n t h e b a n k i n g i n d u s t r y i n I n d o n e s i a .
and
TABLE OF CONTENTS
Page :
EXECUTIVESUMMARY
'TABLE OF C'ONT'EN-rS
LIST OF EXHIBITS
LIST' OF:
TABLES
................
....... .........
.................
......,...........
PART ONE : INDUSTRY ANALYSIS

CHAPTER 1.
INTRODUCTION
........
O b j e c t i v e s o f t h e study
.
Scope o f t h e s t u d y
...
L i m i t a t i o n o f t h e study
.
Methodology
......
1.1. Background
1.2.
1.3.
1.4.
1.5.
CHAPTER 2.
....
. . .. .
....
....
....
E N V I R 0 N M E N T
.....
2.1.
The Indonesian Economy
2.2.
The B a n k i n g L I n d u s t r y i n I n d o n e s i a
2.2.1.The
2.2.2.
C u r r e n t Banking System
. . .
. ..
CI
~.2,1.1.
C e n t r a l Bank
2.2.1.2.
S t a t e Banks
2.2.1.3.
P r i v a t e Banks
2.2.1.4.
F o r e i g n Banks
2.2.1.5.
Development Banks
2.2.1.6.
Savings Banks
2.2.1.7.
R u r a l Banks
..
..
..
...
Other F i n a n c i a l I n s t i t u t i o n s
I
i
v i
xi
I
1
:-:iii
I-
CHAPTER 3. MARKET A N A L Y S I S O F SOURCES

O F LOANABLE FUNDS I N BANKINO INDUSTRY
3.1.
...
18
.......
19
M a j o r Market o f Sources o f f u n d s
3.2.1.
Type' o f D e p o s i t s
3.2.2.
...
...
3.2.1.2.
Time D e p o s i t s
3.2.1.3.
Savings Deposits
..
M a j o r Customers o f D e p o s i t s
.
3.2.2.1.
Demand D e p o s i t s
. .
- 2.2.2. Time D e p o s i t s . .
.
3.2.2.3.
Savings D e p o s i t s .
3.2.1.1.
A.
3.3.
CHAPTER 4.
O t h e r Sources o f f u n d s
.
.
.
.
.
.
.
........
21
22
25
26
27
29
31
.-'
-.a7.7'
MARKET FOR LOANS I N BANKING INDUSTRY

4.1.
34
4.1.1.
34
4.1.2.
4.2.
...........
P r i o r i t y Loans
........
N o n - P r i o r i t y Loans
......
Type o f Loans
O ~ r t s t a n d i n go f Bank C r e d i t
by Economic S e c t o r s
4.3.
M a j o r Customers o f
4.4.
C r e d i t s by t y p e
.........
Credits
....
.........
=
39
36
37
39
CHAPTER 5. C O M P E T I T I O N I N BhNKING INDUSTRY
5.1. Competitors' Performance
5.2.
Range of B a n k Services
5.3.
Key Succe$s Factors
......
......
.........
42
46
47
CHAPTER
6.1. Analysis of Spread
6.2. Opportunities
6.3. Threats
.........
.........
.........
50
52
56
PART I 1 : COMPANY A N A L Y S I S
CHAPTER 7. THE NEW GOVERNHENT P O L I C Y
7.1.
Eac kgro~rnd
7.2.
The Highlights of the
7.3.
The Impact of Policy
CHAPTER 8. P T BfiNK WIDYA KARYA
.........
Policy
.....
.........
62
.....
64
59
59
(BWK)
8.1. Historical Background
. ...
.........
Str~lcture . . . . . . .
8.2. The Objectives of EWK
66
8.5. Organizational
67
vii
CHAPTER 9. PERFORMANCE OF BWK
..
9.1.1. Demand D e p o s i t s .
9.1.2. T i m e Deposits
.
9 -2. Lending F'erfor-manc:e
.
9.3. Financial H i g h l i g h t s
.
9.1.
CHAPTER 10.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
..
..
..
..
..
...
Basic Considerations . . .
Strategy Alternatives
..
11.3.1. S t a t u s q u o . . . .
11.3.2. Merger
....
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
F u n d s Mobilization
.
.
.
.
.
70
71
73
75
79
B A N K ' S STRENGTHS AND WEAKNESSES
CHAPTER 11. T H E PROPOSED STRATEGY
11.1.
11.2.
11.3.
Strategic Situation
11.3.3.
11.4.
Expansion
Recommendations
11.4.1.
11.4.2.
..
.
.
.
.
of t h e business
.
.........
Increase t h e r a n g e of bank
services
a. Priority L o a n s
b. S a v i n g s D e p o s i t s
c. Branch Networks
. . m . .
d. Foreign E x c h a n g e O p e r a t i o n s
...........
...
.....
Improve t h e quality of personnel
viii
.
.
.
.
.
.
85
88
89
89
89
YU
91
92
(9 .7
74
95
96
9.7
1,
CHAPTER 12. T H E I M P L E M E N T A T I O N P L A N
12.1.
12.2.
..........
12.1.1. R a n g e o f S e r v i c e s
.....
.....
,a. P r i o r i t y L o a n s
b. S a v i n g s D e p o s i t s . . .
1 2 . 1 . 2 . B r a n c h Off i c e s
.....
12.1.5. F o r e i g n E x c h a n g e Bank
...
12.1.4. Per-sonnel Development
...
Financial Aspect
........
12.2.1. New.Cwst S t r u c t u r e . . . . .
12.2.1.1. E x p e n s e s . . . . .
a. I n t e r - e s t
...
b. P e r s o n n e l . . .
c. Others
....
12.2.1.2. I n c o m e s
....
12.2.2. F i n a n c i a l P r o j e c t i o n s
...
12.2.3. S e n s i t i v i t y A n a l y s i s
.
1 2 . 2 , 4 . Time S c h e d u l e
.
P l a n of Action
ix
- . .ru-
_--
';rc
- ,- -
\ _ - -
d
__.-_
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
98
98
98
99
99
100
101
102
102
102
102
103
104
109
105
ll:)&l
109
{I
LIST OF EXHIBITS
Exhibit :
Page :
1. Number o f banks and t h e i r o f f i c e s

i n I n d o n e s i a . . . . . . . . . . .
2.
3.
.......
Consolidated balance sheet o f d e p o s i t s
moneybanks
..................
The g r o w t h o f d e p o s i t s by group o f banks . . . .
7.
......
Rupiah t i m e d e p o s i t s by m a t u r i t y
.......
M a j o r customers o f d e p o s i t s b a n k i n g i n d u s t r y . .
M a j o r customers o f demand d e p o s i t s s t a t e banks .
8.
Major customers o f demand d e p o s i t s p r i v a t e banks
9.
M a j o r customers o f demand d e p o s i t s f o r e i g n banks
4.
5.
6.
'The i n t e r e s t r a t e s o f t i m e d e p o s i t s
10. M a j o r customers o f demand d e p o s i t s l o c a l

development bank
11.
12.
................
M a j o r customers o f t i m e d e p o s i t s
banking i n d u s t r y . . . . . . . . . . . . . . . .
..
banks .
banks .
M a j o r customers o f t i m e d e p o s i t s s t a t e banks
13. M a j o r customers o f
time deposits p r i v a t e
14.
Iqajor customers o f t i m e d e p o s i t s f o r e i g n
15.
M a j o r customers o f
development banks
time deposits l o c a l
...............
,
111
Exhibit
Page :
t.
126
...............
127
16. O u t s t a n d i n g banks' c r e d i t s by group o f banks and

economic s e c t o r s
..............
17.
Interest rate of non-priority

by group m f banks
18.
loans
I n t e r e s t r a t e and s e l f - f i n a n c i n g r e q u i r e m e n t
o f Bank I n d o n e s i a ' s r e f i n a n c i n g f a c i l i t y
....
23.
....
Organizational Chart o f B W K
..........
Balance s h e e t o f B W K , 1984 - 1987
.......
Incame s t a t e m e n t o f BWE, 1984 - 1987
.....
P r o j e c t i o n of f i n a n c i a l h i g h l i g h t s 1989-1993 . .
24.
Projection of
19.
The r a n k i n g o f banks,
20.
21.
22.
25
28.
27.
128
129
December 1987
130
131
132
133
income s t a t e m e n t o f BWK 15'89-1993
P r o j e c t i o n o f income s t a t e m e n t o f
S e n s i t i v i t y analysis
I m p l e m e n t a t i o n Time Schedirle
EWK,
........
........
135
134
137
138
LIST OF TABLES
Page n
Table :
1. B a n k i n g ' s f u n d s
2. D e m a n d d e p o s i t s
..............
by bank g r o u p
......
3. T i m e d e p o s i t s by b a n k g r o u p
......
4. B a n k s c r e d i t by t y p e o f c r e d i t a n d
economic sector
.... . .......
5. B a n k c r e d i t by t y p e ( w o r k i n g c a p i t a l &
investment credits)
6.
T h e financial
............
highlights
.........
7. Cast. a f l o a n a b l e f u n d s a n d s p r e a d by b a n k
gr-oup
.................
8. D e m a n d a n d t i m e d e p o s i t s a f B W K . . . . . .
9. M a j o r c u s t o m e r s o f d e m a n d d e p o s i t s o f E W K .
10. M a j o r c u s t o m e r s a f t i m e d e p o s i t s o f B W K . .
11. O u t s t a n d i n g c r e d i t
sectors.
12. F i n a n c i a l
based o n ecanomic
.................
highlights of EWK . . . . . . . .
CHAPTER 1
INTRODUCTION
1.1.
Background
Bank
Widya Karya (BWK) i s one o f
non-foreign
private
national
Indonesia.
I t was founded
the
fifty
commercial
five
banks
in
i n J a k a r t a i n 1967 by
non
d
indigenous
entrepreneurs,
w i t h head o f f i c e
I t s two b r a n c h o f f i c e s a r e a l s o i n J a k a r t a .
i n
Jakarta.
A t t h e end o f
June 1988 Bank Widya Karya ranked t h i r t y s e v e n t h i n terms

of
total
assets
among
non-foreign
exchange
private
n a t i o n a l commercial banks.
From
1967
management.
was h i r e d
t o 1984 t h e bank was r u n by
However,
and
i n 1985 a new P r e s i d e n t
family
Director
s i n c e t h e n BWK t r i e d t o o p e r a t e t h e
bank
more p r o f e s s i o n a l l y .
Meanwhile,
a
major
reform i n t h e f i n a n c i a l
Board,
through
partially
credit
i n June 1983 t h e Government
Bank
Indonesia,
deregulated
ceiling,
interest
the
sector.
the
banking
introduced
The
Monetary
Central
system,
rate control,
and
Bank,
removed
began
to
phase out Bank Indonesia's

certain
priority
industry
liquidity credits, except
programs.
Since
then,
has become mdre competitive. A
the
banking
bank should
more effective and efficient in mobilizing funds

providing t h e full range of
for
and
be
in
banking services.
O b j e c t i v e s o f the Study
1.2.
Objectives of t h e study a r e :
(1) To
review
corporate
t h e objectives of B a n k Widya
and
organizational
operations, and
(2)T o
evaluate
Karya,
structures,
i t s strengths and weaknesses.
the
company's
corporate
opportunities
and
threats.
(3)To
formulate
strengthening the company.
strategy
for
its
its
Scope of the study
1.3.
The
scope
of
(1) A r e v i e w o f
are :
study
t h e banking i n d u s t r y
i n Indonesia.
( 2 ) A review and a n a l r s i s of s o u r c e s o f fund=, market

f o r f u n d s , and s p r e a d i n banking i n d u s t r y .
(3)
A rev'iew and e v a l u a t i o n o f
t h e BWK's
objectives,
o p e r a t i o n s and o r g a n i z a t i o n a l s t r u c t u r e .
1.4.
Limitation of the Study
The l i m i t a t i o n s o f t h i s s t u d y are a s f o l l o w s :
(1) The
study
performance
takes
in
into
the
account
past
four
only
BWU's
the
years
(1984
1987).
(2) In
the
focused
analysis
on
of
competition,
c e r t a i n non-foreign
the
study
exchange
only
private
commercial b a n k s .
t i m e f o r gathering data
and
i n f o r m a t i o n were n o t i n c l u d e d i n i n t e r v i e w s w i t h
the
( 3 ) Due t o t h e l i m i t a t i o n o f
BWK b r a n c h m a n a g e r s .
(4) Data
and
information
which
are
classified
as
private and confidential by the bank and or by the

General
s tcrdy
1.5.
Qct of 1967 were excluded for
Banking
the
Methodology
The
relevant
methodology
primary
used
was
content
analysis
and secondary data. The
primary
of
data
were collected from :
( 1 ) Interviews and discussions with
Board
of
Directors,
General Managers, Managers and officers of Bank Widya

Karya.
( 2 ) Interviews
with
Bank
Indonesia's
key
managers,
several managers of commercial banks and the chairman

of the national private commercial banks association.
(3) BWK's records such as financial statement,
income
statement, annual report and other records.

The
secondary
data
were
publications
from
Bank.
Indonesia,
Statistics,
National
Private
collected
from
Central
Eanks
other relevant institution publications.
several
Bureau
Association
of
and
CHEIPTER 2
ENVIRONMENT
2.1.
The Indonesian Ecanomy
The
Indonesian
economy
i s based
primarily
on
small holder agriculture followed by t h e exploitation

oil,
natural g a s and other mineral resources.

retail trade is the third largest
and
of
Wholesale
economic
sector.
Manufacturing has been growing rapidly in recent years t o

become t h e fourth largest economic sector and has assumed
an
increasingly important role in
Indonesia's
economic
development.
From 1970 t o 1981, t h e Indonesian economy grew a t
an
average rate of 8.0 percent per annum in
owing
markets
real
terms
to t h e quadrupling of oil and g a s prices in
world
and
strong
growth
in
the
manufacturing,
construction and agricultural sectors. In 1982, however,

t h e economy began to suffer t h e
world economic recession and
rate
adverse consequences
decline in oil prices.
of growth in GDP Sell from 9.9 percent in
2.2 percent in 1982.
1981
of
The
to
T h e external payment position also
came
under
i n c r e a s i n g p r e s s u r e as t h e
d e f i c i t widened from B 2.8
current
account
FY 1981/82 t o % 7.0
billion i n
b i l l i o n i n F Y 1982/8Sz.
Recognizing
t h e reduced a v a i l a b i l i t y o f
external
Government u n d e r t o o k a s e r i e s o f measures
resources,
c u r t a i l p u b l i c spending and t o i n c r e a s e t h e
contribution
o f t h e p r i v a t e s e c t o r t o budget revenues and t o

In
1983,
s i g n i f i c a n t measures were t a k e n
percent
devaluation i n t h e value o f t h e
t h e U.S.
d o l l a r and
series
domestic
tax
facilitate
through
receipts
such a s
Rupiah
designed
became law
i n
market o p e r a t i o n s ,
new
27.6
against
system.
to
early
t h e management o f t h e domestic
open
exports.
d e r e g u l a t i o n o f t h e banking
o f t a x r e f o r m measures
to
increase
1984.
money
To
supply
instruments
were
i n t r o d u c e d i n F e b r u a r y 1985.
The government has a c t i v e l y encouraged t h e

of
non
April
o i l exports.
1985
operations
P r e s i d e n t i a l I n s t r u c t i o n No.
introduced
and
gr0wt.h
a series
t h e customs s e r v i c e
of
reforms
i n
of
port
which have enhanced
the
competitiveness
of
Indonesia's non-oil
exports
by
r e d u c i n g c o s t o f t r a d e t r a n s a c t i o n s as w e l l as i n c r e a s i n g
the effectiveness of duty c o l l e c t i o n .
The
economy
structural
oil
(LNG)
responded
a d j u s t m e n t measures.
exports,
to
higher exports o f
in
the
the
liquefied
non-
natural
gas
contributed t o
c u r r e n t account d e f i c i t
b i l l i o n i n F Y 1983/84 t o S 1.8
various
A s t r o n g growth i n
and a marked decrease i n i m p o r t
reduction
price
well
from
4.2
45
i n F Y 1985/86.
To
counter the p a r t i c u l a r l y r a p i d d e c l i n e i n
the
of
oil
the
competitiveness
during
of
the
Indonesia's
f o r e i g n investment i n f l o w s .
relaxing
first
half
of
exports
I n May 1986,
1986,
and
new
encourage
regulations
import r e s t r i c t i o n s f o r export production
announced,
and r e s t r i c t i o n s a f f e c t i n g i n w a r d
f l o w s from f o r e i g n i n v e s t o r s were s u b s t a n t i a l l y
I n addition,
as p a r t o f
the
were
investment
reduced.
continuing e f f o r t s t o adjust
t h e economy and t o improve I n d o n e s i a ' s c o m p e t i t i v e n e s s i n

the
international
markets,
the
Government
has
taken
f u r t h e r measures such as d e v a l u a t i o n o f t h e r u p i a h by
percent
was
a g a i n s t t h e U.S.
d o l l a r i n September 1986.
f o l l o w e d i n Octob4r 1986 w i t h a package o f
31
This
measures
i n t a r i f f s which were reduced on o v e r 150 i t e m s .
The
increase
government
the
economic
measures
activities,
encourage t h e non o i l e x p o r t s .
government
efforts,
above were
mainly
particularly
I n order t o support
t h e bank i n d u s t r y has
to
to
these
opportunities
t o h e l p i n t h e s e economic a c t i v i t i e s .
2.2. The Banking Industry in Indonesia

The
beginning
banking
i n
Javasche Bank.
industry
t h e l a t e 1940 w i t h
Bank
bank
also established.
large
number
Indonesia
the
had
establishment
its
of
S t a t e banks o f n a t i o n a l o r i g i n Bank Negara
Indonesia,
were
i n
I n d u s t r i Negara,
a postal
I n the
o f p r i v a t e banks opened
b e g i n n i n g o f t h e 1950's.
private
and
savings
sector,
business
at
a
the
In
which
the
l a t e 1960's,
the
new
order
government,
i n h e r i t e d an economy i n a s t a t e o f near
stabilization
and
the
rehabilitation
of
collapse,
the
damaged
productive
c a p a c i t y a s we1 1 a5 i n f r a s t r ~ t c t u r e . I n
order
to
badly
create
needed
for
b e t t e r f i n a n c i a l system
the Acts o f
including the
and t h e C e n t r a l Bank a c t o f
1968 r e - e s t a b l i s h i n g
A t present,
the
new
Banking
1968 as w e l l
as
t h e f i v e s t a t e banks.
The C u r r e n t Banking System
2.2.1.
five
the
f a r r e a c h i n g banking r e f o r m s
a s e r i e s o f new s t a t u t e s ,
A c t o f 1967,
was
t h e r e h a b i l i t a t i o n o f t h e economy,
government had t o c a r r y o u t
through
which
banks i n I n d o n e s i a a r e c l a s s i f i e d i n t o
c a t e g o r i e s according t o t h e i r functions,
C e n t r a l Bank,
savings
commercial banks,
banks and r u r a l banks.
namely
development
From 1967 t o October 1988,
the
banks.
t h e Government was n o t a l l o w e d
t o open any new bank i n I n d o n e s i a .
banks,
Based on ownership,
banks a r e c l a s s i f i e d i n t o s t a t e banks and p r i v a t e
Central Bank
2.2.1.1.
The C e n t r a l Eank i s t h e Eank I n d o n e s i a ,

1933
as a r e s u l t o f the n a t i o n a l i z a t i o n of
the
founded i n
Javasche
Hank N.V.
The
Governor
o f Bank
Indonesia
managing
d i r e c t o r s a r e a p p o i n t e d by t h e
Governor
i s
member
of
a l s o a member uf
the
the
Monetary C o u n c i l
and
seven
President.
Cabinet,
and
i t s
of
the
The
ex-officio
Economic
S t a b i l i z a t i o n Council.
Pursuant
f u n c t i o n s of
to
the
Act
No.
13,
1968
the
main
Bank I n d o n e s i a a r e n
t o regulate,
t o s a f e g u a r d and t o m a i n t a i n t h e s t a b i l i t y
o f t h e v a l u e o f t h e Rupiah;
to
well
promote t h e smoothness o f n a t i o n a l
development
a5 t o expand employment o p p o r t u n i t y i n
improve t h e s t a n d a r d o f
order
as
to
l i v i n g o f the people.
The o t h e r f c t n c t i o n s o f Bank I n d o n e s i a as a C e n t r a l
Hank a r e :
h c t s as t h e Government c a s h i e r and
banker,
holding
t h e o f f i c i a l f o r e i g n r e s e r v e of t h e Republic as w e l l as
the
the
Government ' s
treasury
accounts.
Government on economic p o l i c y .
I t
I t also
advises
supervises
and r e g u l a t e s o t h e r banks.
c r e d i t to
Provides
liquidity
intended
t o s u p p o r t t h e financing of c e r t a i n
are
which
the
banks
c a t e g o r i z e d as h i g h p r i o r i t y
agricultural
sector, non-oil
exports
which
are
projects
such
as
the
etc.
activity,
S i n c e J u n e 1 9 8 3 t h e l i q u i d i t y c r e d i t is g r a n t e d by Bank.
I n d o n e s i a o n l y t h r o u g h t h e p r i o r i t y c r - e d it scheme.
I n d o n e s i a a s t h e C e n t r a l Bank p l a y s
Bank
i m p o r t a n t role i n t h e b a n k i n g
has
an
industry.
S t a t e Banks
2.2.1.2.
T h e r e a r e f i v e s t a t e commercial b a n k s o p e r a t i n g i n
Indonesia
(BDN),
Bank Bumi Daya (BBD),
Bank E k s p o r I m p o r I n d o n e s i a
Bank
Dagang
(BEII),
Negara
Bank N e g a r a
I n d o n e s i a 1 9 4 6 (BANK BNI 1 9 4 6 1 , a n d Bank R a k y a t I n d o n e s i a

(BWI).
Each
s t a t e commercial bank g i v e emphasis
on
the
b a n k i n g s e r v i c e s 0 5 s p e c i f i c economic s e c t o r s :
(1) Bank
in
Negara I n d o h e s i a 1946,
as
1946
financing
a Central
at
Rakyat
concentrates
husbandry,
hotel,
Indonesia,
on
established
present
provides
manufacturing
restaurant,
etc.
established
small holder
and
i.e.,
a s w e l l as o t h e r s e c t o r s ,
construction,
( 2 ) Bank
Bank,
p a r t i c u l a r l y f o r the
i n d u s t r i a l sector,
trade,
originally
in
agriculture,
1946,
animal
c o o p e r a t i v e , 'and r u r a l a c t i v i t i e s .
( 3 ) Eank Bumi Daya,
established
f i n a n c i n g mining,
i n 1959, c o n c e n t r a t e s
plantations,
and t h e p r o d u c t i o n
on
of
e x p o r t commodities.
(4)Bank
Dagang
mining
Negara,
projects
and
established i n
the
1960,
production
finances
of
export
commodities.
( 9 ) Eank
Ekspor
Impor I n d o n e s i a ,
provides i n export-import
established
financing.
i n
L968,
hlthough
particular
each
state
economic s e c t o r ,
commercial
bank
has
e v e r y s t a t e commercial
a
bank
i s a l s o a b l e t o a s s i s t t h e other- s e c t o r s .
fit
t h e end o f March 1985 s t a t e
numbered 727 branch o f f i c e s .

