Selanjutnya

•·

LOAN NO. 497-T-085B

AMENDMENT NO. 1 TO

LOAN AGREEMENT

BETWEEN THE

REPUBLIC OF INDONESIA

AND THE

UNITED STATES OF AMERICA

FOR

FINANCIAL INSTITUTIONS DEVELOPMENT

Dated:

Augus t

28 , 1986

This AMENDMENT NO. 1, is entered into between the REHJBLIC

OF INDONESIA (''Borrower") and the UNITED S1ATES OF AMERlCA,

acting through the AGENCY FOR INTERNATIONAL DEVEWPMENT

(''A. l.D.

11 ) .

WhEREAS, the Borrower and A.

I.

D. entered into a Financial

Institutions Levelopment Project Loan Agreement on May

24, 1984

("Loan Agreement'') , whereby A.

1.

D. agreed to lend to the

Borrower up to Fifteen Million and

ｾｩｶ･＠

Hundred Thousand United

States

c·u.

s. '')

Dollars ($15 ,500 ,000) ("Loan

11

) ;

and

WHEREAS, the Borrower and A. 1. D. des ire to amend the Loan

Agreement to add an additional $1,000,000 and to make other

related changes;

NOW THEREFORE, the Borrower and A.l.D. hereby agree as

follows:

1. A new Section

2.2 .

lncremental

ｾ｡ｴｵｲ･＠

of Project, is

added as follows:

"Section

2 .

.L.

Incremental Nature of Project

(b) Within the overall Project Assistance Completion Date

stated in this Agreement, A. I.D., based upon consultation with

the Borrower, may specify in Project lmplementation Letters

appropriate time periods for the utilization of funds loaned by

A.l.D. under an individual increment of assistance.

lt is

anticipated, subject to the conditions set forth in paragraph

(a) of this Section

L.

L:., that

A.

l.D. 's total loan contribution

to the Project will be not less than $L:l,

L50

,000.

11

L.

1'he first paragraph of Section 2 .1. of the Loan

Agreement is revised to read as follows:

11

5ection .5.1. The Loan.

1o assist the Borrower to meet

the costs of carrying out the Project, A.I.D. pursuant to the

Foreign Assistance Act o± 1961, as amended, agrees to lend the

Borrower under the terms of this Agreement not to exceed

Sixteen Million and live Hundred Thousand United States

("u.S.'')

Dollars

ＨＤＱＶＬｾＰＰＬＰＰＰＩ＠

to support the P1oject.

Tlse

aggregate amount of disbursements under the Loan is referred to

as "Principal''.

3.

Paragraph (b) of Section 3. 2. of the Loan Agreement,

Borrower Resources for the Project, is revised to read as

follows:

"lb) Tle resources provided by the Borro\ver for the

Project from sources other than

A.

l.D. will be not less than

-6.

Except as herein above expressly amended, the Loan

Agreement remains in full force and effect.

IN WITNESS WHEREOF, the Borrower and the United States of

America, each acting through its respective duly authorized

representative, have caused this Amendment No. 1 to be signed

in their names and delivered as of the date written above.

REPUBLIC OF INDONESIA

UNITED STATES OF AMERICA

Signed

Djamal ddin Joeda

Acti g Director General

for

o eign Economic Relations

Depa

ent of Foreign Affairs

Signed

v ====

Paul WolfowitJ

Ambassador

Embassy of The

ANNEX I

.AMPLIFIED DES <RIPTION OF 1HE FRO JECT

1. S l11MARY

This $18 .0 million Amendment to the F'lnancial Institutions

Levelopment (FID) Project is designed to support policy and institutional development of the Bank Rakyat Indonesia (ERI) Kecamatan - level

(sub-disc tric) Unit U=sa system. Under this Amendment, which complements

the original $27 .8 million FID effort to strengthen village - based credit systems, trairdng funds, technical assistance, commodities and regional training facilities will be provided to help initiate a formal training program for 13,000 Dnit Lesa employees and to improve the policy and operating environment of the Unit Desa to meet the growing demand for

free-market financial services at the Kecamatan level. In addition a major rural finance research and reporting system will be established.

Activities funded under the Amendment will be implemented by BRI under

the guidance of the Ministry of Finance. 1'he amendment and this amended amplified project descriptions coffiplement the existing Agreement which remains on going.

11. PROJECT DES <RIP110N

A. Amendment Goal

The Project (and Amendment) goal is to encourage enterprise

development, increase productivity and generate employment opportunities in rural areas.

H. _{Amendment Purpose}

The Amendment purpose is (1) to help develop the BRl Unit Desa system in order to provide financial intermediation for middle-level rural

borrowers at reasonable cost; (2) to produce loan portfolios of employment generating activities, primarily off-farm; and ( 3) to

strengthen BRl savings mobilization programs. \1he Amendment purpose

differs from the original Project purpose only in its focus on a

different level within the rural financial system, e.g. Kecamatan-level Lnit Desa operations vs. village-level BKK-type operations.)

C. MAJOR OUTFUTS

The Amendment will focus on four activities -- policy assistance, training, operational improvements, and research -- as outlined below:

How and where the Unit Lesa should best fit within the BRI organization. This will include a review of the financial, organizational and reporting structures, and should involve considerable interaction with the S1DF-financed consulting group.

Particular attention will be given to planning for Unit U=sa staff

career development within bRl. The result of this review will be a

comprehensive long-range plan for development of the Unit Lesa system.

The financial relationship between Unit Desa, BRIand BI, including the role of liquidity credits, profit center accounting for services provided, prof it distributions, operational ceilings and cash

management. Such policy outputs should include recommendations and

follow-through on specific regulatory changes required, both at the national level and within BRI.

Loan portfolio management and marketing, especially focussing on improving management's ability to conduct risk assessment, broadening the market, rationalizing collateral requirements, improving public relatiorm and service, and adjusting interest rates to conform to loan performance and operational costs.

Promotion of savings mobilization, particularly as a means of replacing liquidity credits and encouraging private investment.

Expansion of Unit Desa activities into such services as bank

transfers, pension and tax transactions, pay for civil servants, and longer term savings instruments.

2. Training: The Amendment will support establishment of a high-quality

BRl regional training system and the institutional capacity to maintain the system for the 13,000 Unit Iesa employees and cabang supervisors of Unit De sa operations. This system shall consist of a permanent BRl regional training staff and tour regional training centers, an estaLlished budget procedure and source of funds, and appropriate

training materials and means of updating materials and curriculum as ueeued to properly train staff. Training will consist of at least three

ｾ･･ｫｳ＠ of formal training for each employee during the Amendment, plus

on-the-job training in selected areas such as loan portfolio management and accounting. Training provided will stress the concepts and future

goals of the Unit Desa system, with less emphasis on ｲｯｵｴｩｲｾ＠ procedure .

.:>. (;perational Development: The Amendment will support improvement of

Unit Desa ｡｣｣ｯｵｮｴｩｮｾＬ＠ communications and automation systems as necessary

to lower the cost of .tinancial intermediation in a cost-effective manner.

The accounting system used now is based on simple double-entry accounting, and involves a great deal of transferring written entries

irom ledger to ledger. The system is very labor intensive and, because of a lack of cross-verification, is