number
of
branch
offices,
10.6
of
March
1987
Among
banks
I n t h e p a s t f i v e years,
the
by
53
meaning t h a t average g r o w t h p e r y e a r
i s
s t a t e commercial banks has
branch o f f i c e s o r 1.46
offices.
commercial
t h e r e were
%.
increased
Consequentlyb a t t h e
780
groups o f banks,
state
the
commercial
state
banks
end
bank
have
w i d e r branch network.
Private B a n k s
2.2.1.3.
In
terms of
foreign exchange'activity, there
two k i n d s o f p r i v a t e banks i n I n d o n e s i a ,
exchange
the
p r i v a t e n a t i o n a l commercial banks
are
non-foreign
and
foreign
exchange p r i v a t e n a t i o n a l banks.
With
banks
the
meryer o f t h e f o u r
i n t h e F Y 1985/1986,
13
private
t h e t o t a l number
commercial
of
private
n a t i o n a l b a n k s a t t h e e n d . o f M a r c h 1987 d e c r e a s e d P r o m 68
to
65,
consisting
10
foreign
exchange
b a n k s a n d 55 n o n - f o r e i g n
commercial
banks.
of
However,
the
private
number o f b r a n c h
private
commercial
offices
of
the
commercial b a n k s rose by 33 a n d came u p t o
464
private
branches.
From
March
1983
t o M a r c h 1987,
the
number
of
I
offices
I
increased
f r o m 317 t o 4 6 4 w i t h
average
growth
o f 37 o f f i c e s p e r y e a r .
In
almost
I
I
1:
II
l i n e w i t h t h e g u i d a n c e from t h e C e n t r a l
Bank,
a l l t h e b u s i n e s s a c t i v i t i e s or o p e r a t i o n s of
the
p r i v a t e n a t i o n a l commercial b a n k s w e r e r e l a t e d t o p r i v a t e
companies
operations
r a t h e r than t h e government
of
the
banks
include
institutions.
funds
The
mobilization,
c r e d i t l e n d i n g a c t i v i t i e s , and o t h e v banking s e r v i c e s .
Based o n t h e r e g u l a t i o n f r o m t h e C e n t r a l Bank,
terms
two.
the
of
s c o p e o f o p e r a t i o n b a n k s are
The non-foreign
classified
exchange p r i v a t e banks
provinces only, while t h e foreign
operate
exchange
in
into
in
private
banks o p e r a t e nationwide.
14
II
2.2.1.4.
Foreign Banks
By
t h e end o f March 1987,
t h e r e were
13.
foreign
4
banks o p e r a t i n g t o g q h e r w i t h 67 r e p r e s e n t a t i v e
offices.
F o r e i g n banks o p e r a t i o n s a r e l i m i t e d t o t h e J a k a r t a
o n l y e x c e p t i f a f o r e i g n bank has e n t e r e d
into
area
joint
I
~l
v e n t u r e w i t h n a t i o n a l banks.
Due t o t h i s r e g u l a t i o n ,
for
new
foreign
t h e r e has been n o o p p o r t u n i t y
bank t o
open
and
to
operate
in
remained
unchanged
at
t h e number o f
29,
and
established
wide
private
i n 1960,
operation.
maximum m a t u r i t y
development
consisting
Pembangunan I n d o n e s i a ( B a p i n d o ) , 27 r e g i o n a l
banks,
Development Ranks
A t t h e end o f March 1987,

banks
.I
I n d o n e s i a from September 1967 t o October 1988.
2.2.1.5.
tI
development
of
Bank
development
bank.
i s a government bank w i t h a n a t i o n -
I t s p e c i a l i z e s i n long-term
o f w h i c h i s 1 5 years.
loans,
the
The
regional
provincial
each
development
banks
are
governments w i t h t h e i r o p e r a t i o n
provincial
area.
owned
by
limited
to
13
W i t h t h e opening o f
offices,
r e g i o n a l development bank o f f i c e s i n c r e a s e d t o 253.
Savings Banks
2.2.1.6.
fit
the
savings
end o f March 1987,
banks,
Savings Bank
Bank
and two
Tabungan
there
were
Negara
only
(BTN)
p r i v a t e s a v i n g s banks.
three
or
State
The
number
o f s a v i n g s bank o f f i c e s add up t o 43.
2.2.1.7.
Rural B a n k s
The r u r a l f i n a n c i a l i n s t i t u t i o n s c o n s i s t o f
3,566
4
village
banks,
banks,
2,078
paddy banks,
175
petty
traders
and employees banks. These banks o p e r a t e i n
home
areas
Since
the
system,
the
and
are not
allowed
to
open
r u r a l banks a r e n o t i n c l u d e d i n
C e n t r a l Bank d e l e g a t e d t h e
Bank Rakyat I n d o n e s i a .
the
their
branches.
banking
supervision
to
I n summary,
of
offices,
comprising
s a v i n g s banks,
result of
banks
by t h e end o f March 1987 t h e

commercial,
one
s a v i n g s bank.
development,
private national
and t h e e s t a b l i s h m e n t
On t h e o t h e r hand,
number
of offices,
branch
of
commercial
one
private
E x h i b i t 1 shows t h a t t h e
c o n s i s t i n g o f head,
offices
of
and
I t was
decreased from 115 t o 113 banks.
t h e merger o f f o u r
into
number
has i n c r e a s e d from
branch,
and
1,469
sub-
to
1,561
f i n a n c e companies
known
o f f ices.
2.2.2.
Other Financial Institutions

B e s i d e banks,
as
non-bank
companies,
f i n a n c i a l i n s t i t u t i o n s as w e l l
i n s u r a n c e companies,
Non-bank
development
companies,
company.
there are
leasing
and pawnshops.
financial i n s t i t u t i o n s consist of
f i n a n c e companies,
nine
investment
a housing f i n a n c e i n s t i t u t i o n and
The
as
other f i n a n c i a l
institutions
three
finance
include
93
80 l e a s i n g companies and a number o f
other
of
lesser
significance,
finance
i n s u r a n c e companies,
institutions
;I
such
as
pawnshops,
1.
17
CHAPTER 3
MARKET A N A L Y S I S OF SOURCES OF LOANABLE FUNDS
I N THE BANKING INDUSTRY
3.1.
M a j o r Market of S o u r c e s o f funds
In
response
t a t h e sharp
decrease
i n
government
#
I
revenues
private
from
oil/gas,
domestic
supporting
promoting
sources has become more
production
government
the mobilization o f
continued
and
to
investment.
mobilize
funds
important
In
1987
domestic
funds
f i n a n c i a l i n s t i t u t i o n s e s p e c i a l l y through
major
the
sector
other
the
b u t a l s o f o r t h e government.
partnerships,
comprises
institutions,
the
etc.
government
the
for
the
The
private
corporations,
Whereas t h e
government
companies,
government
and Bank I n d o n e s i a t h r o u g h l i q u i d i t y c r e d i t
other instruments.
Both
by
hand,
was n o t o n l y
consists primarkly of individuals,
cooperative,
and
on t h e
market o f sources o f funds
sector
I
I
banking i n d u s t r y ,
p r i v a t e sector,
i n
banking i n d u s t r y .
In
from
the private sector
and t h e government
sector
as major market o f sources o f funds w i l l be e x p l a i n e d

d e t a i l i n t h e succeeding sub-headings.
18
in
3.2.
Deposits
3.2.1.
Type of Deposits
There
deposits,
are
three
time deposits,
types
December-
1987,
through
banking
industry
from
deposits,
deposits,
and 5.5
of
public
mobilized
p e r c e n t r e a c h i n g Rp 29,330
64.5
deposits.
end
favorable
funds
amount comprised 30 p e r c e n t o r Rp 8,796
savings
percent
the
showed
Compared w i t h t h e y e a r 1986,
by banks r o s e by 24.7
time
Dep0sit.s
a c c o u n t i n g f o r 45
m o b i l i z a t i o n o f funds
the
progress.
demand
demand
t o t a l r e s o u r c e s (See E x h i b i t 2). A t t h e
the
This
deposit
and s a v i n g s d e p o s i t s .
a r e t h e major source o f funds

of
of
billion.
billion
of
p e r c e n t o r Rp 18,997
billion
of
p e r c e n t o r Rp 1,627
billion
of
'The d e t a i l e d f i g u r e s can be
seen
i n
Exhibit 5.
In
terms o f share,
s t a t e banks a r e
among t h e o t h e r bank groups.

networks
s t i l l
leading
I t i s because t h e i r
a r e spread a l l o v e r t h e c o u n t r y .
In
branch
addition,
t h e i r d e p o s i t s a r e secured by t h e government. t h r o u g h
C e n t r a l Bank.
The
1983
to
growth o f
1987 i s
the
t h e m a j o r banking f u n d s from
g i v e n i n T a b l e 1.
TABLE 1
BANKING FUNDS
( i n b i l l i o n s o f r u p i a h and p e r c e n t )
---------------------------------------------------------Year
1983
1984
1985
1986
1987
5,279
43.8%
6,456
39.5%
6,753
136.2%
7,441
30.5%
15,366
62.9%
-------------.----------------------------------------------
Demand d e p o s i t s :
Rupiah
4,365'
Percent
46.5%
Time d e p o s i t s
Rupiah
Percent
4,441
47.3%
6,022
50.0%
3,888
54.3%
10,325
56.4%
Savings d e p o s i t s :
:
Rupiah
Percent
584
6.2%
754
6.2%
1 ,020
6.2%
1,387
7.4%
1,627
6.6%
T o t a l
Rirpiah
Percent
9,390
100%
16,364
1(:)(:I %
18,665
100%
24,434
10(:I%
12,655
100%
..........................................................
Source : Bank I n d o n e s i a
f o r savings deposits,
Except
the
composition
years
has
In
1987.
percent
mainly
much
contrast,
higher
time deposits
and
that
past
five
demand
period.
the i n t e r e s t r a t e o f time
more a t t r a c t i v e than
deposits
percent
increased
62.9 p e r c e n t i n t h e same
'because
deposit s .
The s h a r e o f
from 46.5 p e r c e n t i n 1983 t o 30.5
to
shows
o f b a n k i n g funds d u r i n g t h e
been changing.
decreased
Table 1
from
i n
47.3
This
was
deposits
was
that
of
demand
Demand Deposits
3.2.1.1.
A l t h o u g h t h e s h a r e o f demand d e p o s i t s i n b a n k i n g ' s
fund
decreased,
the
amor-[nt
in
average
g r o w t h r a t e s i n c e 1985 t o 1987 was 11.8
stable
and
o r an i n c r e a s e by
o f demand
billion
Among
1987
total
bank
led
demand d e p o s i t s .
groups,
by 63.6
63.6
state
percent.
of
decreased g r a d u a l l y from
69.7
of
branch
p e r c e n t i n 1984
to
p e r c e n t i n 1987.
p e r c e n t share,
f o l l o w e d by l o c a l development banks w i t h 9.0
t h e s h a r e o f p r i v a t e banks
17.5
indication
other
share
t h e share o f s t a t e
P r - i v a t e banks ranked n e x t w i t h 23.2
from
remained
T h i s was due t.o t h e i r network o f

B u t indeed,
The
percent
banks
p e r c e n t i n terms
o f f i c e s as s t a t e d e a r l i e r .
banks
the
7.8
deposits
bank
percent,
had been i n c r e a s i n g g r a d u a l l y
p e r c e n t i n 1983 t o
23.2
percent i n
p r i v a t e banks were more a g g r e s s i v e

groups
in
terms
p a r t i c u l a r l y i n demand d e p o s i t s .
21
and
of
funds
1987,
than
an
the
mobilization,
bank groups f o r
the period
1983
11
1987.
TABLE 2
Demand d e p o s i t s by bank groups
( i n b i l l i o n s nf r u p i a h and p e r c e n t )
-------------------------------------------------------Year
1983
1984
1985
1986
19137
Stat.e banks :
Rupiah
Percent
2,960
68.8%
9,641
69.2%
4,353
67.4%
4,561
67.5%
4,734
63.6%
P r i v a t e banks :
Rupiah
766
Percent
17.5%
825
15.6%
1,177
18.2%
1,354
20.1%
1,725
23.2%
Lnc.Dev.banks
Rupiah
Percent
586
11.1%
655
10.1%
564
8.4%
671
9.0%
416
9.5%
F o r e i g n banks :
Rupiah
Percent
- i~
.
31(1)
227
271
273
.
4.3%
4.0%
4.2%
4.2%
---------------------------------------------------------T o t a l
Rupiah
Percent
223
5 (3%
4,365
11110%
5,279
1(:)0%
6,456
100%
6,753
100%
7,441
100%
--------------------------------------------------------Source : Bank I n d o n e s i a
3.2.1.2.
Time Deposits
A t t h e end 1987, t h e amount o f
time deposits
46
percent
t o Rp 15,366 b i l l i o n as
10,525
billion
i n
by
the
preceding
year.
increased
compared.
This
with
rise
Rp
was
attributable
all
t o incr-ease
banks.
In
registered
networks.
terms
the
i n time deposits mobilized
of
amount,
highest
due
to
in:terms o f
However,
state
their
percentage,
banks
by
still
wider
branch
private
banks
were l e a d i n g .
From 1986 t o 1987,
t h e s t a t e banks,
regional
development banks,
increase
of
billion),
37.6
66.5
percent
percent
billion),
25.6
billion),
and 32.8
,564 b i l l i o n ) ,
p r i v a t e banks,
and f o r e i g n banks showed

( f r o m Rp 6,730
to
Rp
9,283
(fromRp3,131
to
Rp
5,213
p e r c e n t ( f r o m Rp 164 b i l l i o n t o
percent
an
Rp
( f r o m Rp 500 b i l l i o n
to
206
Rp
respectively.
The i n c r e a s e i n t i m e d e p o s i t s came m a i n l y from t h e

a t t r a c t i v e i n t e r e s t r a t e s on r u p i a h t i m e d e p o s i t s as w e l l
as from c o n t i n u e d suspension o f t h e c o l l e c t i o n o f t a x
on
income earned from d e p o s i t s .

Interest
increased.
rates
on
time
general l y
The i n t e r e s t r a t e s o f f e r e d by s t a t e banks
1987
i n c r e a s e d from a range o f
p.a.
i n
.range
deposits
13 p e r c e n t t o 15
1986 t o 15.5 p e r c e n t t o . 1 8 . 5
percent
i n
percent
p.a.
i n p r i v a t e banks r o s e somewhat from 15 p e r c e n t
The
to
25
21
to
18
the range offered
by
p e r c e n t p e r annum a s c o m p a r e d w i t h 12 p e r c e n t
p e r c e n t p.a.
foreign
i n t h e preceding year;
banks
w i d e n e d t o 9.5 p e r c e n t t o 18
a g a i n s t 13 p e r c e n t t0~16.5 p e r c e n t p . a .
year
as
percent
in the
preceding
( P l e a s e see E x h i b i t 4). T h e i n t e r e s t r a t e s o f
time
d e p o s i t s i n c r e a s e d b e c a u s e a l l bank g r o u p s t r i e d t o o u t d o
each o t h e r to attract consumers.
The
g r o w t h o f t i m e d e p o s i t s f r o m 1983 t o 1987
by
b a n k g r o u p s is g i v e n i n T a b l e 3.
TABLE 3
Time d e p o s i t s b y bank g r o u p s
( i n b i l l i o n s o f ' r u p i a h and p e r c e n t )
----------------------------------------------------------Year
1983
1984
1985
1986
1987
...........................................................
State banks :
Rupiah
Percent
2,831
63.7 %
3,497
58.1 %
P r i v a t e banks :
Rupiah
Percent
1 ,068
24.0 %
L0c.Dev.bank.s
Rupiah
Percent
5,337
6
%
6,730
65.9 %
9 283
60.4 %
1 ,750
29.0 %
2,755
31.0 %
3,131
29.8 %
5,213
34.0 %
56
1.9 %
79
1.9 %
120
1.4 %
164
1.6 %
206
1.3 %
486
10.9 %
696
11.6 %
676
7.6 %
500
4.7 %
664
4.3 %
4,441
1(:)(3 %
6 ,022
10(3 %
8,888
1::I %
10,525
1c:~:)
%
15,366
100 %
Foreign banks :
Rupiah
Percent
-----------------_-----------------------------------------
T o t a l :
Rupiah
Percent
...........................................................
S o u r c e : Bank I n d o n e s i a
The m a t u r i t y o f t i m e d e p o s i t s v a r i e d from 1 month,
3 months,
6 months,
maturity,
a t t h e end o f 1987,
got
12 months,
a 36 p e r c e n t sh;re
customers
were
and 24 months.
I n terms o f
t h e 12-month t i m e
o r the highest.
In
deposits
other
more a t t r a c t e d by t h e 12-month
t i m e d e p o s i t s t h a n t h e more than 12-month
words,
or
less
time deposits.
place
their
money i n r u p i a h t i m e d e p o s i t s f o r more t h a n a y e a r
after
The
the
reason i s t h a t t h e p e o p l e h e s i t a t e d t o
d e v a l u a t i o n o f t h e r u p i a h i n 1986.
rupiah
The
outstanding
t i m e d e p o s i t s a t a l l banks by m a t u r i t y a r e
shown
i n E x h i b i t 5.
Savings Deposits
3.2.1.3.
Private
savings
consists
of
s a v i n g s under
the
N a t i o n a l Development Savings Scheme (Tabungan F'embangunan

Nasional
(Tabunyari
o r Tabanas),
Asuransi
t h e Time I n s u r a n c e Savings
or
Taska)
the
Haj
P i l g r i m a g e Expenses Savings Scheme (Tabungan Ongkos
Naik
H a j i o r ONH),
Berjangka
Scheme
t h e R u r a l Savings Scheme (Simpanan Pedesaan
or
Simpedes),
1987,
t h e s e s a v i n g s i n c r e a s e d by 17.5
t o 1,627.
1,387
previous
the
and o t h e r t y p e s o f s a v i n g s .
From
1986
to
p e r c e n t o r from
Rp
T h i s g r o w t h was l o w e r t h a n t h a t f o r
y e a r which reached 36 p e r c e n t .
T h i s was due
to
dollar
on
of
the
d e v a l u a t i o n o f t h e r u p i a h a g a i n s t t h e U.S
September
1986
which
made
depositors
the
wary
monetary p o l i c y .
The i n t e r e s t r a t e o f s a v i n g s d e p o s i t s i s r e g u l a t e d
by
t h e government t h r o u g h t h e C e n t r a l Bank.
1983
the
interest
r a t e o f savings
deposits
Since
June
has
been
changed t o 15 p e r c e n t p e r y e a r f n r t h e f i r s t Rp 1 m i l l i o n
and
12
million.
percent
per
y e a r on t h e
balance
above
Rp
A c t u a l l y i t i s i m p l i e d t h a t savings deposits a r e
m a i n l y addressed t o t h e customers from t h e r e l a t i v e l y low

t o m i d d l e income groups,
Hp
because t h o s e who have more t h a n
m i l l i o n w i l l p l a c e t h e i r money i n
time
deposits
w i t h the higher i n t e r e s t rate.
3.2.2.
Major Customers of Deposits

The m a j o r customers o f d e p o s i t s a r e c a t e g o r i z e d as
follows
resident
residents,
customers
others.
c o n s i s t i n g o f 13 groups,
i n t h e f,o l l o w i n g
discussed
sub-headings.
t o p i c o f t h i s s t u d y i s on n o n - f o r e i g n
emphasis
and
are
The
shown
More s p e c i f i c a l l y t h e m a j o r customers w i l l
be
non-residents,
of
the
analysis w i l l
be
Since
the
exchange banks,
limited
the
to
rupiah
residents i s the
major
deposits.
3.2.2.1.
I n t h e banking i n d u s t r y ,
customers
.the
o f demand d e p o s i t s c o n t r i b u t i n g 99 p e r c e n t
t o t a l deposits,
residents
and
30
t h a t t h e r e m a i n i n g share o f
others i s negligible.
Therefore
of
non-
further
a n a l y s i s w i l l deal o n l y w i t h r e s i d e n t depositors.
I n terms o f t o t a l amount
individuals
with
22.5
percent share
customer o f demand d e p o s i t s .
enterprises
percent,
21.3
percent,
15.5
( u n c l a s s i f i e d ) 7.7
percent,
percent.
was
the
1987,
highest
T h i s was f o l l o w e d by s t a t e
central
p r i v a t e companies 16.2
institutions
(See E x h i b i t 6 ) i n
government
percent,
and
16.8
o t h e r government
other
customers
More s p e c i f i c a l l y t h e c o m p o s i t i o n o f d e p o s i t o r s i n
each
bank
group
varied.
In
state
banks,
the
major
d e p o s i t o r s were s t a t e e n t e r p r i s e s which had 33.1

shar-e,
f o 1 lowed
private
enterprises
i n s t i t u t i o n s 11.9
other
by
:central
12.1
percent,
customers 8.3
percent,
percent.
percent,
those customers
that
were
t h e major. d e p o s i t o r s o f p r i v a t e
24.5
and
percen.t,
other
government
group
of
E x h i b i t 8 shows t h a t i n d i v i d u a l s ,
official
government
E x h i b i t 7 shows
were i n d i v i d u a l s which c a p t u r e d 6O.S
percent,
percent,
and
for
s t i l l
major customers.
Meanwhile,
companies
23.9
other
i n d i v i d u a l s 10.7
t h e p e r i o d from 1983 t o 1987,

dominant a s
government
percent
banks
p e r c e n t f o l l o w e d by
institutions
const-tmers
9.9
percent.
p r i v a t e companies,
i n s t i t u t i o n s had a b i g c o n t r i b u t i o n as
9.6
and
sources
o f funds f r o m 1983 t i l l 1987.
Exhibit
private
Y shows t h a t f o r e i g n banks
captured
companies as m a j o r c ~ ~ s t o m e rwsi t h 61.4
the
percent,
t h e i n d i v i d u a l s remained a t 53 p e r c e n t as i n t h e p r e v i o u s
year,
and o t h e r s 5.8
percent.
I t s h o u l d be n o t e d
here i s
that
t h e r e was no
account
opened by e i t h e r t h e c e n t r a l o r r e g i o n a l
was
at
s i n g l e demand d e p o s i t
the
foreign
However,
peccent
the
banks due
to
non-rekident
government
customers
which
government
restriction.
reached
6.3
s h a r e compared w i t h o t h e r bank groups which
had
l e s s t h a n 2 p e r c e n t (See E x h i b i t 6 ) .
Since
the
l o c a l development banks a r e
owned
by
provincial
major
customers
followed
The
0.03
governments,
by
i n
regional
these
governments
banks
with
t h e c e n t r a l government w i t h
60.7
17.4
r e m a i n i n g 11 groups o f customers o n l y range

percent
composition
to
of
4.74
percent,
t h e m a j o r customers
d u r i n g t h e p a s t f i v e y e a r s as
3.2.2.2.
percent,
percent.
between
respectively.
remained
the
the
The
same
shown i n E x h i b i t 10.
Time Deposits
L i k e demand d e p o s i t s ,
deposits
are
at
the
end
of
t h e 'major customers o f
1987
were i n d i v i d u a l s
time
which
percent,
social
f o l l o w e d by government companies 12.4

i n s t i t u t i o n s 10.7
percent,
percent,
percent,
p r i v a t e companies
9.7
and t h e o t h e r i e i g h t groups o f customers amounted
t o 8 per-cent (See E x h i b i t 6 ) .
The
major
individuals
percent
shows
13.2
that
5.7
slightby
the
percent,
state
government
companies
share o f
percent,
percent.
20.3
and
banks
In
In
percent,
private
20.3
social
companies
6.8
11
Exhibit
rose
from
27.2
and s t a t e e n t e r p r i s e s
increased
contrast,
companies
insurance
and s o c i a l
foundations
percent.
~ : ) r i . v a t e banks,
individuals with
s o c i a l foundations
12
were
companies
individuals
decreased by 1 p e r c e n t ,
d e c l i n e d by 2.3
Exhibit
in
Compared w i t h t h e f i g u r e s f o r 1986,
p e r c e n t t o 29.3
by
percent,
irlsurance
institutions
percent.
29.3
customers
74.5
had
the
percent,
the
nlajor
customers
private
companies
same s h a r e o f 7.4
shows t h a t t h e government
were
sector
and
percent.
was
r e p r e s e n t e d i n p r i v a t e banks due t o Government p o l i c y .
not
Individuals
and
private
enterprises
customers i n t h e f o r e i g n banks have 53.1

percent,
respectively.
As
shown
to
53.1
percent
i n 1987.
Again
no
major
p e r c e n t and 41.6
i n
i n d i v i d u a l s g r a d u a l l y i n c r e a s e d from 32.9
as
Exhibit
13,
p e r c e n t i n 1983
state
enterprises
p l a c e d t h e i r funds i n f o r e i g n banks because o f government

restriction.
The
l o c a l development banks had t h r e e
major
customers o f t i m e d e p o s i t s which
42.3
percent,
percent,
shows
non-bank
financial
and s o c i a l f o u n d a t i o n 10.7
that
i n t h e p a s t f i v e years,
were
percent.
non-financial
banks
p e r c e n t i n 1987.
institutions
increased
rapidly.
of
individual
institutions
37.2
Exhibit
non-bank
i n s t i t u t i o n s d r a m a t i c a l l y i n c r e a s e d from 0.02
1983 t.o 37.17
groups
14,
financial
percent
i n
T h i s i s m a i n l y because t h e
particularly
However,
rural
t h e r e i s no
w o r r y w i t h t h e r u r a l c r e d i t banks as c o m p e t i t o r s
credit
need
to
because
t h e i r o p e r a t i o n s and f u n d s r e s o u r c e s a r e v e r y l i m i t e d and
n e g l i g i b l e i n t h e banking i n d u s t r y .
T h e main r e a s o n why p e o p l e p r e f e r t o p l a c e
money i n t i m e
the
fact
banks
t h e i r money.
t h e u s e of
t h e i n t e r e s t earned
6.3
free.
d o n o t a s k d e p o s i t o r s where
they
In
get
Moreover d e p o s i t o r s c a n p l a n a s c h e d u l e f o r
1983 t o 1987, s a v i n g s
p e r c e n t ' s h a r e of t o t a l
amount w a s n e g l i g i b l e ,
all
i n saving deposits,
of
deposits
constituted
deposits.
Since
t h e customers w e r e not
depositors w e r e individuals.
banking r e g u l a t i o n s ,
behalf
tax
t h e i r money.
From
because
is
and
Savings d e p o s i t s
3.2.2.3.
only
d e p o s i t s are t h e h i g h e r i n t e r e s t rates
that
addition,
their
the
classified
In
line
with
when a n i n s t i t u t i o n p l a c e s i t s f u n d s
i t m u s t r e g i s t e r a name o f p e r s o n
the institution.
I n o t h e r words,
the
on
target
m a r k e t o f s a v i n g s d e p o s i t s is o n l y i n d i v i d u a l s .
They w e r e
classified
for
99.7
was
low,
into
residents
which
p e r c e n t s h a r e and n o n - r e s i d e n t s ,
Although
the
accounted
0.3 p e r c e n t .
t h e s h a r e of s a v i n g s d e p o s i t s
g o v e r n m e n t is s t i l l e n c o u r a y i n g b a n k s
to
intensify
'
savings m o b i l i z a t i o n ,
and
scouts.
Indeed,
among t h e youth,
especially student
t h e government's p o l i c y i s t o
make
young p e o p l e t o be savings-minded.
3.3.
O t h e r Sources of funds
The
extends
Central
liquidity
Bank,
as a l e n d e r
credit
t o banks.
of
last
Since
resort,
June
15'83,
l i q u i d i t y c r e d i t s from t h e C e n t r a l Bank were o n l y f o r t h e

government's
t.he
h i g h p r i o r i t y programs such as
economically-.weak
programs.
Based
loclal
certain
groups and
on r e g u l a t i o n s ,
certain
only
credits
to
agricultural
state
banks
and
development banks and p r i v a t e
banks
are
a l l o w e d t o g e t Bank I n d o n e s i a ' s l i q u i d i t y c r e d i t f o r h i g h
p r i o r i t y programs.
Another
certificates,
i n
cash.
source
of
funds
i s
Bank
Indonesia
an i n s t r u m e n t o n l y f o r banks w i t h
S t i l l a n o t h e r way i s f o r a bank t o
shortage
get
t h r o u g h i n t e r b a n k c a l l money from a n o t h e r bank which

excess r e s e r v e s .
funds
has
CHAPTER 4
MARKET FOR LOANS I N B A N K I N G I N D U S T R Y
4.1.
T y p e of Loans
Basically,
priority
between
The
there
l o a n s and
are
two types
non-priority
loans.
loans,
The
the
difference
t h e s e t w o loans i s mainly on t h e interest
interest r a t e for priority loans i s
rate.
determined
by
Central Bank, hut t h e interest r a t e of non-priority
loans
is
March
determined by banks themselves. At t h e end
1'987,
t h e priority loans had a 24 percent
of
rc
contribution,
and t h e balance of 76 percent w a s for non-priority
loans.
P
4.1.1.
P r i o r i t y Loans
The
main purpose of priority loans i s t o
the
government's high priority programs.
for
both investment and working capital
interest
rates
of
t h e loanti a r e
set,
finance
T h e loans
credits.
Bank
provides liquidity c r e d i t s w i t h lower r a t e s than
are
Since
Indonesia
lending
rates. S o m e of t h e priority loans a r e :
Small-scale investment c r e d i t (Kredit Investasi Kecil o r
I
1
9
:34
KIK )and permanent working capital c r e d i t ( K r e d i t Modal

Permanen
Kerja
or
EMKP)
with a
maximum
of
Rp
15
million;
1
I
Credit for cooperatives ;
House-ownership
C r e d i t s w i t h a maximum o f R p 75 million.
The
c r e d i t s ; and
ceiling, i n t e r e s t rates, and o t h e r t e r m s
and
conditions
of
19.
Eased
the
on
the
regulation,
local
private
banks
handle
loans. T h e c u s t o m e r s of priority
loans
called
small
scale
banks,
and
economically-weak
enterprises,
only
certain
group,
state
Exhibit
banks,
development
priority
priority l o a n s a r e s h o w n in
includes
cooperatives, farmers, teachers,
students,
etc.
4.1.2.
Non-Priority Loans
Non-pri0rit.y
priority
sector.
l o a n s i s mainly t o f i n a n c e t h e
From
3 u n e 1983, b a n k s
were
non-
free
to
d e t e r m i n e t.heir a w n c r e d i t terms, t h e i n t e r e s t rates, and
financed
expand
by
t h e i r own sources.
Therefore,
i t s c a p a b i l i t y t o extend loans,
in
order
to
i s a bank has
to
manage i t s l i q u i d i t y v e r y e f f i c i e n t l y .
I n terms o f amount,
contribution
the
non-priority
than p r i o r i t y l o a n s '
share o f n o n - p r i o r i t y
l o a n s have a h i g h e r
. This
i s reflected
l o a n s which i s 76
percent
in
of
the t o t a l credits.
4.2.
Outstanding o f Bank C r e d i t s
by Economic Sectors.
Bank
lenclings a t ' t h e end o f 1987 amounted
to
Rp
l a
31,8'79
b i llion,
h a v i n g i n c r e a s e d by 22.8
p e r c e n t compared
~1
~'
w i t h 20.9
percent i n t h e preceding year.
The i n c r e a s e
i n
l e n d i n g s was t h e h i g h e s t i n c r e a s e i n t h e p a s t f o u r
years
(See
state
banks
Exhibit
s t i l l
1 6 ) . F o r 1987,
led
because t h e s t a t e
w i t h a 68.8
banks have
i n terms o f
percent
amount,
share.
p e r c e n t share,
i s
more a s s e t s and have w i d e r
branch n e t w o r k s than t h e o t h e r bank groups.

came n e x t wit.h 23.7
This
P r i v a t e banks
and t h e r e m a i n i n g was
4.3.
Major sectors o f c r e d i t s
A s shown
i n Table, 4,
economic s e c t o r s ,
the
up
year 1986,
by 25.4
r-ubber,
i n 1987,
bank c r e d i t s
to
e x c e p t m i n i n g i n c r e a s e d . Compared
with
lendings t o the a g r i c u l t u r a l sector
went
p e r c e n t o r Rp 533 b i l l i o n ,
palm o i l ,
sugarcane,
and
mainly t o
tobacco
finance
plantations.
C r - e d i t s t o t h e m i n i n g s e c t o r decreased by 2.3
percent
Rp
to
billion,
b i l l i o n i n 1987.
all
from Rp 394 b i l l i o n i n 1986
Rp
or
385
C r e d i t s t o t h e i n d u s t r y s e c t o r mainly
wood
and i t s p r o d u c t s r o s e by 18.9 p e r c e n t o r
billion
(from
Rp 8,839
b i l l i o n t o Up
10,508
C r e d i t s t o t h e t r a d e ' s e c t o r i n c r e a s e d by 20.8
Hp
1,735
billion),
collection
b i l l i o n ( f r o m Wp 8,329
Wp
billion
o f d o m e s t i c a l l y t r a d e d goods,
billion).
percent
to
mainly t o finance r e t a i l trade,
19669
Rp
10,508
purchase
and
or
and
export
of
f i n i s h e d and semi f i n i s h e d goods.
Credits t o the services sector

or
Up 1,021 b i l l i o n ( f r o m Rp 4,130
billion),
mainly
construction,
to
finance
r o s e by 24.7
billion to
percent
Rp
low-cost
business ~ e r v i c e s , e l e c t r i c i t y ,
5,151
housing
and
public
transportation.
By
the
end o f March 1988,
the
working
capital
c r e d i t s m a i n l y used f o r t h e s e c t o r s o f t r a d e and i n d u s t r y
increased
by 28.3
p e r c e n t t o Up 25,560
t o t h e i n c r e a s e o f 24.6
b i 11i o n
compared
p e r c e n t a t t h e end o f March 1987.
The i n v e s t m e n t c r e d i t s i n c r e a s e d by 20.1
percent reaching
Rp
percent
9,515
biliion
precedi.ng y e a r .
compared w i t h
23.2
in
the
4.4.
C r e d i t s by type
In
credits,
line
with
t h e development o f
a t t h e end o f March 1988,
working
capital
t h e share o f
working
c a p i t a l c r e d i t s i n the trade,
manufacturing,
s e c t o r s increased t o 50.5 percent,

percent,
the
respectively.
p e r c e n t and
respectively,
20.1
w h i l e t h e share
m a n u f a c t u r i n g s e c t o r a l s o i n c r e a s e d b y 16.9
from
33.5
The s h a r e o f i n v e s t m e n t c r e d i t s a t
a g r i c u l t u r a l and s e r v i c e s s e c t o r s i n c r e a s e d b y
p e r c e n t and 40 p e r c e n t ,
the
29.9
and s e r v i c e s
of
percent
Hp 3252 h i 1 l i o n i n 1987 t o R p 3803 b i l l i o n i n 1988.
Still,
percent,
the
share o f t h e manufacturing s e c t o r ,
remained t h e h i g h e s t among a l l
s e c t o r s (See T a b l e 5).
other
i.e.
40
economic
TABLE 4
BANK CREDITS BY ECONOMIC SECTORS
( i n b i l l i o n s of rupiah and percent)
growth
growth
1983
83-84
1984
84-85
growth
1985
85-86
growth
1986
...........................................................................................................
86-87
1987
I. l g r i c u l t u r e :
Rupiah
Percent
2 . N i n i n g :
Rupiah
Percent
3. Hanufacturing lndustry :
Rupiah
Percent
).Trade:
Rupiah
Percent
5. Service rendering Ind :
Rupiah
Percent
6 . 0 t h e r s :
Rupiah
Percent
1226
9.5%
92
7.5%
v18
7.3%
338
25.6%
87
0.7%
128
147.1%
215
1.2%
43
20.0%
258
1.2%
136
52.7%
394
1.6%
-9
-2.3%
385
1.2%
5207
40.2%
1460
28.0%
6667
37.2%
925
13.9%
7592
35.8%
1413
18.6%
9005
35.7%
1912
21.2%
10917
34.7%
4022
31.1%
2322
57.7%
6344
35.4%
911
14.4%
7255
34.2%
1144
15.8%
8399
33.3%
1848
22.0%
10247
32.3%
2136
16.5%
870
40.7%
3006
16.8%
965
32.1%
3971
18.7%
131
3.3%
4102
16.2%
1017
24.8%
5119
16.2%
265
2.0%
128
48.3%
393
2.2%
48
17.31
461
2.2%
600
173.5%
1261
5.0%
920
73.0%
2181
6.9%
12943
100%
5000
38.6%
17943
100%
4065
25258
19.2%
100%
6247
24.7%
31505
100%
1656
7.82
441
26.6%
2097
8.30
...........................................................................................................
TOTAL:
Rupiah
Percent
3250
21193
100%
18.1%
...........................................................................................................
Source : Bank Indonesia
559
26.7%
2656
8.43
0l
E
A -
U L
a *
rn
a 4 . d u o 01
U
m
U r n
U
LD.1.1
L.d
m'rl L
a
> a l
r
0l
w E
m 0l.d
L
a c s a l
@
*
r
n
+-.-I
U O 01
z a
m
U r n
Y
U E
r 5.d L
r . d
3
-01
a m c11.1.1
+ L
L
- s c a m
L C
L.d
L C
Ys?r2+c%s g s = 2 + 8 s
&
5 4 2 ;b cu';
r
n
u u al
m
U r n
m.4 L
> a l
& - - IE L L =
4
m
al*
Y M . 4
a =
a
.2
a 4
E *
a a r ~ + v r o
CHAPTER 5
C O M P E T I T I O N I N T H E BANKING I N D U S T R Y
5.1.
Competitors'
By
banking
t h e end o f 1987,
i'n
industry
p e r c e n t share.
by
performance
15.6
t h e f i v e s t a t e banks l e d
terms o f t o t a l .
assets
with
The t o t a l a s s e t s o f s t a t e banks
p e r c e n t from Rp 30,119
billion i n
the
6'7.9
increased
1986
to
Rp
I
I
34,827
rate
b i l l i o n i n 1987,
from
(foreign
second
1984
o r by 22.6
t o 1987.
and n o n - f o r e i g n
with
20.9
group
of
p e r c e n t share.
The
banks
ranked
private
exchange p r i v a t e banks)
p r i v a t e banks r o s e by 37.6
in
The
p e r c e n t average g r o w t h
total
assets
p e r c e n t from Rp 7,955
1986 t o Rp 10,951 b i l l i o n i n 1987 w i t h
of
billion
49.6
percent
average g r o w t h f r o m 1984 t o 1987. Ranking t h i r d were
the
local
7.1
development
percent. and 5.3
banks
percent,
and
foreign
banks
with
r e s p e c t i v e l y (See T a b l e 6).
I
Rlthough
t h e r e were o n l y f i v e s t a t e banks,
their
t o t a l a s s e t s was t h e h i g h e s t beczause t h e y have n a t i o n w i d e
!
branch networks,
w i d e r bank s e r v i c e s ,
and has monopoly on

I
hand 1i n a aover-nnlent funds.
i/
on
total
assets, d e p o s i t s ,
loans,
equity,
and
profit
( l o s s ) w e r e a s f o l l o w s : Bank N e g a r a I n d o n e s i a ( B a n k
BNI
'L
1 9 4 6 ) w i t h t o t a l a s s e t s Kp 1 1 , 8 5 4 b i l l i o n ,
I1
Bank Eumi Daya

I
(Rp
9,329
b i 11i o n )
billion),
Bank R a k y a t
Bank D a g a n g N e g a r a
Indonesia
( R p 7,601 b i 11i o n
(Kp
)
7,811
, and
Bank
I1
E k s p o r I m p o r I n d o n e s i a ( R p 5,097 b i l l i o n ) .
p r i v a t e banks w e r e as follows
The t o p t e n
Central A s i a ,
Bank N i . a g a , Bank Umum N a s i o n a l ,
Bank
Bank B a l i , P a n i n B a n k , Bank B u a n a I n d o n e s i a , Bank

Overseas
Express
Bank,
Bank
Duta,
Dagany
Nasional
Indonesia,.
and
Bank
Pasific.
By D e c e m b e r 31, 1987, t h e t o t a l a s s e t s o f
Bank
C e n t r a l A s i a w a s Rp 1 , 5 4 2 b i l l i o n a n d Bank F a s i f i c w a s Rp
I
b'
1-
227 b i l l i o n .
The c o m p a r a t i v e r a n k i n y o f a l l p r i v a t e b a n k s
is shown i n E x h i b i t 19.
I,
1
I
In
terms
of
p r o f i t a b i 1i t y
foreign
exchange
t
private
about
b a n k s had t h e h i g h e s t r e t u r n on assets (RQA)

percent
which w a s
0.59 p e r c e n t
above
of
the
indi.rstry
banks
was
average.
I n addition,
f o r e i g n exchange
a l s o had t h e h i g h e s t r e t u r n on e q u i t y
about
47 p e r c e n t o r 12.7
percent
private
which
(ROE)
higher
I'
than
I
1
the
banking
i n d u s t r y ' s 'average.
ROA was o n l y 1,93
1.66 p e r c e n t ,
ROE
percent,
non-foreign
state
percent,
percent,
non-foreign
banks
foreign private
banks
i t was n o t r e f l e c t e d t h a t t h e 10 o f
had
F o r example,
second
KOA.
among
them,
Bank
had o n l y 1.53
Niaga,
I
I
percent.
was t h e h i g h e s t ,
high
However,the
and f o r e i g n banks was 39.08
A l t h o u g h t h e average ROA o f
banks'
exchange banks was
f o r e i g n banks was 1.23 p e r c e n t .
o f s t a t e banks was 32.26
was 19.73
The average o f
which
p e r c e n t ROA.
them
ranked
T h i s was
because t h e c o m p o s i t i o n between e q u i t y and a s s e t s was 5.8

percent
o r lower than t h e t h r e e o t h e r banks
(See
Table
1
5).
The low o f Bank N i a g a ' s ROA was i n l i n e w i t h t h e
profit
"low
margin s t r a t e g y .
profit
spread".
margin"
I n contrast,
of
Bank
Niaga
the
was
concept
called
low
of
"low
when Bank Niaga was a s m a l l bank i n
t h e 1 9 7 0 ' s t h e spread was a l m o s t 8 p e r c e n t ,
but the
risk
loans
was
also
competitive
i t s
high.
bank,
Based on e x p e r i e n c e ,
o n l y l e s s t h a n 0.2
Niaga
and
Bank
percent,
'1
by
:I
low
the successful
On t h e
Bank
foreign
other
hand
exchange p r i v a t e
bank
/I
p e r c e n t as w e l l as t h e ROA Bank Bhumy Bahary
Dewa
R u c i which had
respectively.
the
2.54
percent
U n l i k e Bank Niaga,
and
percent,
s e l e c t e d banks.
highlights of
the
banking
i n
For
Bank
Bank Bhumy Eahary was 11.1.
and Bank Dewa R u c i 12.8 p e r c e n t .
financial
2.5&
t h e composition
composition o f e q u i t y t o assets
Widya Earya was 27.5
the
supported
e q u i t y and a s s e t s o f t h e t h r e e banks were h i g h .
instance,
banks,
By u s i n g t h i s s t r a t e g y ,
Widya Karya a s a n o n - f o r e i g n
percent,
of
percent.
p r i v a t e banks i n I n d o n e s i a .
had ROQ 0.59
became
i t s d o u b t f u l c r e d i t s was
proved i t s e l f t o be one o f
exchange
Niaga
i n o r d e r t o compete w i t h o t h e r
spread was o n l y around 2 p e r c e n t ,
r i s k loans.
Bank
L a t e r when Bank
Table 6
industry
shc~ws
and
il
TABLE C,
T H E FINANCIAL HIGHLIGHTS OF BANKING INDUSTRY

(in Billion of Rupiah)
FOREX NOH-FOREX
BANKIM STATE PRIVATE PRIVATE FOREIGN
INDUSTRY BANKS BANKS
BANKS
BANKS
2. DEPOSITS :
-TIME DEPOSITS
3. E 0 U I T Y r
-PAID UP CAPITAL
-PROFIT (LOST)
~ 4 L. O A N S
MNK
BANK
BHUMY DEWA
BAHARY RUCI
18212
4680
3159
2028
----
----
13.4
28.3
0750
5441
999
793
002
6.0
7.4
3.9
112.3
10710
11119
3561
2230
1226
6.6
10.2
33.7
390.3
3146
2201
357
5.2
---- ---- -----
4.4
6.5
30.3
584
1081
30217
----
523.8
---- ---- -----
----
----
07
----
146
221
37
4.5
2.1
14.4
710
168
74
34
0.7
1.0
1.3
12.2
26653
4033
3301
1406
10.7
27.6
40.7
58.5
----- ----- ----
375
38
BANK
WIAGA
29096
----- ----- ----
-DEMAND DEPOSITS
BANK
WIDYA
KARYA
5. PROFITABILITY :
ROA
1.99%
ROE
1.93%
2.58%
1.66%
34.35% 32.26% 47.06%
19.732
1.23%
0.591
2.54%
39.08% 13.46% 22.732
2.56% 1.552
20.002
40.26%
Source : Bank Indonesia and banks' record, Decerber 31, 1907.
5.2.
Range o f S e r v i c e
In
have
order t o improve banking services, s o m e
introduced
new
services
i.e.
automatic
banks
teller
machines
accounts
even
I/
Computerized s e r v i c e speeds up
bank
!1
(ATM) and c o m p u t e r i z e d s e r v i c e .
customers
can
d e p o s i t o r withdraw t h e i r
a f t e r w o r k i n g hours.
services.
By
The
othtr
bank
services
AT'M,
using
which
are
also
a v a i l a b l e a r e c a r l o a n s and h o u s i n g ownership l o a n s .
private
hanks
which s t a r t e d t o serve
savings
i1
Some
deposits
w h i c h s e t u p the terms and c o n d i t i o n s by themselves.
11
5.3.
Key Success Factors
Before
and
loans,
June 1983,
the i n t e r e s t rates o f
and c r e d i t c e i l i n g s were c o n t r o l l e d
C e n t r a l Bank.
deposits
by
the
B u t s i n c e t h e d e r e g u l a t i o n o f June 1, 1983,
t h e r e s t r i c t i o n s were l i f t e d banks were f r e e t o d e t e r m i n e
. 1i
1
the
interest
certain
rate
of deposits
and
government c r e d i t s programs.
c o m p e t i t i o n among banks became keener.
loans
except
Consequently,
by o f f e r i n g a t t r a c t i v e i n t e r e s t r a t e
arid l o a n s ,
I:
the
Each bank t r i e d t o
compete w i t h o t h e r banks i n o r d e r t o g e t a b i g g e r
share
for
l i b e r a l terms and c o n d i t i o n s ,
on
market
deposits
and b e t t e r
and
wider
bank s e r v i c e s ,
etc.
C r i t e r i a o f .juccess o f a
bank
b a s i c a l l y depends on how m u c h e a r n i n g i t g e t s as measured

by
i t s
RDA and ROE. From t h e company

l o o k s at', t h e ROA;
management
more
concerned w i t h HOE.
point
however,
of
view,
stockholders
ROE,
the
b e t t e r t h e company's p r o f i t a b i l i t y .
To measure these
two
ratio,
with
they
average.
how
should
be
The h i g h e r HDA and/or
are
compared
the
The company's ROA and/or HOE l e v e l
much a s s e t s , d e p o s i t s ,
industry's
depends
l o a n s and p r o f i t s i t has,
shown i n t h e e a r l i e r a n a l y s i s o f c o m p e t i t o r s '
(5.1.
on
as
(1
!I
I
I
I
performance
i n t h i s Chapter).
Eased
commercial
on i n t e r v i e w s w i t h s e v e r a l key managers
banks
and Bank I n d o n e s i a ,
w r i t e r ' s observation,
and based
t h e f o l l o w i n g a r e some key
on
of
the
success
f a c t o r s i n t h e banking i n d u s t r y .
First,
interest
of
transaction,
i n t e r e s t r a t e o f d e p o s i t s and
deposits
u s u a l l y depends on t h e
the period o f deposits,
t h e i m p o r t a n c e o f t h e consumers,
loans.
The
value
of
the relationship
or
competitors'
price,
and
the
banks'
financial
condition a t
that
time
of
the
transaction.
second i s t h e extent of t h e branch
The
When
a bank h a s a wide
~pportunity to
market i.e.
The
&luick,
counters
usually
the
customers
a big city a s
area,
in
has
various
and pleasant s e r v i c e a t t r a c t
Usually,
an
potential
a t r a d e center.
bank u s e s
services.
and
computers
t o m a k e s e r v i c e e a s i e r and faster.
satisfy
in
teller
Withdrawals
t a k e s l e s s than f i v e minutes. Bank EN1 1946
leader in computerization in t h e
banking
Of late, s o m e private banks including hTM

suit.
it
c ~ t h e r key s u c c e s s factor i s better
safe,
customers.
reach
operational
network^.
'To p r o c e s s a loans application, t h e
consumed i s usually o n e week o r less.
also
was
industry.
followed
average
time
CHAPTER 6
F I N D I N G S
6.1,
A n a l y s i s o f spread
The
mobilize
main
objective
of
deposits
banks
funds from t h e community o r t h e p u b l i c
lend
t.he f u n d s t h r o u g h c r e d i t s .
cost
of
The
d i f f erence
funds ankt l e n d i n g r a t e is t h e spread
i s
to
and
to
between
or
gross
p r o f i t o f t h e banks.
4s
banks
stated e a r l i e r
the major sources o f
were demand d e p o s i t s ,
time deposits,
funds
and
of
savinys
d e p o s i t s w h i c h a r e mobi,1 i z e d by banks from t h e community.

N o t a l l d e p o s i t s a r e l e n t o u t as l o a n s because banks have
t.0
have r e s e r v e some funds t o p r o v i d e f o r w i t h d r a w a l s
the depositors.
Banks a r e t h e r e f o r e r e q u i r e d t o
maintain
minimum o f 1 5 p e r c e n t cash r a t i o o r 1 5 p e r c e n t . o f
d e p o s i t s and 10 p e r c e n t o f
of
depc3sits
savings.
averhead
bank.
l o a n a b l e funds
and
YO
cnst
i s
85
percent. each from
I n addition,
demand
t i m e and s a v i n g s d e p o s i t s .
c a l c u l a t . i n g c a s t u f funds and c o s t o f
amount
by
In
l o a n a b l e funds,
percent
time
from
the
demand
deposits
and
t h e spread i s a l s o i n f l u e n c e d
and r e s e r v e f o r d o u b t f u l
loans
by
of
each
T a b l e 7 shows t h e spread o f each bank groups
from
Cost o f
TCIBLE 7
l o a n a b l e f u n d s and spread by group o f banks
( i n percent)
........................................................
Dec .31
Dec .31
Dec .31
1985
15'86
1987
11 40
3.15
3.03
19.58
19.34
3.76
10.55
4 01
1.26
15.82 .
18.21
2.39
10.72
4.11
1.39
16.42
19.32
2.9
-
12.14
5.65
0.81
18.34
21.67
3.33
8.58
6.68
1.56
16.82
2i:) 43
3.61
9.61
6.90
0.48
16.99
24.35
7.36
5.65
6.98
-1.22
12.85
22.19
5.80
6.28
6.33
1.24
13.85
21.45
-------------------------.------------------------------STATE BANKS
Interest cost
Overhead c a s t
Reserve
Cost o f l o a n a b l e funds
I n t e r e s t loans
Spread
FOREX PRIVATE BANKS

Interest cost
Overhead c o s t
Reserve
Spread
NON-FOREX PRIVATE BANKS
Interest cost
Overhead c o s t
Reserve
Cost o f l o a n a b l e f u n d s
Spread
FORE IGN BANKS
Interest cast
Overhead c o s t
Reserve
Spread
LOCAL DEV. BANKS
Interest cost
Overhead c o s t
Reserve
Spread
5.90
1 08
12.78
2 0 5i:)
7.72
........................................................
interest
spr-ead
rate
of
of
loans i n Table 7
shows
that
l o c a l development banks was t h e
average
highest
with
I
7.6
percent,
f o r e i b n banks was
7.36
percent,
exchange p r i v a t e banks was 3.41 p e r c e n t ,

2.9
percent,
was
1.9
banks
percent.
the
local
limited,
they
However,
II
was
II
lowest,
development
and f o r e i g n banks can be e x p l a i n e d by t h e i r
i n t e r e s t r a t e o f deposits.
was
s t a t e banks
p r i v a t e banks,
The h i g h spread i n
foreign
lower
since t h e i r operation
could n o t obtain a
high
market
of
share.
6.2. Opportunities
Based
customers,
the
on t h e secondary d a t a and s u r v e y on
and
banks,
key p o s i t i o n managers o f Bank I n d o n e s i a
opportunities
and t h r e a t s i n t h e
e s p e c i a l l y f o r non-foreign
banking
industry
p r i v a t e banks a r e as f o l l o w s
52
t
I
----*
ww
--- --..- -
, .
. --
S
F
-
I
--
."--
r
I
W"
.
T
'
6.2.1.
S i n c e t h e c u r r e n t government p u l i c y i s t o i n c r e a s e
t h e economic a c t i v i t i e s ,
p a r t i c u l a r l y t o encourage
t h e n o n - o i 1 qxpor-ts and,
t o he1p ec:unomical ly-weak
groups,
banks a r e needed t o p a r t i c i p a t e i n
econumic a c t i v i t i e s .
those
T h i s o p p o r t u n i t y i s open
o n l y f o r t h e s t a t e banks,
not
but also f o r the p r i v a t e
banks and o t h e r banks.
6.2.2.
The
major
consumers o f demand
banking
industry
are
pri.vate enterprises,
guvernment.
However,
demand
(60.3
major
percent).
and
Therefore,
private
the
state
and t h e
central
consumers
d e p o s i t s i n p r i v a t e banks a r e
percent)
in
individuals,
enterprises,
t.he
deposits
of
individuals
enterprises
t h e i n d i v i d u a l s and
(24.5
private
e n t e r p r i s e s a r e o p p o r t u n i t i e s f o r p r i v a t e banks t o
increase
t h e m o b i l i z a t i o n o f funds
or
potential
s o u r c e s o f funds.
6.2.3.
The
m a j o r consumers o f
time deposits
banks a r e i n d i v i d u a l s (74.4
I
I
53
1
percent)
in
private
and
private
(24.6
enterprises
6.2.4.
Again,
opportunities
f o r p r i v a t e banks t o
mobilization
of
funds
from
I n terms o f economic s e c t o r s ,
grant
loans
industry,
were
i s mainly t o
t r a d e and
sectors.
In
the
group
of
finance
t h e l a s t f i v e years,
to
manufacturing
those
industry
sectors
f o r 88 p e r c e n t
of
loans
banks
private
the
opportunity
especially
there are
the
opportunities
non-foreign
exchange
banks t o o f f e r new b a n k i n g s e r v i c e s ,
such
as :
a.
To handle p r i o r i t y loans.
Since
yuvernment
t h e p r i o r i t y loans i s mainly t o
high
p r i o r i t y programs,
Bank p r o v i d e s l i q u i d i t y c r e d i t s .
54
the
i4
are
increase
services-rendering
I n t h e banking i n d u s t r y ,
for
there
these
s t i l l growing accounting
the t o t a l
6.2.5.
percent).
finance
Central
when a bank handles p r i o r i t y l o a n s ,
Therefore,
w i l l
i n
have a cheap s o u r c e s o f funds.

case
amount
o f bad d e b t ,
75 p e r c e n t
F~~rthermore,
of
o ~ l t s t a n d i n g loans i s
of
it
the
total
covered
by
PT
Askrindo
semi-government
credit
insurance
institution).
b.
Ta h a n d l e e l e c t r i c i t y and t e l e p h o n e b i l l s .
By
handling
benefit
since
percent
of
the
hank.
shortage
t h e s e two b i l l s ,
t h e f u n d s amounting
bank
to
t h e t o t a l funds c o l l e c t e d
gets
least
stays
These funds can be used t o
cover
o f cash p a r t i c u l a r l y when i t i s l o s t
20
with
the
in
cheque l o s t .
c.
To h a n d l e c a r l o a n s .
Because t h i s l o a n s i s c a t e g o r i z e d a s a consumer
loan,
the
interest
rates
productive/business loans'
are
higher
To do e n t e r i n t o
than
this
s e r v i c e a bank must c o l l a b o r a t e w i t h a c a r d e a l e r .
d. To use a u t o m a t i c t e l l e r machines ( A T M I .
In
o r d e r t o improve bank s e r v i c e s ,
bank
is
for
one u n i t o f A T M i s more than Up 100
million,
o n l y c e r t a i n banks can a f f o r d an A T M .
6.2.6,
I n o r d e r t o @ e v e l o p bank a c t i v i t i e s ,
exchange
private
bank
exchange p r i v a t e bank
can
a non-foreign
become
provided
foreign
t h a t t h e bank has
a l r e a d y gone i n t o a merger w i t h o t h e r
exchange
non-foreign
p r i v a t e banks a t l e a s t t w i c e and
it
i s
cat.eqorized as a sound bank.
6.3.
Threats
6.3.1. When
p r i v a t e bank wants t o open a
office,
there
a r e some
new
limitations
branch
which
are
r e g u l a t e d by t h e C e n t r a l Bank such a s t y p e o f bank

and l o c a t i o n .
a
lncal
bank,
sub-branch
However,
national
I f a p r i v a t e bank i s c a t e g o r i z e d
i t w i l l be a l l o w e d t o open
o r a branch o n l y f o r p r o v i n c i a l
bank,
i t can open
new
areas.
when a p r i v a t e bank i s c a t e g o r i z e d as
private
as
new
a
sub-
ri
branch
In
n r a branch nationwide.
addition,
the
o t h e r r e q u i r e m e n t f o r opening a b r a n c h i n s i d e Java
is
f o r t h e bank covered t o open a b r a n c h
Java f i r s t .
6.3.2.
'
TO be a f o r e i g n exchange p r i v a t e bank,
required,
foreign
since
However,
a merger i s
i t i s v e r y d i f f i c u l t f o r a non-
p r i v a t e bank t o merge w i t h
s h a r e h o l d e r s do n o t want t o
p a r t i e s i n r u n n i n g t h e i r bank.
arise
outside
another
involve
bank
other
Problems c o u l d a l s o
f r o m t h e e n t r y o f o t h e r p a r t i e s as
regards
t o c o n t r o l o r owners'hip e n t i t y .
6 . 3 . 3 . The
fluctuations
i n the value o f the
also
one o f t h e t h r e a t s .
past
four
rupiah
years,
against
devaluation
on
depositors
since
57
T h i s i s because i n
t h e government
U.S.
dollar
September
the
rupiah
devaluated
twice.
1986
economic
The
i s
the
the
last
prejudiced
the
situation
was
unfavorable.
rupiah
If
the
government
again,
t h e consumers w i l l
of
depasits
result.
shortage
devalues
withdraw
source
by
higher
offering
their
w i l l
o f l funds
I t f o l l o w s t h a t a bank t r i e s
customers
the
to
attract
interest
rates,
therefore
the
expensive.
cost
Finally,
o f funds
w i l l
become
the i n t e r e s t rates
of
more
loans
w i l l a l s o increase.
6.3.4.
Since
all
banks a r e f r e e t o
determine
interest
r a t e s and c r e d i t c e i l i n g ,
a f i e r c e r competition i n
t h e banking i n d u s t r y w i l l
follow.
"strong"
networks,
bank who has more a s s e t s ,

a
professional
contrast,
Consequently,
professional
staff,
w i l l
wider
manager
be
a "small" non-foreign
as
the
branch
well
as
winner.
In
exchange
private
bank w i t h l i m i t e d f i n a n c i a l and human sources w i l l

f i n d i t v e r y h a r d t o compete w i t h
" g i a n t " banks.
;I
CHAPTER 7
THE NEW GOVERNMENT P O L I C Y
7.1.
Background
With
view
to
sustaining
and
achieving
sufficiently
high economic growth a s well
employment
opportunities,
five
plan,
year
as
especially during
on October 27,
and
banking
fields.
the
fifth
1988, t h e . government
introduced a series of policy measures in the

monetary,
expanding
These
financial,
policies
were
designed to promote and/ or t o improve the following :

( 1 ) Mobilization of funds.
( 2 ) Non-oil exports.
( 3 ) Efficienty
in
the operations of
banks
and
other -
financial institutions.
( 4 ) Effectiveness
in
the
implementation
of
monetary
policy.
( 9 ) Development of the capital market.
7.2 T h e h i g h l i g h t s o f the policy
The
related
to
highlights of the policies

the
banking
industry
briefly in the following paragraphs.
especially
will
be
those
explained
7.2.1
Funds mobilization
T'he
new p o l i c i e s f o r f u n d s
mobilization
include
the following :
a.
Opening o f new branch o f f i c e f a c i l i t i e s f o r banks and

f o r non-bank
financial institutions;
b.
E s t a b l i s h m e n t o f new p r i v a t e banks;
c.
E s t a b l i s h m e n t and o p e r a t i o n o f r u r a l c r e d i t banks;
d.
Issuance o f c e r t i f i c a t e o f d e p o s i t s ;
e.
Expansion o f s a v i n g s .
and
7.2.2 The promotion of non-oil and/or gas exports.

The
requires
promotion
of
non-oil
and/or
expansion and improvement o f
gas
banking
such a s :
a.
Expansion o f
b.
Establishment o f j o i n t - v e n t u r e
c.
Opening o f f o r e i g n bank sub-branch
d.
Improvements on t h e SWfiP arrangement.
e.
E s t a b l i s h m e n t o f money changers.
---
f o r e i g n exchange banks;
_-
banksg
offices;
exports
services
7.2.3.
Enhancement o f e f f i c i e n c y
financial
institutions,
w i l l
a more c o m p e t i t i v e c l i m a t e
d e p o s i t s o f non-bank
s t a t e e n t e r p r - i s e s (Badan Usaha M i l i k
Negara) and non-bank
l o c a l government e n t e r p r i s e s
Usaha
M i l i k Daerah) i n p r i v a t e
bank/non-bank
i n s t i t u t i o n s ( NBFIs ) . The amount of
(Badan
financial
funds deposited
a l l p r i v a t e banks may n o t exceed 5C) p e r c e n t o f t h e
i n
state
e n t e r p r i s e s t o t a l funds i n d e p o s i t s .
7.2.4.
Enhanced implementation o f monetary p o l i c y
The
demand
minimum
time,
reserve
af
and s a v i n g s d e p o s i t s i s lowered
percent t o 2 percent o f
7.2.5.
requirement
banks
from
for
15
l i a b i l i t i e s t o t h i r d parties.
Development o f t h e c a p i t a l market
l o a c c e l e r a t e development o f t h e c a p i t a l market,
61
it
income, f r o m
deposits
securities.
deposits
The
of
tax r e s t i t u t i o n .
(including
t h a n t h e l e v e l of
income
r a t e on income
earned
from
time
with
the
total
is
lower
i n t o m e from t i m e d e p o s i t s )
t a x a b l e income,
other
I f the taxpayer's
namely Rp 2,880,000
annum f o r a f a m i l y w i t h t h r e e c h i l d r e n ,
be requested.
from
1 5 percent,
i s set a t a f l a t rate of
possibility
income
tax
with that of
a tax refund
Tax on income earned from s a v i n g s ,
per
may
however,
is exempted.
Such a p o l i c y r e g a r d i n g t a x r a t e on income
from
time
community
before.
deposits
since
What
i s
was no l o n g e r
they
have known o f
a t t r a ~ t i v et o
increase i n i n t e r e s t r a t e
the
surprise
this
earned
to
policy
customers
o f time deposits i n
i s
the
long
the
Indonesia
compared t o a l l n e i g h b o r i n g c o u n t r i e s .
7.3.
The i m p a c t o f the policy
The
only
impact
fiercer
o f t h i s new p o l i c y package,
competition
among
banks,
was
but
not
also
opportunities for
t h e banking i n d u s t r y
particularly for
p r i v a t e banks such a s :
Opening
of
f a c i l i t i e s f o r new b r a n c h
and
sub-branch
o f fices
Expansion o f s a v i n g s
Expansion o f
Placement o f d e p o s i t s o f non-bank
f a r e i g n exchange banks
(BUMN) and non-bank

i n p r i v a t e banks.
63
state
enterprises
l o c a l government e n t e r p r i s e s (EUMD)
CHAPTER 8
BANK W I D Y A KAFNA
8.1.
Historical Background
Bank Widya Karya (BWK) was e s t a b l i s h e d i n
i.n
1967
by non n a t i v e e n t r e p r e n e u r 3
as
Jakarta
a . non-foreign
exchange p r i v a t e bank w i t h a p a i d up c a p i t a l o f around R p

X
1 billion.
A11 t h e s t o c k h o l d e r s came from t h e same f a m i l y
who a l s o managed t h e bank w i t h t h e Government c o n t r o l l i n g

t h e i n t e r e s t r a t e on d e p o s i t s and loans.
However,
EWE
hired.
in
tried
p r o f e s s i o n a l manner.
a
1985 a new
to
operate
President
the
bank
Director
in
more
w i t h i n t h e p a s t f o u r y e a r s BWE
" n o t sound enough bank r o s e t o t h e c a t e g o r y a
was
from
"fairly
sound" bank.
Finally,
from t h e m i d d l e o f 1987 u n t i l
end o f 1988,
BWK has been c a t e g o r i z e d as a "sound" bank.
I n order t o g e t wider o p p o r t u n i t i e s ,
part
of
1987,
i n Jakarta.
the
i n the l a t t e r
BWK opened a branch and a sub-branch
both
A t t h e end o f December 1987, among f i f t y f i v e non-
BWK
f o r e i g n exchange p r i v a t e banks,
in
terms o f
capital,
t o t a l assets.
p r o f i t , BWK
and
eighth,
thirty-sixth,
ranked f o r t y - s e v e n t h
I n terms o f
ranked
deposits,
loans,
forty-sixth,
and f i f t i e t h ,
forty-
respectively.
The
f i n a l rank was f o r t y - f i f t h .
x'
BWK
While
performance,
changed.
the
has
been
trying
environment i n
On October 27,
1988,
to
the
a new
improve
banking
banking
opening
private
of
banks
non-foreign
new banks
i s
now
a r e a l l o w e d t o open
exchange
branch
exchange banks under c e r t a i n c o n d i t i o n s .
policy,
inc:onle
the
moratorium
allowed.
p r i v a t e banks may
i n d u s t r y has become more c o m p e t i t i v e .
industry
regulation
went i n t o e f f e c t and a f t e r more than a 15-year

the
Moreover,
offices
become
performance
affected
the
community
h a s . been e x p e c t i n g t h i s p o l i c y
y e a r s back.
65
the
Aside from t h i s new

tax
F o r t u n a t e l y t h i s t a x has
of
and
foreign
As a r e s u l t
government a l s o imposes 15 p e r c e n t
fvorn t i m e d e p o s i t s .
i t s
deposits
on
not
because
the
since
few
8.2.
The O b j e c t i v e s o f BWK
I'
I
The
economic
mission
of
development
BWE i s
of
to
participate
Indonesia.
Eased
on
in
the
the
work
program
for
1988,
improve
the
volume
soundness o f
the objectives o f
o f business
the
and
the following strategies
To
are
maintain
to
the
t h e bank.
I n order t o achieve these goals,
to
bank
endeavor
t h e bank employed
t o decrease
the i n t e r e s t
rate
uf
time
deposits
To improve
cheap
funds
mobilization
f r o m demand
deposits
To
place
t h e f u n d s on s e l e c t i v e l o a n s
and
business
which i s c a t e g o r i z e d a s p r o d u c t i v e and p e r f o r m i n g w e l l
To
improve t h e s u p e r v i s i o n and l o a n s
avoid
the
collection,
and
p o s s i b i l i t y o f a r r e a r s o r bad d e b t
To i n c r e a s e o v e r a l l e f f i c i e n c y .
66
I
h
8.3. Organizational Structure
The
management
c:ommissioners
and,
of
BWK c n n ~ i s t so f
a Board o f
Managing
Board
Directors.
of
The
Board
of
Cammisaioners
and
the
Board
of
Managing
D i r e c t o r s c o n s i s t o f f o u r members each.
The composi.tion o f
t h e s e boards i s a s f o l l o w s :
Board oof Commissioners 1
P.
Chairman : M r .
Indra
Members
Bambang.
: Mr.
Mr.
Yuwono S.
Mr.
Harry
T.
President : M r .
M.
Yunus
Members
: Mr.
Abdullah
: Mr.
Agus D w i h a r d j o ( i n charge o f s u p e r v i s i o n
and development)
: Mr.
Irawan ( i n charge o f o p e r a t i o n )
( i n charge o f f i n a n c e )
The day t o day o p e r a t i o n o f

by
General
t h e company is
Manager a s t h e c h i e f
headed
executive o f f i c e r .
The
o p e r a t i n g d i v i s i o n s o f t h e company c o m p r i s e
of
the
following :
( 1) F i n a n c e d i v i s i o n
( 2 ) Loans d i v i s i o n
( 3 ) Personnel d i v i s g o n
( 4 ) Accot-i13tinq d i v i s i o n .
The
number
assigned
from
to
high
follows
of
employees
two branches.
school.
i s 124
people,
A11 EWK s t a f f
The c o m p o s i t i o n o f
45
are
of
them
graduates
personnel
i s
as
Boards members
General Manager
Deputy General Manager
Manager
Staff
67
Cashier
Others
Total
The o r g a n i z a t i o n c h a r t o f EWK can be seen i n E x h i b i t 21.

The range o f s e r v i c e s a t BWK i n c l u d e demand d e p o s i t s ,
time deposits,
and l o a n s .
The o t h e r s e r v i c e s w h i c h a r e n o t
planned by BWE a r e money t r a n s f e r ,
incaso,
and
c a l l money. Money t r a n s f e r and i n c a s o emphasize

service
the
least
r a t h e r than p r o f i t ,
name
b u t they s e r v e t o
o f BWK and t h e funds ( f r o m
a t t h e bank for- a few days.
s a v i n g s account s e r v i c e .
sources o f funds.
incaso)
BWK does n o t
interbank
customer
advertise
stays
offer
at
a
I t d e p r i v e s t h e bank o f a cheap
CHCSPTER 9
!I
PERFORMANCE O F BANK WIDYA KARYA (BWK)
9.1.
Funds mobilization
The
deposits
major
which
deposits.
sources
o f funds
consist
For
the
o f time
past
four
BWE
of
come
deposits
years
and
total
1987
year.
and
w i t h an average g r o w t h r a t e o f 53
billion
percent
The averaye annual g r o w t h r a t e o f demand

time
deposits
were 56 p e r c e n t
and
demand
deposits
i n c r e a s e d from Rp 5.9 b i l l i o n i n 1984 t o R p 13.4

in
from
per
deposits
percent,
24.2
i1
I
respectively.
By
t h e end o f 1987,
the
composition
demand d e p o s i t s and t i m e d e p o s i t s was a l m o s t e q u a l ,

demand
deposits
accounting
d e p o s i t s 49.5 p e r c e n t .
f o r 50
percent
and
of
with
time
The c o m p o s i t i o n o f demand d e p o s i t s
and t i m e d e p o s i t s from 1984 t o 1987 can be seen i n T a b l e 8.

I
TABLE 8
DEMAND AND TIME DEPOSITS
BANK W I D Y A KAHYA
1984-1987
1,
( i n m i l l i o n s o f rupiah & percent)
...........................................................
1984
1985
HP
%
HP
%
--.----------------------------------------------------------
1986
RP
1987
%
HP
%
1
DU
2,233
37.6
5,470
58.7
5,588
53.7
6,789
50.5
TD
3,708
62.4
3,856
41.3
4,644
46.3
6,660
49.5
............................................................
TOTRL
5,941
108
9,326 100
10,092 100 13,449
............................................................
Source : B a n k ' s r e c o r d
100
Total
deposits
uf
BWE* i n c r e a s e d
every
year.
i
However,
i t s
market
share
of
deposits
i n
banking
'I
I
industry
was
o n l y 0.05
percent,
and
among
exchange
p r i v a t e banks i t s s h a r e was 0.42
non-foreign
percent.
low market s h a r e was' due t o i t s l i m i t e d branch

and
relatively
non-aggressive
netwurk,
marketing
effort.
BWK has o n l y two b r a n c h o f f i c e s and b o t h
Currently,
The
are
I
in
Jakarta.
marketing
of
In
additions,
BWK i s
not
e f f o r t s t o a t t r a c t depositors.
BWK a r e t h o s e who l i v e o r have come
store
the
around t h e BWK o f f i c e s .
recommendation
active
Most
in
i t s
customers
business
Advertisement i s
o f e x i s t i n g customers,
and
and/or
through
throuyh
p e r s o n a l r e l a t i o n s h i p o f BWC:: . p e r s o n n e l .
9.1.1.
Demand Deposits
As a t t h e end o f
deposits
to
demand
t h e t o t a l amount o f
s l i g h t l y d e c l i n e d by 1.5
t h e impact o f
t h e U.S.
1986,
the devaluation o f the
d o l l a r i n September 1986.
deposits
rose
T h i s was
rupiah
billion
reach
due
against
B u t as a t end o f
by 26 p e r c e n t t o
b i l l i o n a s compared w i t h Rp 5.3
year.
percent.
demand
Rp
1987,
6.8
i n the preceding
from
578
i n
1986
to
768
in
1987.
'The
composition
o f customers i s made up o f 55.9
percent i n d i v i d u a l s ,
percent
and
private
foundations.
enterprises,
The c o m p o s i t i o n o f
0,6
percent
43.5
social
t h e customers from
1/
iI
1984
t o 1987 can be seen i n T a b l e 9.
TfiBLE 9
MAJOR CUSTOMERS OF DEMAND DEPOSITS
1984
1987
( i n m i l l i a n s o f r u p i a h and p e r c e n t )
Individuals
1,111
49.8
3,726
68.1
3,143
58.3
3,793
55.9
Privateenterprises
1,090
48.8
i,670
31.1
2,191
40.7
2,957
43.5
Socialfoundations
92
1.4
0.8
54
1.0
44
40
0.6
.................................................................
T O T A L
2,233
100
5,470
100
5,388
100
6,770
100
Source : B a n k ' s r e c o r d
I n o r d e r t o o f f e r good s e r v i c e s t o i t s
BWK
operates
facilitate
two
banking
mobile
units.
These
customers,
mobile
s e r v i c e s f o r out-of-reach
units
customers
in
b u s i n e s s a r e a s t h a t a r e o u t s i d e busy c e n t e r s
suburban.
Cheques
claimed
at
Finally,
the
accounts
are
collected
clearing
house
from
proceeds a r e c r e d i t e d
to
i n
customers
Hank
through
and
the
and
Indonesia.
customers'
Another
service
to
recording
strategy
which
B W K uses t o
i s t h e use o f
i t s customer,
demand d e p o s i t s accounts.
By u s i n g computers,
i t s
f a s t e r than
customers
Consequently,
better
computers
for
These computers
are
l o a n s accounts,
and
a l s o used f o r t i m e d e p o s i t s accounts,
o t h e r accounts.
give
EWK i s a b l e t o
through
manual
serve
operations.
i t takes l e s s than f i v e minutes t o serve
customer a t t h e t e l l e r window.
9.1.2.
Time Deposits
As a t end o f 1987,
p e r c e n t t o Kp 6.6
at
the
end
t i m e d e p o s i t s i n c r e a s e d by 43.4
b i l l i o n a s compared w i t h Rp 4.6
o f 1986.
This
increase
came
billion
mainly
from
i n d i v i d u a l customere, which i n c r e a s e d by -92.6 p e r c e n t .
The
73
--
-=-J-
'-*
v a r i o u s groups o f
1987
were 65.3
foundations,
the
past
enterprises
t i m e d e p o s i t s customers as a t t h e end o f
percent i n d i v i d u a l s ,
and 4.5
percent
percent p r i v a t e enterprises.
years
four
30.2
from
1984
to
1987,
social
Within
private
p l a c e d t h e i r funds i n t i m e d e p o s i t s a n l y
1985 and i n 1987 because most o f

b e i n g i n t h e r e t a i l business,
the p r i v a t e enterprises,
r e q u i r e d funds f o r
working
c a p i t a l t u r n o v e r and t h e r e f o r e would n o t w i s h t o t i e
their
of
funds i n t i m e d e p o s i t s .
time
in
Table 16 shows t h e
d e p o s i t s from 1984 t o 1987
by
major
up
growth
customer
groups.
TRELE 10
MAJOR CUSTOMERS OF TIME DEPOSITS
BANK WIDYA KARYA
( i n m i l l i o n s o f r u p i a h and p e r c e n t )
-----.-----------.-------------------------------------------------
---.-------------------------------------------------------------I n d i v i d u a l s : 1,681
Privateenterprises :
45.3
1.,799
46.6
2,634
56.7
Socialf o u n d a t i o n s : 2,027
4,349
500
54.7
2,012
52.2
2,010
43.3
2,012
.................................................................
T O T A L
3,708
100
3,8s6
l o o 4,644
100
6,661
.................................................................
Source : Bank's r e c o r d
74
65.3
4.5
30.2
100
7 -
competitive
compared
with
other
private
banks.
For
;I
e x a m p l e i n t h e f i r s t w e e k o f J a n u a r y 1988, BWE o f f e r e d 17
percent,
19 p e r c e n t ,
19 p e r c e n t ,
a n d 20 p e r c e n t
interest
r a t e p e r annum f o r t i m e d e p o s i t s o n m a t u r i t y o f 1, 3,
a n d 12-month.
Meanwhile,
t h e range of
i n t e r e s t rate
6,
II
from
o t h e r b a n k s were 1 5 . 5 t o 2 2 p e r c e n t p e r annum.
9.2.
Lending Performance
A s a t t h e e n d o f 1987, t h e t o t a l o u t s t a n d i n g l o a n s
g r a n t e d by BWE w e r e
percent
year.
c o m p a r e d w i t h Hp 9.7 b i l l i o n
share
percent
private
funds
in
the
preceding
i n 1986 a n d 2 0 4 c u s t o m e r s i n 1987.
customers
0.03
an i n c r e a s e of 12.8
terms o f t o t a l n u m b e r o f c l i e n t s , i t
In
market
Rp 10.9 b i l l i o n ,
banks.
and
had
The
o f BWK i n t h e b a n k i n g i n d u s t r y
a n d 0.3 p e r c e n t
The r e a s o n s w e r e
in
mainly due
Table
o u t s t a n d i n g l o a n s d i s t r i b u t e d among t h e v a r i o u s
s e c t o r s f r o m 1984 t o 1987.
only
exchange
to
11
151
loans
was
non-f o r e i g n
l i m i t e d branch network.
1
14
limited
shows
the
economic
TABLE 11
OUTSTANDING LOANS BASED ON ECONOMIC SECTORS
BANK WIDYA EARYf7
( i n m i l l i o n s o f r u p i a h and p e r c e n t )
..................................................................
1984
1986
7.
1987
RP
Agriculture
26.6
0.4
85.9
1.2
Mining
3:3.31.
5
48.1
3837.2
52.4
4304.4
44.4
3326.2
30.4
Transport
161.3
2.3
131.8
1.8
150.7
1.6
141.4
1.3
Service
6'73.4
9.7
Other-s
199.1
2.8
219
3.0
224.9
2.3
559.1
5.1
.>
(3 (3
8.1
0.1
5.4
0.05
Unclassified
RP
RP
Industry
1985
RP
160.9
1.7
260.6
2.4
12.8
0.1
..................................................................
Source
: Bank's r e c o r d
Based on economic s e c t o r s ,
compasitiun
industry's.
of
In
mainly f o r trade,
loans
was
o t h e r wor-ds,
industry,
l o a n s were channeled t o
similar
to
the
t h e markets f o r
banking
loans
and s e r v i c e s s e c t o r s .
are
I n 1987,
client
was
t h e average l o a n s g r a n t e d by BWK f o r each
Hp 53.5
million.
I n terms o f
s h a r e o f market i n t h e b a n k i n g
percent,
In
and 0 . 3 2
comparison,
industry of
the
2.4
was
t h e market share o f
loans i n t h e
p e r c e n t and 0.15
other-
percent,
banks.
banking
are
banks) were
respectively.
i n t e r e s t r a t e an l o a n s ,
t o 27 p e r c e n t p e r annum i s
BWK charges o f
comparable
banks w h i c h also o f f e r e d around 2 4 t o
27
with
percent
i n t e r e s t p e r annum.
EWK
major
grants only f o r short-term
and t h e r i s k o f s h o r t - t e r m
loans.
loans
l o a n s because
s o u r c e s o f funds come from s h o r t - t e r m
Towards
was 91.8
p e r c e n t good,
percent doubtful.
the
(deposits),
loans i s lower than long-term
t h e end o f 1987,
6.4
the
performance
percent f a i r ,
11.
0.03
Bank C e n t r a l A s i a and Bank Niaga ( w h i c h
f i r s t and t h e second l a r y e s t i n p r i v a t e
percent
only
p e r c e n t i n non-f o r e i g n exchange
I n terms o f
24
industry
BWK's
loans,
of
and
1.8
BWE
I n order t o give b e t t e r service
t r i e d t u process every loans a p p l i c a t i o n w i t h d i s p a t c h .
a l o a n s a p p l i c a t i o n and d e c i d e whether t h e
process
application
or
approved
is
not.
Time
consumed
p r o c e s s i n g l o a n s a p p l i c a t i o n s a l s o d e p e n d s on t h e
of
the
loans
applied
for.
If
the
amount
requested
for
is more t h a n Rp 3:) m i l l i o n ,
apprnved
by
two
commissioners.
members
of
the
loan
for
amount
of
it
loans
must
board
be
managing
Thus p r o c e s s i n g t a k e a l o n g e r t i m e d u e
to
t h e various l e v e l s t h e a p p l i c a t i o n has to go through.

I n t e r m s of
loans strategy,
t h e p o s s i b i l i t y of
long-term
BWK c o u l d
loans.
look
L e n d i n g on p r i o r i t y
l o a n s can be a worthwhile e f f o r t . Funds f o r t h e s e

which
long t e r m i n nature, can be
are
into
l i q u i d i t y c r e d i t s f r o m Bank I n d o n e s i a .
loans,
sourced
through
S c h e m e s l i k e small
-scale i n v e s t m e n t c r e d i t ( c e i l i n g l i m i t o f R p 30 m i l l i o n )
and
i n v e s t m e n t c r e d i t ( c e i l i n g l i m i t o f Hp
facilitate
credits
pri0rit.y
such
are
liquidity
credits.
These
cheap funds w i t h . 1 0 ~ i n t e r e s t
75
million)
liquidity
rates.
l o a n i t s e l f i . s g u a r a n t e e d by PT' A s k r i n d o
is a c r e d i t i n s u r a n c e i n s t i t u t i o n .
78
-----_-.
---.~.-
The
which
Furthermore, support
11
g i v e n i n terms o f c r e d i t s u p e r v i s i o n a n d s t a f f t r a i n i n g .
BWE's
b r a n c h e s are l o c a t e d i n J a t i n e g a r a
market
a n d T a n a h Abang m a r k e t i n l i n e w i t h i t s s t r a t e g y t o c a t e r
t o retail b u s i n e s s a n d / o r i n d i v i d u a l s .
firm
plans
C u r r e n t l y , BWK h a s
t o open a n o t h e r t w o b r a n c h e s to
be
located
X
also
in
business
c e n t e r s , namely
Kebayoran
Baru
and
E e b a y o r a n Lama.
9.3.
The financial highlights of BWK

Pri
t e r m s of growth,
t o t a l a s s e t s i n c r e a s e d by
average
27.34
p e r c e n t p e r annum
dur-ing
period.
The a v e r a g e growth i n t h e banking
20.8 p e r c e n t w i t h p r i v a t e banks a t 37.7

P r o f i t before tax declined
in
the
1964-1987
industry
was
percent.
f r o m Rp
228.2 m i l l i o n
1 9 8 4 t o Rp 1 1 2 . 4 m i l l i o n i n 1987, a n d t.hen
by 33.5 p e r c e n t t o Rp 150 m i l l i o n
an
i n 1988.
increased
In 1987, t h e
r e t u r n o n a s s e t s ( R O A ) w a s n n l y 0.59 p e r c e n t ,
compared t o
the
non-foreign
industry's
ROA
at
1.99
percent
and
exchange p r i v a t e banks a t 2.58 p e r c e n t .

(ROE)
was
percent.
2.18
industry's
This
was
R e t u r n on
much
exchange p r i v a t e
w h i c h were 34.36 p e r c e p t and 19.73 p e r c e n t ,
equity
lower
than
banks'
ROE
respectively.
T a b l e 12 shows t h e f i n a n c i a l h i g h l i g h t s o f BWK f r o m
1984
TABLE 12
X
THE FINANCIAL HIGHLIGHTS OF BWK

( i n m i l l i o n s o f rupiah)
---------------------------------------------------------------------1. A s s e t s
9425.6
2. D e p o s i t s
------
3.
Demand D.
Time D.
Equity
13005.3
13807.8
2232.9
3708.1
------
-------
Paid up c a p i t a l
2650
Reserves
Retained earning
68.2
26st:)
255.2
375.3
5. Loans
32461.1
5941
2718.2
4. P r o f i t
19038.5
228.2
6930.7
6. Loans t o d e p o s i t s 116.7%
7. Loans t o a s s e t s
73.5%
56.3%
70 1%
57.4%
8. P r o f i t a b i l i t y
ROA
ROE
2.42%
8.40%
1.65%
6.96%
1.14%
4.80%
(3 59%
2.18%
......................................................................
Source : Bank's r e c o r d
80
63.3%
(2.46%
2.79%
Table
12
also
increased from Rp 2.65

i n 1987.
the
shows t h a t
the
paid-up
capital
b i l l i o n i n 1986 t o R p 4.5
billion
U n d i s t r i b u t e d e a r n i n g s had been r e t a i n e d
p a s t y e a r s t o entable t h e expansion o f
ratio
of
percent
loans
extended
against
EWK.
deposits
was
during
Average
91.3
B W G earns a spread o f 1 t o 4 p e r c e n t ,
based on t h e
I(
f o l l o w i n g compcrtation a
Cost o f
l o a n a b l e funds
: 17 p e r c e n t
O p e r a t i n g expenses
4 percent
Write o f f
2 percent
Base r a t e
: 23 p e r c e n t
of
between
percent
and' 27
lending
percent,
t h e spread i s t h e r e f o r e 1 p e r c e n t t o 4 p e r c e n t .
I n summary,
rate
24
Against
BWE's assets, d e p o s i t s , and l o a n s grew
f o r t h e p a s t f i v e years,
b u t p r o f i t a b i l i t y was much lower
compared w i t h t h e banking i n d u s t r y ' s .
CHAPTER 10
B A N K ' S STRENGTHS AND WEAKNESSES
10.1.
STRENGTHS
K0t.a
which
i s
known as one
centers i n Jakarta.
Jatinegara
business
complexes
banks
and
the
biggest
business
The two branch o f f i c e s a r e l o c a t e d i n
Pasar Tanah Abang,
centers,
and
of
but
both being
also located
p r i v a t e companies.
close
not
to
only
housing
There a r e o n l y
few
i n t h e branch o f f i c e s a r e a s so t h a t BWK s t i l l
has
o p p r 2 r t u n i t i e s t o i.ncr'ease i t s cust.omers.
e x p e r i e n c e i n bank o p e r a t i o n s .
a
former
general
The p r e s i d e n t d i r e c t o r was
manager- from Bank
It
Indonesia.
i s
important f o r
B W K t o m a i n t a i n good r e l a t i o n s h i p w i t h
C e n t r a l Bank
s i n c e BWK has bt-tsiness w i t h Bank I n d o n e s i a ,
parti.cuLat-1y
with
r e q u i r e m e n t account,
Besides,
is
also
the
one
regard
to
clearing
house,
the
reserve
r e p o r t s , and o t h e r o f f i c i a l m a t t e r s .
o f t h e board o f
b i g g e s t shareholder-,
commissioners
i s well
known
who
as
successful
businessman
relationships
with
l e a s t w i l l add
t(3
i n Indonesia
t h e Gavernmer'lt.
and
His
has
close
popularity
at
t h e BWE image.
1
10.1.3.
The g r a w t h o f d e p o s i t s i n t h e p a s t f a u r y e a r s
has
been
the
community
bank.
steady.
BWK
i s
funds
by
in
the
" T r u s t " is v e r y i m p o r t a n t f o r b a n k i n g business,
for
without
who t h e r e f o r e ' p l a c e t h e i r
trusted
i t , i t i s v e r y d i f f i c u l t f o r a bank
to
develop
i t s business.
10.1.4.
as
BWM has a goad image because i t i s c a t e g o r i z e d
a sound bank.
Furtharmore,
some o t h e r p r i v a t e banks.
BWK n e v e r
collapsed
I f a bank e v e r c o l l a p s e d ,
like
it i s
v e r y d i f f i c u l t f a r t h e bank t o a t t r a c t customers.
10.2.1.
rendered
The
limited
branch networks
of
BWE
i t n o n - c o m p e t i t i v e w i t h o t h e r banks which
has
have
wider
branch
operations,
networks.
a bank s h o u l d have
a wide
to
get
branch
wider
network.
S i n c e J a k a r t a i s a l a r g e a r e a w i t h many p o t e n t i a l
market
l o c a t i o 1 7 s , more branches a r e needed.
10.2.2.
school,
Most
BWK
employees a r e g r a d u a t e s
and o n l y a few o f them
from
high
have e v e r t a k e n one
week
t r a i n i n y i n banking.
I n contrast,
trained
order
staff
in
many p r i v a t e banks have
to
get
better
no
staff
quality
employees.
If
development,
i t i s d i f f i c u l t t o be more p r o f e s s i o n a l
there
i s
and/or
of
employee
and
t o compete w i t h o t h e r banks due t o t h e d i f f e r e n c e i n t h e

a t t i t u d e s and s k i l l s o f t h e employees.
The range o f bank s e r v i c e s o f f e r e d by BWK
10.2.3.
limited
to
Actually,
of
funds,
priority
hand,
demand d e p o s i t s ,
f o r sources o f
Further,
BWK
loans.
loans.
needs o t h e r t y p e s o f
source
o n l y s e r v e s nonOn
loans
l o a n s w h i c h have low i n t e r e s t r a t e s
term l o a n s .
and
t h e r e i s another
and/or short-term
t h e communit:y
priority
funds,
s a v i n g s deposit.5.
loans
time deposits,
i s
the
other
such
and
as
long-
I 1
CHhPTER 11
THE PROPOSED STRfiTEGY
11.1.
Strategic Situation
Pr-ior
would
like
to
formulating the
to
strategy,
g i v e t h e background
of
the
the
writer
prevailing
s i t u a t . i o n i n t h e b a n k i n g i n d u s t r y d u r i n g t.he p e r i o d 1983-
1988 as e x p l a i n e d i n t h e f o l l o w i n g paragraphs.
As
situation
matter
af fact,
<he
keenly
competitive
i n t h e banking i n d u s t r y s t a r t e d i n
i m m e d i a t e l y a f t e r t h e C e n t r a l Bank
popularly
known
as
"the
deregulation".
S i n c e then,
the
rate
interest
of
1st
amended
of
June
June
the
deposits
and
policy,
1985
banks were f r e e t o
l.983
banking
determine
loans.
Another
i m p o r t a n t change was t h a t t h e c r e d i t c e i l i n g o r q u o t a was

no
longer
imposed
on
Central
a bank
in
bank began
granting
addition,
the
to
liquidity
c r e d i t s t o banks e x c e p t f o r
phase
loans.
out
certain
In
the
priority
l o a n s scheme.
Such
"freedom"
advantages t o t h e
i n t h e banking
private
85
banks
in
industry,
offers
fund m o b i l i z a t i o n
and
l o a n expansion.
the
deregulation
private
banks
deposits
loans
rose
(June
1983 t o
deposits
from 17.5
198.71,
gradually
percent t o
t h e shar-e o f s t a t e banks,
the
23.2
t h e major
T h i s was m a i n l y because t h e p r i v a t e banks'
compete
and
has
of
of
Time
percent,
percent.
t h e market l e a d e r s among bank groups,
However,
share
increased.
i n c r e a s e d from 17 p e r c e n t t o 23.7
o t h e r hand,
and
in
A f t e r f o u r y e a r s o f enforcement
On
and
the
players,
declined.
interest
rate
t h e r e were a few p r i v a t e banks u n a b l e t o

survive
i n
the
new
experienced losses i n t h e i r operations.
environment,
These were
and
bankg
which were weak i n fund management such a s t h o s e o f f e r i n g

t o n h i g h i n t e r e s t r a t e on d e p o s i t s as a r e s u l t o f
t h e bank o p e r a t i n g c o s t was a f f e c t e d .
which,
BWK
managed
was
one t h e non-forex
private
which
t o s u r v i v e i n t h i s c o m p e t i t i v e s i t u a t i o n and
make a p r o f i t i n i t s o p e r a t i o n . T h i s
capability
interest
banks
EWK
of
rate
ih
offered
managing
both
on
was m a i n l y due t o t h e
and
controlling
deposits
and
the
loans.
i n order t o strengthen i t s gperations,
Furthermore,
to
EWK
opened two branches i n 1987.

Meanwhile,
new
on Oct.ober 27,
banking r e g u l a t i o n e n f o r c e d which n o t o n l y
opport.unities,
however,
rather
provided
opportunities
f o r opening new p r i v a t e
there
banks o r
private
heavy r e q u i r e m e n t s .
bank
stockholders
reputation.
For instance,
have banking e x p e r i e n c e
F o r o p e r a t i n g a f o r e i g n bank,
and
and
a
the
goad
conditions $re
imposed such as t h e 50 p e r c e n t o f t o t a l l o a n s
be g r a n t e d t o e x p o r t c r e d i t .
due
t o open a new
r e q u i r e s a Hp 10 b i l l i o n c a p i t a l
must
are
foreign
i t i s n o t l i k e l y t o be easy f o r new e n t r a n t s
the
as
B W K ' s p o i n t o f view,
t h a n t h r e a t s t o ' t h e company. A l t h o u g h
banks,
also
From
t h e new p o l i c y seems t o o f f e r new
opportunities
another
b u t a l s o posed t h r e a t s t o t h e i n d u s t r y
mentioned e a r l i e r i n Chapter 7.
to
1988 t h e r e was
must
The new p o l i c y ,
has g i v e n BWK t h e o p p o r t u n i t i e s t o
expand by opening new branches,

or
getting
activity.
involved
further
I n availinq of
in
the
foreign
exchange
t h e advantages and i n o r d e r
strengthen i t s operations,
a s t r a t e g y which w i l l
i n c r e a s i n g bank s e r v i c e s ,
therefore the w r i t e r
to
proposed
be e x p l a i n e d i n t h e succeeding sub-
headings.
11.2.
Basic considerations
In
made,
the
also
proposing
the
strategy,
considerations
are
based on t h e a v a i l a b l e o p p o r t u n i t i e s and t h r e a t s i n
6.
b a n k i n g i n d u s t r y as mentioned i n ' t h e Chapter

c o n s i d e r s t h e o b j e c t i v e s o f BWK,
weaknesses,
changes
i t s
experiences,
and
i t s strengths
the
It
and
environmental
i n t h e i n d u s t r y as a l r e a d y mentioned i n
Chapter
E?
7.
Basicall y ,
t h e l a t e s t development i n t h e
environment
I
1
not
only
gives
compet.itive,
room
but
particularly
for
also
the
industry
provides
other
f o r p r i v a t e banks t o grow.
to
more
be
opportunities
Hence,
keener
c o m p e t i t i v e s i t u a t i o n s h o u l d be expected s i n c e each
il
bank
w i l l t r y t~ s t r e n g t h e n i t s b u s i n e s s .
88
--"
- -
- -
<
< -
-7-
--
I
-=-._
7
11.3.
Strategy alternatives
In
other
BWK has s e v e r a l a l t e r n a t i v e s : keep t h e s t a t u s quo
banks,
o r d e r t o s u r v i v e a n d / o r t o compete w i t h
merge w i t h a n o t h e r \bank.,
o r expand i t s business.
Each
o f these s t r a t e g i c a l t e r n a t i v e s i s evaluated as f o l l o w s :
a. Status quo
To m a i n t a i n t h e
under
t h e keenly
competitive s i t u a t i o n .
branches and l i m i t e d bank s e r v i c e s ,

compete
with
through
branch
w i l l
be
the
With
are
I f BWE w i l l n o t
l e f t behind and t h e r e f o r e ,
only
two
BWK w i l l n o t a b l e
o t h e r banks w h i c h
expansion.
a d v i s a b l e f o r DWK.
BWK
s t a t u s quo i s i m p o s s i b l e f o r
status
growing
fast
develop,
quo
I t has been t h e r u l e o f t h e game
to
it
not
that
i t i s b e t t e r f o r one t o r u n i n o r d e r t o g e t t h e b a l l t h a n
t o w a i t f o r t h e b a l l t o coming t o him.
b.
Merger
Generally,
by merging w i t h a n o t h e r p r i v a t e
BWK w i l l become s t r o n g e r .
bank,
I t s t o t a l assets w i l l increase,
and a t t h e same t i m e i t s branch network coverages w i l l

wider
without
employees.
the
requirement
However,
of
recruiting
being a small f a m i l y
be
new
company,
the
owner i s most l i k e l y to l o s e t h e 100 p e r c e n t c o n t r o l o v e r

t h e bank t h r o u g h such ,merger which t h e y a r e n o t
to
do.
Basically,
t h e f a m i l y members owning t h e bank
n o t want o t h e r p a r t i e s %o be i n v o l v e d i n
they
prepared
r u n n i n g BWK
b e l i e v e t h a t " i t i s b e t t e r t o be a k i n g i n a
kingdom
rather
than
to
be
minister
prestigious
empire".
could
a r i s e from t h e o t h e r p a r t y
also
S i m i l a r problems
and
as
i n
do
as
small
big,
disagreement
regards
who
s h o u l d e x e r c i s e c o n t r o l i n f i n a l i z i n g t h e merger.
From
t h e abc~vereasons,
therefore,
merger i s
not
i n 1987 BWK opened
two
l i k e l y t o be acczeptable.
c.
Expand the business
I n expanding i t s business,
branches,
and a n o t h e r two new branches a r e expected t o be
opened i n 1Y89.
same
to
However,
t h e s e r v i c e s o f f e r e d remain t h e
and a r e q u i t e l i m i t e d .
improve
quality
i t s
i t i s a need f o r
'T~LIs,
range o f s e r v i c e s and
i
of
i t s employees as w e l l ,
to
BWK
upgrade
as p r a c t i c e d
by
the
the
o t h e r banks i n o r d e r t o a t t r a c t more customers.
Since
considering
i t s
the
EWK
has l i m i t e d
bank
services,
and
t h e o p p o r t u n i t i e s a v a i l a b l e f o r i t t o expand
operations,
BWK can move a l o n g
this
direction
in
order- t o s t r e n g t h e n i t s business.
11.4.
Recommendations
From
t h e above s t r a t e g y a l t e r n a t i v e s ,
expand i t s
business
recommends
that
additional
and a w i d e r range o f bank
branch
offices,
BWK
the
writer
by
offering
services,
opening
improving t h e q u a l i t y o f i t s
personnel,
and
expanding as a f o r e i g n exchange p r i v a t - e
the
w r i t e r c o n s i d e r s as i m p o r t a n t i n s t r e n g t h e n i n g
business.
bank
which
i t s
I n t h e area o f o f f e r i n g a w i d e r r a n g e o f s e r v i c e s ,
BWK s h o u l d c o n s i d e r o t h e r s e r v i c e s t o f u l f i l l a d d i t i o n a l
community
requirements
deposits,
priority
particularly
for
the
saving
transactions.
of
loans,
and
foreign
e x change
P r i o r i t y L o a n s are a new a n d c h e a p
f u n d s s i n c e 80 p e r c e n t o f t h e l o a n s a r e s u p p o r t e d
t h e C e n t r a l Bank.
S o are t h e s a v i n g d e p o s i t s and
exchange t r a n s a c t i o n s which tend t o g i v e o t h e r

In
source
improving t h e q u a l i t y of s e r v i c e ,
should
be
upgraded
and
college
the
11
1
foreign
benefits.
present
graduates
by
staff
should
!I
I
1 II
be
p r e f e r r e d f o r a d d i t i o n a l r-ecruitment.
I n c r e a s e t h e r a n g e o f bank s e r v i c e s
11.4.1.
FWK
i n c r e a s e t h e range of
p r i o r i t y loans categorized as
include
Kecil
may
its
Kredit
(Small Investment C r e d i t ) and Kredit
Permanen
(Permanent
Working
Capital
services
Investasi
Eerja
Modal
Credit)
Rp
mi.llion, Kredit. I n v e s t a s i ( I n v e s t m e n t C r e d i t ) and

I
Modal Kerja ( W o r k i n g C a p i t a l C r e d i t ) Rp 75 m i l l i o n ,
also saving d e p o s i t s .
to
50
Kredit
and
I
.I
Aside
from
those mentioned above,
include other services such a s telephone

bills
it
may
also
electricity
and
collections, house ownership credits,
car
loans,
and
and Automatic Teller M a ~ h i n e . Due to limited capital
human resources available, however, BWE should limit

plan
on increasing the services to focus
on
its
additional
!I
I
services a s follows :
I
a. P r i o r i t y
loans.
There
loans,
most
are
around twenty two
types
of
of them for agriculture sectors
priority
and
rural
credits. Since EWK operations are more in the urban area,

only
certain
credit
programs are suitable
for
it
to
handle such as Small Investment Credit (KIE) Up 13 to
Hp
30 million, Permanent Working Capital Credit (EMKPI Hp 15
to
Rp 3
(:1
milliun,
million, Investment Credit ( K I ) through
Up
'75
and Working Capital Credit (KMK) through Rp
'75
million.
The
advantages to BWK in providing this
service are a s follows :
kind
uf
Eighty
p e r c e n t o f t h e amount o f
w i t h 5.2
by t h e C e n t r a l Bank
and/or
'KMKF',
l o a n w i l l be
financed
percent i n t e r e s t f o r
f o r M I and/or
and about 70 p e r c e n t
KIK
EMK
a t 3 percent i n t e r e s t .
opportunity
I t i s t h e r e f o r e c o n s i d e r e d as an
f o r a d d i t i o n a l and cheap s o u r c e s o f
funds
f o r BWC: ;
In
case
o f bad d e b t s ,
70 p e r c e n t o f
o u t s t a n d i n g i s covered by PT A s k r i n d o
the
t o t a l amount
( c r e d i t insurance
institution)
BWK
w i l l b e n e f i t f r o m t h e C e r r t r a l Bank g u i d e l i n e s
information
market
The
for
g r a n t i n g loan i n
the
new
and
potential
Central
Bank w i l l sponsor t r a i n i n g
BWK's p e r s o n n e l such as c o u n t e r p a r t c o u r s e
programs
for
and on-the-
j o b t r a i n i n g a t R e g i o n a l P r o j e c t Management U n i t ,
Bank
I n d o n e s i a ; and
Bank
Indonesia
monitoring.
w i l l
also
assist
BWK
i n
credit
Savings deposits
b.
Through s e r v i n g s a v i n g s d e p o s i t s ,
only
not
it
also
a cheaper source of funds, but
have
participate
in
mobilization
from t h e community.
savings
t h e bank. w i l l
gov&rnment
deposits
available
programs
can
regarding
funds
T h e r e are t w o k i n d s
the
Tabungan
/I
of
Nasional
( l a b a n a s ) t h e t e r m s a n d c o n d i t i o n s o f w h i c h are r e g u l a t e d
by Bank I n d o n e s i a
for
which
since
a n o t h e r t y p e of s a v i n g s
t h e choice,
t h e f i r s t one
is
(1
deposits
p o l i c y g u i d e l i n e s a r e d e t e r m i n e d by t h e
Glven
itself.
and
bank
preferable
i t e n j o y s t h e g u a r a n t e e f r o m t h e C e n t r a l Bank
and
i t is m o r e f a v o r a b l e t o t h e c o m m u n i t y .
[I
c. Branch networks
in
Eebayoran
mid 1989, BWK w i l l o p e n t w o b r a n c h o f f i c e s

E a r u a n d K e b a y o r a n Lama.
Both l o c a t i o n s
in
are
t
"
'
service
sectors.
residential
The l o c a t i o r r s a r e a l s o
areas
where
individuals
surrounded
are
the
by
main
p o t e n t i a l segment o f customers f o r BWK.
After
one o r two y e a r s o f o p e r a t i o n ,
new branches t u r n o u t t o be p r o f i t a b l e ,
the
possibility
e f f o r t t o capture
i f
BWK may
the
two
consider
o f opening o t h e r new branches
the
in
w i d e r market and coverage.
Foreign exchange operations
d.
By expanding t o
BWK
w i l l
increase
a f o r e i g n exchange p r i v a t e
i t source
of
revenues
bank,
aside
from
g a i n i n g o t h e r advantages as f o l l o w s :
E a r n i n g from commissions from L e t t e r o f C r e d i t ( L / C )

Export/Import,
traveler
cheque,
foreign
and
exchange
conversion
transfer,
rate
on
irrcaso
from
foreign
the
banking
exchange t . r a n s a c t i o n s (money changer) ;
Locally
world
and i n t e r n a t i o n a l r e c o g n i t i o n i n
; and
I n c r e a s e i n p u b l i c c o n f i d e n c e towards BWE.
In
professionally
competitive
t r a i n e d p e r s o n n e l a r e needed
e f f i c i e n t operation o f
employees
competen t
situation,
t h e bank.
for
Since t h e present
a r e m o s t l y from h i g h s c h o o l g r a d u a t e s
more
BWK
only,
p e r s o n n e l development t h r o u g h v a r i o u s t r a i n i n g programs
I
X
s h o u l d be pursued try BWK.
Likewise,
f u t u r e recruitment
i~
policy
should
emphasize
quality
man
power
with
I
sufficient
graduates
background
academic q u a l i f i c a t i o n
with
banking
and
prefer-ably
finance
and
college
management
CHRPTER 12
THE IMPLEMENTATION PLAN
plan of
a c t i o n i s recommended :
Plan of action
12.1.
Range of services
12.1.1.
a. Priority loans
The
KIE/KMKP
scheme t h r o u g h Rp
scheduled t o s t a r t i t s f i r s t y e a r
handle
these
interested
these
two
r e p o r t i n g system,
information.
loans.
for
loans,
(1989). To
Bank
million
Indonesia
the
transferred
on t h e j o b
Tep p e o p l e w i l l
head
office.
Since
be needed t o
from t h e Loans S e c t i o n ,
two
credit
BWK w i l l
and
handle
branches
w i l l
people
the
preparation i s
11
and
be
therefore,
need t o r e c r u i t o n l y 8 people.
When
assists
training,
E i g h t a r e meant f o r t.he f o u r
i s
effectively
banks by p r o v i d i n g g u i d e l i n e s such as
procedures,
credit
pri0rit.y
30
/-
completed,
BWK
should
p u b l i c i z e i t s KIK/KMKP schemes t h r o u g h a d v e r t i s e m e n t s and
1
1 1
;I
Savinqs d e p o s i t s .
b.
Phis
s t r a t e g y s h o u l d be
implemented
p r e f e r a b l y i n t h e f i r s t y e a r s i n c e i t can
w i thocrt
mcrch requirement..
immediately
be e a s i l y done
F i v e p e r s o n n e l a r e needed
h a n d l e s a v i n g s d e p o s i t s accounts,
where f o u r w i l l be
the
f o u r b r a n c h o f f i c e s and one f o r t h e head o f f i c e .
i t s
preparation,
Research
and
Indonesia.
BWK
i s allowed t o
Development
BWK
of
consult
Funds
with
Division,
s h o u l d i m m e d i a t e l y announce i t s
to
fur
In
the
Bank
savings
d e p u s i t s s e r v i c e t o t h e pcrblic t h r o u g h a d v e r t i s e m e n t s and
o t h e r promotion a c t i v i t i e s .
12.1.2.
Branch o f f i c e s
I
From
i t s
e a r l i e r e x p e r i e n c e o f opening
i t s
two
existing
br-anches,
BWE
s h o u l d have
no
difficulty
to
i
i
prepare
and implement t h e opening of t h e two
additional
1
branches.
and
Kebayoran.,
additional
order
The two new o f f i c e spaces a r e i n Kebayoran Lama

Baru.
The
recrcriting
process
for
p e r s o n n e l has s t a r t e d s i n c e January 1989.
t o o p e r a t e smoothly,
t h e composition o f
40
In
personnel
I/
in
t h e new branches s h o u l d
be a mixed o f
new
recruits
and e x p e r i e n c e d employees.
~ o r e i ~exchange
A
bank
12.1.3.
Ba-sed on t h e C e n t r a l Bank r e g u l a t i o n ,
exchange
private
bank
should
satisfy
the
foreign
following
requirements:
Rp 1 0 0 b i l l i o n o f t o t a l a s s e t s f o r t h e l a s t s i x
months g
r e p u t a t i o n a s a sound bank f o r t h e l a s t twenty
four
months ;
Although
total
for
assets
BWK
BWK i s c a t e g o r i z e d a s a sound
i s only
kp
t o be c o n s i d e r e d
32 b i l l i o n .
a
foreign
bank
I n order
its
therefore
exchange
private
bank,
i t
should increase the t o t a l assets t o
requirement.
meet
Based on t h e p a s t f i v e y e a r s f i n a n c i a l d a t a ,
t h e t r e n d f o r BWE t o r e a c h a Rp 1 0 0 b i l l i o n t o t a l
w i l l
the
assets
take another f i v e years.
Meanwhile,
before a t t a i n i n g i t s status,
prepare f o r t h e o p e r a t i o n s through
BWK
j o i n t operation
can
with
1
!
an
e x i s t i n g f o r e i g n exchange p r i v a t e bank.
i f
BWK's
customers
transactions,
of credit
while
want
to
make
Pn so
import
doing,
or
export
BklK can handle i t as an agent bank.
(L/C:)
can bee opened t h r o u g h

r
g u a r a n t e e i n g i t s customers.
i t s bank
By d o i n g so,
L.etter
partner,
w i l l
BWK
g a i n e x p e r i e n c e s from t h e j o i n t o p e r a t i o n i n a d d i t i o n
getting
to
commission.
Therefore,
when BWK w i l l
have s a t i s f i e d t h e
total
.I
a s s e t s r e q u i r e m e n t i t would be have a l r e a d y gained enough

experier1c:e t o s t a r t i t s own o p e r a t i o n .
12.1.4.
UWK
Personnel development.
should
choose from
i t s
existing
personnel
p a r t i c u l a r l y i n t h e s t a f f and management l e v e l s those who

should
a t t e n d t r a i n i n g programs conducted
by
?I
Indonesia
.
Banking Development I n s t i t u t i o n ( L P P I ) . Examples o f
training
program
officers.
million
programs
are asset
and
liability
f o r accounts o f f i c e r s and l o a n c o u r s e
The
average
per-person.
c o s t f o r every course
management
for
i s
such
loan
Hp
\I
For
t h e f i r s t year,
t h e managerial
of
sections
should
t r a i n i n g s h o u l d be
l e v e l one a t a t i m e ,
and s t a f f
members.
p r o v i d e them o n - t h e - j o b
given
ta
t h e n f o l l o w e d by head
F o r new
emplayees,
t r a i n i n g and/or
BWE
training
i n o r d e r t o g e t a h o l i s t i c view o f bank o p e r a t i o n s v i s - a v i s t h e banking i n d u s t r y .
12.2.
Financial Aspect
New Cost Structure
12.2.1.
I n c o n s i d e r i n g t h e proposed s t r a t e g y t o expand t h e
bank
business,
the
new c o s t
s t r u c t u r e namely
expenses
and incomes w i l l be as f o l l o w s :
~ x ~ e n s e:k
12.2.1.1.
a. I n t e r e s t Expenses
In
interest
line
with
r a t e on time,
1.7 p e r c e n t ,
15 p e r c e n t ,
Therefore,
based
t h e RWK's s t r a t e g y ,
savings,
the
base
and demand d e p o s i t s
and 5 p e r c e n t p.a.,
on d e p o s i t s p r o j e c t i o n
of
are
respectively.
in
1989,
the
i n t e r e s t expenses f o r 1989 a r e as f o l l o w s :
Time d e p o s i t s : 17% x Rp 17140 m i l l i o n = Rp 2,914 m i l l i o n
Savings d e p o s i t s : 15% x Rp 1500 m i l l i o n = Rp 225 m i l l i o n
Demand d e p o s i t s : 5% s Hp 12966 m i l l i o n = Rp 648 m i l l i o n
Sub t o t a l
= Rp 3,787
million
I n t e r e s t expenses on E I K / K M K F '
Liquidity
credit
from
Hank I n d o n e s i a :
= Kp
93.6
m i llion
: 1'7% x Rp 2QO m i l l i o n = Rp
54.0
million
5.2% x R p 1800
Self financing
scheme i s a s f o l l o w s
m i llion
---.----.-..
Sub
total
=Rp
= Hp 3914.6
T o t a l i n t e r e s t expenses f o r 1989
b.
12'7.6tnillion
million
Personnel expenses :
Salary :
In
Kp
1988,
620 m i l l i o n .
t h e 124 p e r s o n n e l expenses ( s a l a r y )
Based on t h a t f i q u r e ,
t h e arssumption
t h e annual s a l a r - y i s Kp 620 m i l l i o n / 124 = Rp 3

per-employee.
personnel
salary :
Since
for
40
BWE
w i l l
new branches,
x
Rp 3 m i l l i o n
recruit
therefore
of
million
additional
the
was
40
additional
Rp 200 m i l l i o n .
Together. w i t h t h e 124 e x i s t i n y employees,
the salary
for
164 p e r s o n n e l w i l l be :
Rp 620 m i l l i o n
+ Kp 200 m i l l i o n = Kp 820 m i l l i o n .
Taking i n t o a c c o u n t a 46 p e r c e n t average g r o w t h r a t e i n
salary,
t h e r e f o r e t h e t o t a l e s t i m a t e d s a l a r y expenses
in
I
1.
1989 i s Rp 1,197 m i l l i o n .
4,
Aside
expenses
from
salary,
namely bonud,
there
honorarium,
accounts f o r 23
expenses
which
personnel
expenses.
are
other
training,
percent
Consequently,
the
personnel
and
other
from
total
total
personnel
expenses i n 1989 w i l l Rp 1,472 m i l l i o n .
Training :
Training
i s
four
c o s t f o r s i x managers i n t h e f i r s t
Rp 12 m i l l i o n ,
years
and
s i x s t a f f per y e a r f o r
i s Rp 48 m i l l i o n .
Thus,
the
year
the
total
next
training
c o s t f o r f i v e y e a r s i s Rp 60 m i l l i o n .
c. O t h e r expenses
To
open two new branch o f f i c e s BWK w i l l
100 m i l l i o n f a r each.
The head o f f i c e o n l y needed
m i l l i o n f o r equipment: and o t h e r s expenses.

a d d i t i o n a l costs,
t h e p o s s i b l e sources o f
104
need
Hp
Rp
10
To f i n a n c e t h e
funds a r e from :
Retained e a r n i n g s from p r o f i t o f
The balance f u n d i n g s coming from t h e e x i s t i n g
t h e bank.
bWK's
c a p i t a l o f Hp 5 b i l l i o n and an a d d i t i o n a l Rp 5
billion
from t h e s t o c k h o l d e k s o f BWE.
Incomes :
12.2.1.2.
The i n t e r e s t income from n o n - p r i o r i t y
and p r i o r i t y
l o a n s f o r 1989 a r e as f o l l o w s :
I n t e r e s t income from n o n - p r i o r i t y
priority
loans
l o a n s : 24 % x Rp 28745
i s v a r y c o n s e r v a t i v e because i t
i s .the
lowest r a t e .
By
new
g r a n t i n g Rp 2 b i l l i o n
sources o f
million.
income
Therefore,
i n 1989 i s Rp 7,138
12.2.2.
KIE/EMKP scheme,
: 12% x Hp 2 b i l l i o n = Rp
t h e estimated t o t a l i n t e r e s t
the
240
income
million.
Financial P r o j e c t i o n s
Based
or1
the f i n a n c i a l data f o r
y e a r s from 1984 t o 1988,
the
past
and t h e proposed s t r a t e g y ,
five
the
financial
projections
f o r t h e next f i v e years
1 9 9 3 ) , a s shown i n E x h i b i t 23 and 24,
a.
a r e as
:I
(1989
follows :
assuming an increase o f 27.5 X p.a
Total assets,
While
the
growth r a t e o f
the
industry's
total
I
I,
p e r c e n t and 37 p e r c e n t by p r i v a t e
a s s e t s was 20.8
banks,
the
HWK a s s e t s g r o w t h was 36.2
percent.
By
opening
the
fi
1
1
two
new branches a s p l a n n e d and
figures
mentioned
projected
easily
achievable
it
assets
t h i s time,
exchange
27.5
percent
growth
is h i g h l y c o n s e r v a t i v e and t h e r e f o r e would
projection,
total
above,
i n comparison w i t h
for
BWK.
Based
on
i s expected t h a t a f t e r
w i l l r e a c h Rp 109 b i l l i o n
this
five
i n
the
as
be
growth
years,
1993.
the
BY
BWK s h o u l d be a b l e t o become a p r i v a t e f o r e i g n
bank s i n c e t h e t o t a l a s s e t s w i l l have
exceeded
t h e W p 100 b i l l i o n m i n i m a l r e q u i r e m e n t .
b. Demand deposits, assuming an increase o f 35 % p.a

Eased
on
the
compound a v e r a g e
growth
rate
of
iI
and
i n d u s t r y ' s 37.5
the
percent,
therefore,
p e r c e n t and p r i v a t e
banks'
t h e p r o j e c t e d 35 p e r c e n t g r o w t h
45
rate
shoi.11d be a c h i e v a b l e .
d e p o s i t s , assuming an i n c r e a s e of 15 % p . a
=..Time
R l t h o u g h t h e BWK's average g r o w t h o f t i m e d e p o s i t s
in
the
p a s t f i v e y e a r s was 44
banking
was
i n d u s t r y was 14.5
percent,
28.5
percent,
percent,
growth
i n the
and f o r p r i v a t e banks
the target i s only
reason
i s
because
time deposits i s
source
r3f
f u n d s than demand d e p o s i t s ,
15
a
percent.
more
iI
The
expensive
therefore
I
I
it. i s
t a r g e t e d l o w e r than demand d e p o s i t s .
d.
The p r o p o r t i o n o f
industry
was 6.7
savings deposits i n the
percent o f t o t a l deposits.
s a v i n g s d e p o s i t s i s a new s e r v i c e f o r EWK,
at
Savings d e p o s i t s , t a r g e t e d a t 3 % o f d e p o s i t s
o n l y 3 percent a f t o t a l deposits i n t h e
But
banking
because
i t i s targeted
first
year,
e.
Loans amounting t o 95 % of t o t a l deposits

\
Based
on
t h e p a s t performance,
the
total
loans
n e x t f i v e y e a r s t h i s percentage w i l l be m a i n t a i n e d a t t h e
same
level
because
it
i s in
line
with
the
banking
regirlation.
Priority
percent o f
i n
t.he
KIK/KMKP
loans
(KIK/KMEP)
t o t a l loans.
industry
i s
The C:IK/KMKP
was around
new
is
service
targeted
share of
at
10
t o t a l loans
14
percent,
but
because
at
BWK
10
percent
the
p r o j e c t i o n i s reasonable.
S e n s i t i v i t y analysis.
12.2.3.
-When t h e i n t e r e s t r a t e on l o a n s decreased from

percent
t o 24.5
Exhibit
25 shows t h a t t h e p r o f i t i n 1989 i s l o w e r ,
Rp
258
shows
from
percent,
t h e bank i s
m i l l i o n t o Rp 114 m i l l i o n .
However,
t h a t when t h e i n t e r e s t r a t e o f
25
percent
to
108
25.5
percent,
s t i l l
loans
BWE
25
made p r o f i t .
Exhibit
i s
w i l l
from
2h
increase
gain
an
a d d i t i o n a l p r o f i t o f R p 143 m i l l i o n o r an i n c r e a s e ,
from
Rp 258 m i l l i o n t o Rp 401 m i l l i o n i n 1989.
When
increased
suffer
seen
the
interest
from
Ioss.
17
rate
on
time
p e r c e n t t o 1'7.5
dcp0sit.s
BWK
percent,
The d e t a i l s o f t h e i m p a c t on p r o f i t can
T'herefore,
BWK s h o u l d
not
t h e i n t e r e s t r a t e p a r t i c c r l a r l y on t i m e d e p o s i t s .
i n
o r d e r t o a t t r a c t t h e customers,
interest
deposits'
rate
be
However,
on
the
time
the
cheapest
i m p l e m e n t a t i o n p l a n o f t h e proposed
strategy
since
the
demand d e p o s i t s
than
w i l l
increase
BWK can i n c r e a s e
on demand d e p o s i t s r a t h e r
i s
s o u r c e c j f funds.
12.3. Time schedule

The
f o r the n e x t f i v e y e a r s i s scheduled as f o l l o w s :
Year one
--
P r e p a r a t i o n and i m p l e m e n t a t i u n o f K I K and KMKP scheme.
P r e p a r a t i o n and i m p l e m e n t a t i o n o f s a v i n g s d e p o s i t s .
--
Preparation
training
and
implementation o f
program
arid r - e c r u itmen t.
staff
development
Year two
E v a l u a t i o n on
rjavinys
and
EMEP
c o n t i n ~ ~ a t i o no f
the
implementation o f
program,
and
KIK
scheme,
staff
development program.
Y e a r three :
E v a l u a t i o n on s t a f f development program and r e v i e w

EIK,
the
KMEF'.
Preparation o f
J o i n t o p e r a t i o n i n f o r e i g n exchange a c t i v i t y w i t h o t h e r
K I / G M K scheme.
bank.
Y e a r four :
-. C o n t i n u a t i o n on j o i n t
operation
and
preparation o f
expansion a s a f o r e i g n exchange p r i v a t e bank.
Year five
Expansion
evalua.kion
can
a5
foreign
exchange
on t h e whole programs.
be seer1 i.n E x h i b i t : 28.
private
bank
'Time s c h e d u l e
and
chart
EXHIBIT 1
NUMBER OF BANKS AND THEIR OFFICES
I N INDONESIA
-------------.------------------------------------------------Particular
198.3
1984
1985
1986
1987*)
-------------------------------------------------------------Commercial banks
S t a t e Banks
- Number o f banks
5
- Number o f o f f i c e s
727
P r i v a t e commercial banks
Number o f banks
70
- Number o f o f f i c e s
317
F o r e i g n banks/ j o i n t v e n t u h e s
- Number o f hanks
11
Number o f o f f i c e s
2(1)
~ t i v e l o ~ m e nBanks
t
S t a t e development banks
- Number o f banks
1
22
R e g i o n a l development banks
Number o f banks
2'7
185
P r i v a t e Development Banks
- Number o f banks
1
1
Savings banks
S t a t e s a v i n g s banks
Number o f banks
1
12
P r i v a t e s a v i n g s banks
- Number o f banks
2
2
Number o f commercial banks,
development banks & savings
banks
- Wurnber o f banks
118
1,286
1
R u r a l c r e d i t s banks
- V i l l a g e banks
3,561
- Paddy banks
2,(:)81
- P e t t y t r a d e r s banks
167
- Employees banks
1
------.---------.---------------------------
5
739
6Y
351
11
21
1
27
194
1
1
**
T o t a l number o f banks
T o t a l number o f f i c e s
5,928
7,096
C)C)
Lrl
1
12
2
2
117
1,342
3,574
2,079
169
1
5,940
7,165
f ) P o s i t i o n from 1983 t o 1987 i s t h e end o f
31 March.
t t ) Number o f banks a n d / o r o f f i c e s . The numbers o f o f f i c e s c o m p r i s i n g

head, branches, and sub-branch
offices.
EXHIBIT 2
CONSOLIDATED BALANCE SHEET OF DEPOSIT MONEY BANKS
(bi1 1 ion of rupiah and percent 1
..................................................................
I tems
March 51, 1986

( R p1
(% 1
------------------------------------------.--------.----------------
ASSETS
609
Cash in hand
Bank Indonesia
i
2,474
Securities
31
Domestic draft
991
Outstanding loans
20,863
Foreign exchange assets
- Loans
719
- Others
6,903
Participations
97
Premises, furnitures, & fixtures
499
Other assets
1,694
ASSETS = LIABILITIES
LIABILITIES
Paid up capital
Reserves/profit & loss account
Borrowings
Demand deposits
Time & savings deposits
Draft payable
Guarantee deposits
Foreign exchange liabilities
- Demand deposits
- Time & savings deposits
- Borrowings
- Others
Bank Indonesia
Other liabilities
March 31, 1987

(Hp)
(%)
1.74
7 09
0 (39
2.84
59.83
670
2,072
28
918
25,880
1.61
5.0(3
(1 07
2.21
62.45
2.04
19.8S)
0 28
1.41
4.85
1,205
8,535
107
593
1,635
2.90
20.1(3
0.26
1.43
5.94
.
.
.
34,870
100
41,441
4 60
1 4 1(1)
1,635
6 , (386
10,127
432
127
1.32
4 (34
4.69
17.45
29.04
1.24
0.36
520
2,12(3
3 (1)06
6,162
12,709
443
118
94s)
3,502
Y6
593
7,765
1,699
2.69
1(:).(:)4
0.27
1.70
22.26
4.87
1,371
5,464
157
805
8,587
1,979
................................................................
Saurce : Bank Indonesia
100
1.25
0.51
7.25
14.86
50.66
1 0.7
0 28
.
.
3.30
8.35
C). 37
1.Y4
20.67
4.77
~f
EXHIBIT 3
DEMAND DEPOSITS, TIME AND SAVINGS DEPOSI'TS
BY GROUP OF BANKS
(in billions of rupiah)
---------------------.-----------------------------------DEMAND DEPOSITS
--..-------.------.3641
State Banks
2Y6O
Private Banks
766
824
416
58'7
L.oc.Dev. Banks
Foreign Banks
223
227
4353
1177
655
271
4562
1354
564
273
4735
1724
6'7 1
911
----
----
-------------
----
----
Banking Industry
4365
5279
6456
6753
7441
2831
1(:)'7E3
56
476
3497
17St:)
79
696
5337
2755
120
676
----
673t:)
3131
164
9(2(3
------
9283
52d2
206
665
4441
6022
8888
10525
15366
489
69
26
634
87
33
8.32
138
1121
198
68
1298
252
77
----
TIME DEPOSITS
-------------
State Banks
Private Banks
Loc. Dev. Banks
Foreign Banks
-----
-.---.---------
Banking Industry
----
----
SAVINGS DEPOSITS
State Banks
Private Banks
Loc.Dev.Banks
Foreign Banks
-------------
----
----
----
----
584
754
1(1)2(3
1387
1627
6280
1913
498
1399
7772
2661
699
923
10522
40.70
825
947
12413
4683
796
773
15316
7188
954
976
10090
12055
16364
18665
----.--
Banking Industry
50
TOTAL DEPOSITS
---------------
State Banks
Private Banks
Loc .Dev.Banks
Foreign Banks
----------.----
Total Industry
------ ------ ------ ------
........................................................
-----
24434
EXHIBIT 4
INTEREST RATES ON TIME DEPOSITS
(PERCENT PER ANNUM)
-------------------------------------------------------------------I
Maturity
1985
Lowest
S t a t e banks
1 months
3 months
6 months
1 2 months
24 months
I
'
I
I
I
I
I
1986
1987
...................................................................
13.00
13.50
14.50
15.00
14.00
Highest
Lowest
13.5(:)
14.25
14.5&
15,00
15.00
13.00 - 13.50
13.50 - 14,25
14.50 - 14.50
15.00 - 15.00
1.4.00 - 15.00
Fore):
p r - i v a t e hanks
1 months
3 mon t h s
6 months
1 2 months
13.C)C)
12.50
13.50
14.50
14.00
15.(:)0
16.50
17.0(:)
12.00
13.50
14.00
14.00
24 months
16.00
17.00
1.5.50
Highest
Lowest
15.50
16. 50
17.00
17.50
17.50
Highest
17.00
18.00
18.00
18. SO
18.50
I
14.00
19.00
1tS.00
16.(:)(:)
17.00
15.50
17.00
17.00
17.50
18.00
18.00
19.00
19.50
20.00
x
I
20.00
I
I
Non-Farex
p r i v a t e banks
1
3
6
12
24
months
months
months
months
months
F o r e i g n banks
1 months
3 months
6 months
1 2 months
24 months
13.00
14.00
15.00
16.00
19.OQ
12.5(5
13.13
13.5(:)
14.25
14.S:)
17.00
17.00
18.00
19.00
14.25
15.25
16.00
16.5(:)
15.00
14.50
15.00
15.00
15.00
16.UO
17.00
18.00
15.00
17.00
18.00
18.(:)(:)
9.50
9.50
10.00
10.29
13.25
14.25
14.75
15.13
13.50
14.13
14.75
15.00
19.90
19.50
20. 5 0
2 1 .a(:)
17.50
19.00
18.50
18.50
------------------------------------------------------------------
4
I
EXHIBIT 5
OUTSTANDIWG RUPIAH T IHE DEPOSITS
AT ALL BIIWKS BY NATURITY
( i n b i l l i o n s of rupiah & percent)
....................................................................................................................
1983
Rupiah
1984
Rupiah
1905
Rupiah
1986
X
Rupiah
1980 t )
1987
Rupiah
....................................................................................................................
Natured
178
4.0
70
1.2
78
0.9
79
0.8
122
0.0
111
0.6
1 month
756
17.0
992
16.5
1251
14.1
1201
11.4
3192
20.8
3439
19.1
3 months
605
13.6
877
14.6
1403
15.8
1448
13.0
3331
21.7
4129
23.0
Others
111
2.5
20 3
3.4
189
1.1
132
1.3
207
1.3
230
1.3
Total
4441
100
6022
100
8888
100
10525
100
15366
100
17967
100
....................................................................................................................
t ) u n t i l June
I
Rupiah
1
x
I
I
i
-
'
D E M R N D
D E P O S I T S '
*-------------------------------------------*-----------------------------------------MAJOR CUSTOMERS
STRTE
PR I VRTE
BANKS
BRNKS
RP
-----------------------------------------------------------------------A----d-----------------------------------------
A. RESIDENTS
1.
2.
3.
4.
5.
6.
7.
0.
9.
10.
11.
12.
13.
Central Govt
Regional Govt
Official Entities
Rural Cr.Institut
Insurance Ca's
Non-bank Fin.Instut
Pawnshops
State Enterprises
Private Enterprises
Social Foundations
Cooperatives
Individuals
Others
4693
1 123
131
427
27
38
115
1
1 555
566
94
33
500
82
RP
99.1%
23.9%
2.8%
9.1%
0.6%
0.8%
2.5%
0%
33.1%
12.1%
2.0%
0.7%
10.7%
1.7%
26
0.5%
2.9
C. UNCLASSIFIED
16
0.3%
8.4
RP
99.3%
0.001%
0.0002%
9.6%
0.2%
1.1%
0.1%
0%
0.1%
24.6%
1 B%
2.2%
60.3%
0.2%
8. NON-RES I DENTS
eFftbKS
%
1713
0.025
0.004
164
4
18
1.6
0
1.3
421
30
37
1033
'
4
LOC. DEW.
FOR~IGN
0.2%
0.5%
291f
0
0,
2
0.2 "
2.7
2.4'
0
0.8
178.7
7.5
0.3
95.5
0.7 ,*
19.7
Oj
i : :-
BRNK I NG
I NOUSTRY
%
RP
BANKS
%
RP
93.7%
0%
0%
0.7%
,0.1%
0.9%
0.8%
0%
0.3%
61.4%
2.6%
0.1%
32.8%
0.2%
669
117
406
- 24
0.2
6
2
0
17
32
16
3
30
15
99.9%
17.5%
60.7%
3.6%
.0%
0.9%
0.3%
0. 0%
2.5%
4.8%
2.4%
0.42
4.5%
2.2%
.,,
t
TOTRL D E M M D
7366
1240
537
617
31
65
122
0.7
1574
1198
1 48
73
1658
1 02
I1
99,OX
16i 0%
713"
st 4X
0 4%
Q 9%
1 7%
0%
21 4%
16,%
2,OX
6.3%
0.1
.O%
49
0.0%
0.2%
25
01 7%
Oi?1--..
-------_------------------------------------------------------i
i
i
i
i
i
i
i
i
i
i
-
TOTRL
4734
100%
1725
1 OWL
31 1
100%
670
100%
7440
i
fill-
+$
I
I
l r n t
I
I
IF1
I
I
Iw l
I
I
lrnl
i
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I
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---
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C
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1521
iSi
j * Il
fI
fI
I
I
i
I
I
I
I
I
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I
I
I
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I
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r n ~i
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w o o
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'T-'-----"----------"-"'
TOTAL SAVING
.-t-----------------:
I.
.X i
WINK ING
INDUSTRY
RP
x
TOTRL DEPOSITS
BANKING
INDLISTRY
RP
EXHIBIT 7
MAJOR CUSTOMERS OF DENAND DEPOSITS
STATE BANKS
( i n b i l l i o n s rupiah & percent)
...................................................................................................................
MAJOR CUSTOHERS
1983
RP
1
1984
RP
1
1985
RP
1
1986
Rp
1987
RP
1
----------------------------------------------------L--------------------------------------------------------------
A. Residents
1. Central Governsent
2.Reqional6overnment
3. O f f i c i a l e n t i t i e s
4. Rural Cr.1nstitution
5. Insurance Companies
6. Non-bank Fin.Instuti
7. Pawnshops
8. State Enterprises
9. Private Enterprises
10. Social Foundations
11. Cooperatives
12. Individuals
13. Others
C, Others
2922
675
108
451
7
16
46
2
803
381
47
29
322
35
98.72%
23.10%
3.70%
15.43%
0.24%
0.55%
1.57%
0.07%
27.48%
13.04%
1.61%
0.99%
11.02%
1.20%
3602
1079
148
465
8
18
85
9
862
419
77
25
319
88
98.93%
29.961
4.11%
12.91X
0.22X
0.50%
2.36%
0.25%
23.93%
11.63%
2.14%
0.69%
8.86%
2.44%
4313
1364
115
545
12
21
107
2
997
482
102
27
404
135
99.08%
31.63%
2.67%
12.64%
0.28%
0.49%
2.48%
0.05%
23.12%
11.18%
2.36%
0.63%
9.37%
3.13%
4505
1167
127
521
24
21
78
1
1285
494
167
30
458
132
98.77%
25.902
2.82%
11.56%
0.53%
0.47%
1.73%
0.02%
28.52%
10.97%
3.71%
0.67%
10.17%
2.93%
4693
1123
131
427
27
38
115
1
1555
566
94
33
500
82
99.13%
23.93%
2.79%
9.10%
0.58%
0.81%
2.45%
0.02%
33.13%
12.06%
2.00%
0.70%
10.65%
1.75%
14
0.47%
19
0.52%
18
0.41%
33
0.72%
16
0.34%
100%
4734
100%
---r--------------------------------------------------------------------*------------------------------------------
TOTAL
2960
100%
3641
100%
4353
100%
4561
.................................................................................................................
EXHlElT 8
HAJOR CUSTOHERS OF DEHAND DEPOSITS
PRIVATE BAMKS
( i n b i l l i o n s rupiah C percent)
...................................................................................................................
1983
HAJOR CUSTOHERS
RP
1984
1
RP
1985
1
RP
1986
RP
1
1987
RP
1
A. Residents
1. Central 6overnren t
2. Regional 6overnrent
4. Rural Cr.lnstitution
5. Insurance Corpanies
6. Non-bank Fin. I n s t u t i
7. Pawnshops
11. Cooperatives
12. Individuals
13. Others
C. Others
1410
765835
100% 824830
. 1002 1177324
100% 1543560
100% 1724557
...................................................................................................................
TOTAL
100%
EXHIBIT 9
MJOR CUSTOHERS OF DENMIND DEPOSITS
FOREIGI BANKS
(in billions rupiah & percent)
.................................................................................................................
H U O R CUSTOHERS
..........................
4. Residents
1.
2.
3,
4.
5.
6.
7.
0.
9.
10.
11.
12.
13.
Central lovernren t
Regional lovernrent
Official entities
Rural Cr.1nstitution
Insurance C ~ p a n i e s
Non-bank Fin. Instuti
Pawnshops
State Enterprises
Private Enterprises
Social Foundations
Cooperatives
Individuals
Others
C. Others
TOTAL
223297
0%
100% 227142
0%
100% 270760
OX
100% 273014
OX
100% 310752
...................................................................................................................
Source
Bank Indonesia
OX
100%
EXHIBIT 10
HAJOR CUSTORERS OF DERAND MPOSITS
LOCAL DEVELOPIENT WiNKS
( i n b i l l i o n s rupiah 4 percent)
MAJOR CUSTOHERS
..........................
A. Residents
1. Central 6overnrent
2. Regional bvernren t
4. Rural Cr. Institution
5. insurance Corpanies
6. Won-bank Fin. I n s t u t i
7. Pawnshops
11. Cooperatives
12. Individuals
13. Others
C. Others
1227
TOTAL
415916
0.30%
1390
0.24%
1062
0.16%
1371
0.24%
...................................................................................................................
100
506375
100
654000
100
564050
100
..................................................................................................................
1490
670791
0.22%
100
EXHIBIT 11
HAJOR CUSTOHERS OF TIHE MPOSITS
BANKING INDUSTRY
...................................................................................................................
Major customers
..................................................................................................................
1. Central Governrent
2. Regional Government
3. O f f i c i a l entities
4. Rural Cr.Institution
5.Inwrancecompanies
6.Non-bankfinancelns
9. Private enterprises
10.Socialfoundations
11. Cooperatives
12. Individuals
B. Non-residents
C.Others
4127.8
96.8
3.4
222.5
2.7
544.4
149.7
92.95
2.35
0.08
5.39
0.07
13.19
3.63
5915.9
259.5"
14.2'
312.5
1.1
622,b
37.6
98.24
4.39
0.24
5.28
0.02
10.52
0.64
8746.8
193.6
23.8
360.5
2.1
977.7
65.9
98.41 10394.1
2.21
281.4
0.27
8.3
4.12
570.5
0.02
37.1
11.18 1589.2
0.75
88.9
98.76 15206.5
2.71
350.4
0.08
6.7
5.49
419.9
0.36
48.7
15.29 2050.4
0.86
100.7'
98.96
2.30
0.04
2.76
0.32
13.48
0.66
591.7
616.8
3.5
1568.3
54.5
2.7
310.5
14.33
14.94
0,08
37.99
1.32
0.06
6.99
609.1
821.4
8.4
2503.7
219.9
3.817
102.3
10.30
13.88
0.14
42.32
3.72
0.06
1.70
660.4
1064.6
18.2
4241.3
313.8
4.0
136.3
7.55
12.17
0.21
48.49
3.59
0.05
1.53
7.12
12.86
0.29
42.10
3.39
0.02
1.23
9.75
10.73
0.26
45.69
1.57
0.04
1.00
740.1
1336.9
29.7
4375.5
352.6
1.6
129.4
..................................................................................................................
..................................................................................................................
121
1483.3
1631.5
39.1
6947.6
238.9
6.2
153.4
EXHIBIT 12
NAJOR CUSTOHERS OF TIHE MPOSITS
STATE BANKS
( i n billions of rupiah & percent)
1983
Ha jor customers
1984
1985
1986
1987
RP
RP
RP
RP
RP
2831
100
3497
100
5337
100
b730
100
9283
100
A. Residents
1. Central Eovernment
2. Regional hvernment
3. Official entities
5. Insurance companies
b. Won-bank finance Ins
7. Pawnshops
8. State enterprises
10. Social foundations
11. Cooperatives
12. Individuals
13. Others
0. Won-Residents
C.Others
TOTAL
.................................................................................................................
Source r Bank Indonesia
EXHIBIT 13
HAJOR CUSTUNERS OF TINE DEPOSITS
PRIVATE BANKS
( i n b i l l i o n s of rupiah k percent]
--------------------------------------------------------------------------------------------------------------*---
1983
Hajor customers
RP
A. Residents
1064.9
1. Central Bovernment
0
0
2. Regional lovernment
0.5
2.6
5.Insurancecompanies
37.3
0.9
6. Non-bank finance I n s
7. Pawnshops
0
0
9,Privateenterprises
185.1
111.5
11. Cooperatives
1.1
12. Individuals
725.7
13. Others
0.2
0. Won-Residents
0.2
3.3
C.Others
1984
1985
1986
1987
RP
RP
RP
RP
99.67
0
0
0.05
0.24
3.50
0.00
0
0
17.38
10.47
0.10
68.15
0.02
0.02
0.31
1739.7
0
0
2.3
0.4
59.3
16.6
0
0
209.7
198.6
6.5
1233.8
12.5
0.2
10.4
99.39
0
0
0.13
0.02
3.41
0.95
0
0
12.09
11.42
0.37
70.92
0.72
0.01
0.59
2790
0
0
9.8
2.1
65.6
6.7
0
0.7
263.3
208.5
12.6
2130.5
30.6
0.4
4.1
99.84
0
0
0.36
0.08
2.39
0.24
0
0.03
9.57
7.58
0
77.47
1.04
0.01
0.15
3100.9
0.1
0.05
40.4
1.4
92.6
10.2
0
0
329.3
271.6
10.9
2287.6
56.6
0.04
29.6
99,05
0
0
1.30
0.05
2.99
0.33
0
0
10.62
0.76
0.35
73.77
1.83
0
0.95
5132,2
0
1
61.3
1.9
94.8
38.3
0
0.01
379
379.9
24.1
3821.1
109.5
1.5
78.8
98.46
0
0.02
1.19
0.04
1.85
0.75
0
0
7.38
7.40
0.47
74.45
2.13
0.03
1.51
5213
100
----------------------------------------------------------------------------------*--------------------------------
TOTAL
1060
100
1750
100
2755
100
3131
100
..................................................................................................................
EXHIBIT 14
nMOR CUSTOMERS OF TIHE DEPOSITS
FOREIGW BANKS
(in billions of rupiah 4 percent)
..................................................................................................................
1983
Major consumers
1984
1985
1986
RP
RP
435.7
0
0
0
0
12.2
16.2
0
0.2
245.5
15.4
1.1
143.4
1.8
1.2
39
91.55
0
0
0
0
2.80
3.72
0
0.05
56.35
3.53
0.25
32.91
0.41
0.25
8.19
655.9
0
0
1.8
0.5
31.9
1.5
0
4
290.6
25.7
0.1
292.2
1.5
3.2
36.7
94.27
0
0
1.19
0,08
4.86
0.23
0
0.61
44.31
3.92
0.02
44.55
0.23
0.46
5.27
610
0
0
0.4
0
32.3
1.4
0
1.8
238.3
13.6
0.2
320.8
1.2
3
62.8
90.26
0
0
0.07
0
5.30
0.23
0
0.30
39.07
2.23
0.03
52.59
0.20
0.44
9.29
476
100
696
100
676
100
RP
1987
X
RP
451
0
0
0.2
0
17,2
23.5
0
5.3
191,6
12.3
0,l
199.4
1.4
0.7
48.2
90.22
0
0
0.04
0
3.81
3.21
0
1.18
42.48
2.73
0.02
44.21
0.31
0.14
9.64
619.4
0
0
1.4
0
6.4
9.6
0
4.9
257.5
8.7
0.1
329.1
1.6
3.8
t1.4
93.20
0.00
0.00
0.23
0.00
1.03
1.55
0.00
0.79
41.57
1.40
0.02
53.13
0.26
0.57
6.23
500
100
665
100
RP
...................................................................................................................
A. Residents
1. Central Government
2. Regional Governlent
3. Official entities
5.Insurancec~panies
6. Non-bank finance Ins
7. Pawnshops
9,Privateenterprises
11. Cooperatives
12. Individuals
13. Others
9. Won-Residents
C.Others
.................................................................................................................
TOTAL
EXHIBIT 15
MAJOR CUSTOMERS OF TIHE DEWSITS
LOCAL DEVELOPNEWT BAWKS
................................................................................................................
1983
1984
RP
A. Residents
1. Central 6overnment
2.RegionalG~vernment
3. O f f i c i a l entities
5. Insurance companies
6. Won-bank finance Ins
7. Pawnshops
11. Cooperatives
12. Individuals
13. Others
B. Won-Residents
C.Others
56.02
0
0.01
0.40
0
27.70
0.01
0
2.30
0.08
6.10
0.07
18.00
1.30
0.00
0.23
99.59
0
0.02
0.71
0
49.45
0.02
0
4.11
0.14
10.89
0.12
32.13
2.32
0.00
0.41
TOTAL
56.25
100
Major customers
RP
1985
1986
1987
RP
RP
RP
99.63
0
0.05
1.88
0
48.23
1.21
0
3.39
0.92
8.17
0.22
35.77
2.07
0.01
0.35
119.62
0.5
0.12
1.67
0
50
0.10
0
2.87
0.65
9.69
0.52
49.05
4-36
0.01
0.47
99.60
0.42
0.10
1.40
0
41.80
0.15
0
2.40
0.54
8.10
0.43
41.00
3.64
0.01
0.39
162.75
2
0.09
1.61
0
60.07
0.3
0
5.01
1.12
15.1
0.42
72.5
3.69
0.01
1.99
98.79
1.23
0.06
0.99
0
36.91
0.18
0
3.57
0.69
9.28
0.26
44.55
2.27
0.01
1.21
203.86
1.5
0.47
1.76
0
0.01
75.77
0
9.21
0.43
21.76
1.23
86.29
4.85
0.01
2.3
98.88
0.74
0.23
0.86
0
0
37.17
0
4.52
0.21
10.67
0.60
42.33
2.38
0.00
1.12
100
120.10
100
164.75
100
206.17
100
...................................................................................................................
78.67
% O
0.04
1.48
0
37.94
0.95
0
2.67
0.72
6.43
0.17
28.14
1.63
0.01
0.H
..................................................................................................................
78.96
EXHIBIT 16
OUTSTANDING BANK'S CREDITS BY G R W OF BANKS & ECONOHIC SECTORS
( i n billions of rupiah & percent)
........................................................................................................................
1984
RP
1985
RP
1986
Rp
7.
.......................................................................................................................
1. STATE W K S
Agriculture
H i n i n g
Hanufacturing Industry
T r a d e
Services
O t h e r s
2. PRIVATE BANKS
Agriculture
H i n i n g
T r a d e
Services
O t h e r s
3. REGIONAL MV.BANKS
Agriculture
H i n i n g
Hanuf acturing Industry
T r a d e
Services
O t h e r s
4. FOREIGN BANKS
Agriculture
H i n i n g
T r a d e
Services
O t h e r s
5. TOTAL ( 1 thru 4)
Agriculture
H i n i n g
T r a d e
Services
O t h e r s
13345
1256
211
5165
4537
1922
2 54
3042
34
3
897
1331
720
57
510
28
1
62
167
213
39
1046
0
0
543
309
151
43
17943
1318
215
6667
6344
3006
393
74.4% 100%
9.4%
1.6%.
38.7%
34.0%
14.4%
1.9%
17.0% 100%
1.1%
0.1%
29.5%
43.8%
23.7%
1.9%
2.8% 100%
5.5%
0.2%
12.2%
32.7%
41.8%
7.6%
5.8% 100%
0%
0%
51.9%
29.5%
14.4%
4.1%
100%
7.31
1.2%
37.2%
35.4%
16.8%
2.2%
'
15374
1575
254
5877
5092
2327
249
4106
45
3
1181
1610
1183
84
640
35
1
74
200
269
61
1073
1
0
460
353
192
67
21193
1656
258
7592
7255
3971
461
72.5%
100% 17782
10.2%
1989
1.7%
386
38.2%
6928
33.1%
5559
15.1%
2364
1.6%
556
19.4% 100% 5506
1.1%
65
0.1%
6
28.8%
1462
39.2%
2275
28.8%
1320
2.0%
378
3.0% 100%
766
5.5%
40
0.2%
1
11.6%
84
31.3%
241
42.0%
245
155
9.5%
5.1% 100% 1204
0.09X
3
0%
1
42.9%
531
32.9%
324
17.9%
173
6.2%
172
100.01
25258
2097
7.81
394
1.2%
9005
35.8%
34.2%
8399
18.7%
4102
2.2%
1261
70.4%
21.8%
3.0%
4.8%
100%
8.3%
1.6%
35.7%
33.3%
16.2%
5.0%
100% 21676
11.2%
2506
2.2%
375
39.0%
8630
31.3%
6317
13.3X
2877
3.1%
971
100% 7462
1.2%
97
0.1%
9
26.61
1691
41.3%
3279
24.0%
1698
6.9%
688
100%
961
5.2%
48
0.12
1
11.0%
97
31.5%
292
32.0%
286
20.2%
237
100% 1406
0.25%
5
0%
0
44.1%
499
26.9%
359
14.4%
258
14.3%
285
31505
2656
385
10917
10247
5119
2181
........................................................................................................................
1987
RP
11
1
1I
1
68.81
23.7%
100%
11.6%
1.7%
39.8%
29.1%
13.3%
4.5%
lOOX
1.3%
3.1%
.
4.5%
100%
8.4%
1.2%
34.7%
32.5%
16.2%
6.9%
100%
1
j
II
1'
'
EXHIBIT' 17
INTEREST RATE
DF NON-.PRIORITY LOANS
BY GROUP OF BQNES
---------------------.----------------------------------------------------------.---------------------------------------.---------------------S t a t e Banks
Working C a p i t a l
Investment
18.23%
19 ..64%
19.76%
18.08%
19.36%
19.32%
18.54%
17.88%
19.95%
18.70%
P r i v a t e F o r e x Banks
Investment
24.40%
18.55%
26.33%
24.25%
23.07%
22.98%
24.88%
23.55%
21.40%
P r i v a t e nan-Farex Banks
I n v e strnen t
29.56%
27.13%
27.67%
23.75%
22.00%
L o c a l Development Banks
23.14%
Investment
19.44%
23.76%
19.73%
23.69%
20.69%
22.80%
20.50%
22.86%
20.03%
F o r e i g n Banks
Investment
26.38%
26.98%
21.61%
21.72%
21.02%
19.83%
22.92%
'25.77%
21.19%
26.(:)5%
S o u r c e : Bank I n d o n e s i a
EXHIBIT 18
INTEREST RATE AND SELF-FINANCING REQUIREMENT OF

BANK INDONESIA'S REFINANCING FACILITY
(percentage)
rate of El's refinancfng
I. Working capital credits

1. Bimas credits
2. Permanent Working Capital
Cred~ts(KMKP)
3. Credtts to Blmas for productiur.
imporl and distribution of fedand Insedc~de
4. Credrls to Nahond Private
Plantat~on(PSN)
5. Cred~trto cooperatives (for momben
and for the purchase of essential
commodities1
6 Export credits
12
freely determined
by respective..
handllng bank "
9
18
7. Credits to national contraclon

8. Credits to villages (Kupcded
9. Working Cap~talCredit thmugh
Rp 75 million
10
10
50
15
70
12
.I00
12
12
16
80
35
55
65
12
12
12
0
10 a]
0
80
12
10
80
12
0
0
0
0
40
100
100
100
90
100
3
3
80
'3
15
10. Keppres 29/ 1984
11. Credits to fanners through KUDs

b r the Inlenofkation of paddy/
secondary crops
11. Investment credits
1. Small Investment Credtts WK)
2. Plantation nedits :
a. Nucleus Srnallhddm
Estate (PIRA
b PIR Trans
c Rejuvenation. R e h a b d i ~ ~ o n
and Expansion of Expo* Pbnt
(PRPTE)
d. Natlonal P y p t ~
Pknta'lo" (PSNL
3. New rice fields
4. Investment credts through
Rp 75 mlLon
5. Credltr to cooperatwe (fa
members
and k r the purchase of esrentfal
commodlt~eJ
6 Credds to villages IKupeded
7. Mlni credits
8. Mdt credits
'
Ill.Others
1. House O w m t u p Credry-rCPR)
2. Credla for Indomlan Studana (KMII
3. Credla for Student Domiiaies
55
85
100
'
i
12
12
12
5.9
6
5
10 20
0
0
3
3
1) An InterPn of 9% p a would bs qrplrd a credllr of whkh exports have been realued

21 15'6 for natmal enmpr&s. 30% (bofae Oaohr 19861 and 15% (rlnce October 1986) !lor PMA companies
31 Fixed at 70% f a state commer&bwlr priuate commercial natlonal banks. regional dovolopmen~bankr and foreqn bankr and 95% for stale developmen1
bank (Baptndo)
4) 95% for Raplndo
51 Exdudes reserve f a h k
61 The above regubtmn are related 4plananon enterprise while smallhdder estate ltnanctng n proded entudy by ccrdd For oed~ts~ansfeledlo farmers.
the 168 Interest rale Wlll bQ r e d u d to the rate ol lnturerl charged to economcally weak goup
71 h r exlensLon credit to lama. h s cred'il u k m e prov~dcdby Bank Indonema as dlreo crcd~tto the Mur~suyof Agrkullure
F
a new projects and ertembn of cnnfmg pbntatmn areas reaching mtnnmurn econo~nksof scale. own l~nanc~ng
is r t a1 30%
El
EXHIBIT 19
RANKIN6 OF B M K S
DECEHBER 1987
f
I. STATE BANKS
V. LOCAL DEVELOPMENT BANKS
-----------
1.
2.
3.
4.
5.
BANK
BMK
BANK
BANK
BANK
BUHI DAYA
DAGAN6 NEGARA
BNI 1946
RAKYAT INDONESIA
EKSPOR IHPOR IND.
11. FOREX PRIVATE BANKS
-------------------
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
BANK CENTRAL ASIA

BANK MIA61
BANK U H M NKiIONAL
BANK DUTA
PAN INDONESIA BANK
BANK BALI
BANK DA6AN6 NASIONAL IND.
BANK BUANA INDONESIA
OVERSEAS EXPRESS BANK
BANK PASIFIC
I11. RN-FOREX PRIVATE BANKS
.......................
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
10.
19.
20.
21.
22.
23.
BANK INTERNATIONAL IND.

BANK U H M KOPERASI
B M K PERNIAGAAN IND.
BANK DANAHON IND.
BANK PERKEHBANGAN IND.
SEJAH'IERA BANK unun
UNITED C I T I BANK
BANK PERNIAGAAN IND.
BANK DANAHDN IND.
BANK N I S P
BANK TAN1 NASIONAL
BANK UHlM HAJAPAHIT
BANK SUSILA BAKTI
TAHARA COHHERCIAL BANK
SOUTH EAST ASIA BANK
BANK BHUHY ARTA
BANK HARAPAN SENTOSA
BANK RAHA
NATIONAL TRANSPORT IND.
BANK INDONESIA RAYA
BANK CENTRAL DAMN6
BANK unun SERTIVIA
BANK SURYA NUSANTARA
SOURCE : BANK INDONESIA
......................
24.
25,
26.
27.
28.
29.
BANK PERTIWI
BANK JAKARTA
BANK ANGKASA PUTRA
BANK DAGAN6 BALI
BANK ~ T R OEKSPRESS
BANK DEWA RUTJI
30. BANK NASIONAL
31. BANK BHllHY BAHARY
32. BANK ANTAR DAERAH
33. PERNIAGAAN unun
34. HARANNU BANK
35. BANK unum ASIA
36. BANK PELITA
37. BANK RAHARJA MAKHUR
38. BANK PIWESAAN
39. DJASA ARTA
40.BANKAP
41. BANK HUSTIKA SARI
42. BANK ARTA N I L 6 1 K.
43. BANK HAY INDO PERTAHA
44. BANK WIDYA KARYA
45. BANK PATRIOT
46. BANK KARHLN
47. BANK KESAWAN
48. BANK SUKAPURA
49. BANK DHARHA USAHA
50. BANK PENGEHBAN6AN NASIONAL
51. BANK SURYA INDONESIA
52. BANK SWAGUNA
53. BANK PROPELAT
54. BANK ANRICO
IV. FOREIGN BANKS
------------
I.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11,
BANK OF TOKYO
CITIBANK
BANK PERDMIA
HON6KON6 & SHANGHAI B.C
CHASE MANHATTAN BANK
DEUTCHE BANK ASIA
AHERICM EXPRESS BANK
BANK OF AMERICA
ALGEHENE BANK NEDERLAND
STANDARD CHARTERED BANK
BAN6KOK BANK
I.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
BPD
BPD
BPD
BPD
BPD
BPD
BPD
CENTRAL JAWA
DKI JAYA
EAST J M A
WEST BARAT
NORTH SUHATERA
WEST SUHATERA
B A L I
bPD WEST KALIHANTAN
BPD EAST KALIHANTAN
BPD SOUTH SUHATERA
BPD NORTH SULAWESI
BPD WEST NUSA TEN66ARA
BPD LAHPUNG
BPD MLUKU
BPD R I A U
BPD A C E H
BPD SOUTH SULAWESI
BPD YOGYAKARTA
BPD IRIAN JAYA
BPD SOUTH K L I M N T A N
BPD EAST NUSA TEN66ARA
BPD J A H B I
BPD TIHOR TIHUR
BPD CENTRAL KALIHANTAN
BPD BENGKULU
BPD SOUTHEAST SUUWESI
BPD CENTRAL SULAWESI
.--
EXHIBIT 20
ORGRNIZRTIONRL CHART OF BHNK WIOYR KRRYR
EXHIBIT 21
BANK WIDYA KARYA
BALANCE SHEET
.................................................................................................................
Year
1983
1984
RP
1985
1986
1987
RP
%
%
RP
%
RP
%
.................................................................................................................
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
RP
Cash
Account with B I
Account w/ other banks
Domestic b i l l s
Securities
Deposits
Loan extended
Forex assets
Participation
Prerisos & Inventories
Sundry account
TOT& ASSETS
LIABILITIES
1. Derand deposits
2. Short-tern payable
3. Savings
4. Tire deposit5
5. Borrowings
6. Guarantee deposits
7. Sundry accounts
8. Capital
-Paid up
- I ) d d i t i ~ a lpaid up
9. General reserves
-Asprescribedbylaw
-Capital
10. Other reserves
11. PIL o f l a s t year
12. PIL of current year
TOTAL L lABILITIES
6925.5
100% 9425.6
100% 13005.3
100% 13807.8
1967.8
92.0
28.4%
1.3%
2232.9
7.1
23.7%
0.1%
5469.5
18.7
42.1%
0.1%
5387.6
21.2
1811.5
295.5
26.2%
4.3%
3708.1
235.5
39.3%
2.5%
3855.8
185.5
29.6%
1.4%
4644.5
145.5
130.6
1.9%
118.0
1.3%
155.7
38.3%
2650.0
2650.0
3.4
66.7
6925.5
177.6
0.05%
68.3
1.0%
228.2
100% 9425.6
28.1%
1.9%
2650.0
213.9
0.7%
214.3
2.4%
241.9
100% 13005.3
100% 19038.6
39.0%
0.2%
6789.5
28.3
33.6%
1.1%
1.2%
171.0
-
1.2%
660.0
145.5
3.3
179.5
20.4%
19.2%
4500.0
1.6%
2650.0
255.2
1.6%
375.3
1.9%
157.5
100% 13807.8
1.8%
100%
35.7%
0.1%
3.5%
0.82
0.9%
23.6%
154.6
0.8%
2.7%
495.3
1.1%
82.4
100% 19038.6
2.6%
0.4%
100%
.z===========================================L======D=====a============a====================z========Oa==========
Source : Bank's record
EXHIBIT 22
BLNK WIDYA KLRYA
INCOHE STATERENT
1984
1988
(in millions of Rupiah & percent)
...................................................................................................................
I'
I
1984
1985
1986
1987
RP
%
RP
%
RP
%
RP
1
...................................................................................................................
I. IWCOHE I
1. Operational
a.Interestincome :
- Won-Priority loans
- Priority loans
1988
1,
RP
1750
1750
94.2%
94.2%
1798
1798
92.81
92.8%
1926
1926
89.2%
89.2%
2228
2228
87.2%
87.2%
4521
4521
85.9%
85.9%
95
10
2
1857
5.1%
0.5%
0.17.
100%
115
24
2
1938
5.9%
1.2%
0.1%
100%
169
65
7.811
3.0%
0.0%
100%
150
152
24
2554
5.9%
5.9%
0.9%
100%
286
172
20.3
5262
5.4%
3.3%
5.4%
100%
b. Provision
c. Other
2. Non-operational
TOTLL
2160
11
I
I
li
11. EXPENSES :
1. Dperational
a. Interest expenses :
Deposits
Liquidity loans BI
c. Personnel
- Salary
- Others
d. Depreciation
e. Dthers
2. Non-operational
TOTAL
111. PROFIT (LOSS)

IV. PIL of past year
563
34.6%
745
43.9%
880
43.9%
1040
42.6%
2414
47.2%
189
112
77
671
203
3
11.6%
6.9%
4.7%
41.2%
12.5%
0.2%
281
168
113
355
309
6
16.6%
9.9%
6.7%
20.9%
18.2%
0.4%
326
252
74
361
431
4
16.3%
12.6%
3.7%
18.0%
21.5%
0.2%
528
359
169
324
501
49
21.6%
14.711
6.9%
13.3%
20.5%
2.01
852
620
232
783
741
323
16.71
12.1%
4.5%
15.3%
14-51
6.3%
1629
100%
1696
100%
2002
100%
2442
100%
5112
100%
228
242
157
112
150
68
214
375
495
569
...................................................................................................................
Source : Bank's record.
EXHIBIT 23
THE PROJECTION OF FINANCIAL HIGHLIGTHS
ASSETS, DEPOSITS, LOANS & PROFIT
1989 - 1993
( i n Hi1l i o n s of Rupiah)
1.ASSETS
9426
2.DEPOSITS
5941
13005
13607
19039
32461
41388
52770
67281
15784
109374
9325
10032
13450
24508
30255
38261
48552
61825
78999
------ ------ ------ ------ ------ ------ ------ ------ ------
- DEMAND DEPOSITS
2233
5470
5388
6790
9604
12966
17503
23630
31900
43065
- TIME DEPOSITS
3708
3856
4645
6660
14904
17140
20568
24682
29618
35541
- SAVINGS DEPOSITS
150
190
241
307
393
2000
2100
2205
2315
2431
2718
3078
3281
5150
5385
7013
8795
10176
11554
12473
2650
2650
2650
4500
4500
6000
7500
8500
9509
10000
214
255
155
316
322
329
335
342
349
68
214
375
495
569
691
966
1341
1712
2125
228
242
158
112
150
258
426
584
618
670
6931
7330
----
9686
10925
20558
-----
-----
30743
38448
48330
61049
77481
6931
7330
9686
10925
20558
28743
36348
46125
58734
75050
2000
2100
2205
2315
2431
0.62%
3.68%
0.81%
4.84%
0.87%
5.74%
0.72%
5.351
0.61%
5.37%
3.
I LIQUIDITY CREDIT
4.EQUITY
- PAID UP CAPITAL
- RESERVES
- RETAINED EARNING
5. PROFIT (LOSS)
6.LOANS
----
NON-PRIORITY
PRIORITY
7. PROFITABILITY
ROB
ROE
------
----
----
----
----
-----
----
----
----
----
-----
-----
---- ------
-----
-----
2.42%
8.40%
1.86%
7.86%
1.14%
4.80%
0.59%
2.10%
0.46%
2.79%
..................................................................................................................
Assuaptions the projection o f f i n a n c i a l highlights froa 1989 up
Assets growth i n 27.5% p.a
Industry's growth was
Deaand deposits growth 35 X p.a.
Tire deposits growth i s 15 % p.a
Savings dep. 5 X froa t o t a l deposits
Non-Priori t y loans granted 95% f roa deposits
P r i o r i t y loans granted 10 % fro# t o t a l loans
t o 1993 :
21 % p.a
37.3 % p.a
14.5 % p.a
20 % p.a
Private
Private
Private
Private
banks
banks
banks
banks
i t was 37.7
i t was 45 %
i t was 28.5
i t was 36.4
X p.a
p.a
% p.a
X p.a
EXHIBIT 24
BANK WIDVA KARVA
THE PROJECTION OF INCOHE STATMENT
1989 1993
..................................................................................................................
A
P R O J E C T E D
.....................................
.........................................
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
----------------------------------------------a-------------------------------------------------------------------
I. INCME :
1. Operational
a. Interest income :
- Non-Priority loans
- P r i o r i t y loans
1750
1750
1798
1798
1926
1926
2228
2228
4521
4521
7426
7186
240
9339 11795
. 9087 11531
252
264
14961
14604
277
19056
10763
293
95
10
2
1857
115
24
2
1938
169
65
2160
150
152
24
2554
286
172
283
5262
150
150
25
7751
180
216
165
158
28
26
9703 12204
259
174
30
15424
311
182
33
19584
375
495
569
563
1323
1694
b. Provision
c. Other
2. Non-operational
TOTAL
11. EXPENSES :
1. Operational
Deposits
L i q u i d i t y loans B I
c. Personnel
Salary
Others
d. Depreciation
e. Others
2. Non-operational
563
745
189
112
77
671
203
3
281
168
113
355
309
6
111. PROFIT (LOSS)
228
242
68
214
I V . PI1 o f past year
717
973
..................................................................................................................
Assumptions f o r projections from 1909 t o 1993

1. Interest income
: 25 X from non-priority loans and 12 X from p r i o r i t y loans.
2. Interest ezpenses : 171, 151, and 5% from Time, Savings, and Demand Deposits, respectively.
: 5.2 X l i q u i d i t y loans from B I
3. Personnel expenses : salary w i l l be increased by 46 1
: other personnel expenses w i l l be increased by 35 1 included Rp 40 m i l l i o n t r a i n i n g cost.
4. Other expenses
: increased by 30 X included additional cost f o r new two branches Rp 200 million.
EXHIBIT 25
BANK WIDYA KMYA
SENSITIVITY MALYSIS
THE PROJECTIOH OF INCOHE STATEflENT
1989 1993
( i n m i l l i o n s of rupiah)
.................................................................................................................
A
P R O J E C T E D
......................................
.........................................
I. IHCOHE :
1. Operational
a. Interest income :
#on-Priority loans
P r i o r i t y loans
b. Provision
c. Other
2. Non-opera t i o n a l
TOTAL
11. EXPENSES :
1. Operational
Deposits
L i q u i d i t y loans BI
c. Personnel
- Salary
Others
d. Depreciation
e. Others
2. #on-operational
TOTAL
111. PROFIT (LOSS)
IV. PIL of past year
1750
1750
1798
1798
1926
1926
2228
2228
4521
4521
7282
7042
240
9157 11565
8905 11301
252
264
14667
14390
277
18680
18387
293
95
10
2
1857
115
24
2
1938
169
65
286
172
283
5262
150
150
25
7607
180
216
I65
158
26
28
9521 11974
259
174
2160
150
152
24
2554
15130
311
182
35
19208
563
745
189
112
77
671
203
3
281
168
113
355
309
6
1629
1696
2002
2442
5112
7493
9277 11621
14806
18977
228
242
157
112
150
114
244
354
324
231
68
214
375
495
569
563
631
777
909
1184
34
..................................................................................................................
hssumptions f o r projections from 1989 t o 1993

1. Interest income
: from non-priority loans decrease from 25% t o 24.5 X
2, Interest expenses : 17%, 131, and 5% from Time, Savings, and Demand Deposits, respectively.
3. Personnel expenses : salary w i l l be increased by 46 X
: other personnel expenses w i l l be increased by 35 X included Rp 48 m i l l i o n t r a i n i n g cost.
4. Other expenses
: increased by 30 X included additional cost f o r new two branches Rp 200 m i l l i o n .
EXHIBIT 26
BANK WIDYA KARVA
SENSITIVITY ANALYSIS
THE PROJECTION OF INCOIIE ITATEHENT
1989 - 1993
( i n r i l l i o n s of rupiah)
.....................................................................................................................
A
I. IWCOHE :
1. Operational
a.Interestincome :
-ion-Priorityloans
- P r i o r i t y loans
b. Provision
c. Other
2. Hon-operational
TOTAL
P R O J E C T E D
1750
1750
1798
1798
1926
1926
2228
2228
4521
4521
7569
7329
240
9520
9268
252
12026
11762
264
15254
14977
277
19431
19138
293
95
10
2
115
24
2
169
65
1057
1938
2160
150
152
24
2554
286
172
283
5262
150
150
25
7894
180
158
26
9884
216
165
28
12435
259
174
30
15717
311
182
35
19959
1629
1696
2002
2442
5112
7493
9277
11621
14806
18977
228
242
157
112
150
401
607
815
911
982
68
214
375
495
569
563
803
1167
1656
2203
'
I
I
11. EXPENSES :
1. Operational
Deposits
L i q u i d i t y loans 01
c, Personnel
- Salary
- Others
d. Depreciation
e. Others
2. Hon-operational
TOTAL
111. PROFIT (LOSS)
I V . PIL of past year
....................................................................................................................
Aswrptions f o r projections f r o r 1909 t o 1993

1. lnterest incore
: f r o r non-priority loans increase f r o r 25% t o 25.5 X
2. Interest expenses : 171, 151, and 5% f r o r Tire, Savings, and Derand Deposits, respectively.
: 5.2 f l i q u i d i t y loans f r w 01
3. Personnel expenses : salary r i l l be increased by 46 %
: other personnel expenses w i l l be increased by 35 X included Rp 48 r i l l i o n .training cost.
4. Other expenses
: increased by 30 % included additional cost t o r new two branches Rp 200 m i l lion.
'I
EXHIBIT 27
BANK WIDYA KARYA
SENSITIVITY ANALYSIS
THE PROJECTION OF INCONE STATEHENT
1989 - 1993
( i n m i l l i o n s of rupiah)
.....................................................................................................................
A
P R O J E C T E D
.........................................
.........................................
1984
I. INCOME :
1. Operational
a.Interestincome :
-Won-Priorityloans
P r i o r i t y loans
b. Provision
c. Other
2. Non-operational
TOTAL
.
:
1985
1986
1987
1988
1989
1990
1991
1992
1993
1750
1750
1798
1798
1926
1926
2228
2228
4521
4521
7426
7186
240
9339
9087
252
11795
11531
264
14961
14684
277
19056
18763
293
95
10
2
1857
115
24
2
1938
169
65
2160
150
152
24
2554
286
172
283
5262
150
150
25
7751
180
158
26
9703
216
165
28
12204
259
174
30
15424
311
182
35
19584
228
242
157
112
150
172
275
319
155
-228
68
214
37 5
495
569
563
666
831
1022
1115
11. EXPENSES :
1. Operational
Deposits
L i q u i d i t y loans B I
c. Personnel
Salary
- Others
d. Depreciation
e. Others
2. Non-operational
TOTAL
111. PROFIT (LOSS)
I V . PIL of past year
.....................................................................................................................
Assumptions f o r projections f r 1989

~ t o 1993
1, Interest income
: 25 % from non-priority loans an 12% from p r i o r i t y loans
2. Interest expenses : 17.5%, 15%, and 5% from Time, Savings, and Demand Deposits, respectively.
3. Personnel expenses : salary w i l l be increased by 46%
: other personnel expenses w i l l be increased by 35 % included Rp 48 m i l l i o n t r a i n i n g cost.
4. Other expenses
: increased by 30 X included additional cost f o r new two branches Rp 200 m i l l i o n .

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ASIAN INSTITUTE OF MANAGEMENT

EUGENIO LOPEZ FOUNDATION

ASIAN INSTITUTE. O F MANAGEMENT

this managememt research rqwrt emtitled

ACHMAD E.FFE.NDY ABDURACHMAN

DEAN HORACIO M. BORROMEO JR.

---------- ------------------MR. A. A. SIDARTO, Ph.D.

the assistance i n information

F r o f . Gabino &#, Mendara,

M r . Amal Abadi S i d a r t u F h D., T h i r d P a n e l i s t ,

banks c o n s i s t i n g o f 1.0 f o r e i g n exchange p r i v a t e banks and

f r o m t h e l a t e b O ' s u n t i l mid 1983,

June 1983 t.he government i n t r o d u c e d a m a j o r r e f o r m i n t h e

opening some o p p o r t u n i t i e s t o t h e banking i n d u s t r y .

spurred the competition

leading w i t h i n the industry.

1987. 'This i s because s t a t e banks

Bank Widya Karya (BWK)

proposed t h a t BWK s h o u l d improve i t s s e r v i c e s i n

BWK new s o u r c e s o f f u n d s a t cheaper c o s t .

i t was suggested t h a t BWK expand

PART ONE : INDUSTRY ANALYSIS

The Indonesian Economy

CHAPTER 3. MARKET A N A L Y S I S O F SOURCES

MARKET FOR LOANS I N BANKING INDUSTRY

CHAPTER 5. C O M P E T I T I O N I N BhNKING INDUSTRY

5.1. Competitors' Performance

Key Succe$s Factors

6.1. Analysis of Spread

The Highlights of the

The Impact of Policy

CHAPTER 8. P T BfiNK WIDYA KARYA

8.1. Historical Background

8.2. The Objectives of EWK

CHAPTER 9. PERFORMANCE OF BWK

B A N K ' S STRENGTHS AND WEAKNESSES

CHAPTER 11. T H E PROPOSED STRATEGY

Improve t h e quality of personnel

1. Number o f banks and t h e i r o f f i c e s

Major customers o f demand d e p o s i t s p r i v a t e banks

M a j o r customers o f demand d e p o s i t s f o r e i g n banks

10. M a j o r customers o f demand d e p o s i t s l o c a l

16. O u t s t a n d i n g banks' c r e d i t s by group o f banks and

Interest rate of non-priority

income s t a t e m e n t o f BWK 15'89-1993

Widya Karya (BWK) i s one o f

June 1988 Bank Widya Karya ranked t h i r t y s e v e n t h i n terms

t o 1984 t h e bank was r u n by

i n June 1983 t h e Government

phase out Bank Indonesia's

liquidity credits, except

has become mdre competitive. A

more effective and efficient in mobilizing funds

i t s strengths and weaknesses.

strengthening the company.

Scope of the study

( 2 ) A review and a n a l r s i s of s o u r c e s o f fund=, market

Limitation of the Study

private and confidential by the bank and or by the

Qct of 1967 were excluded for

and secondary data. The

were collected from :

( 1 ) Interviews and discussions with

General Managers, Managers and officers of Bank Widya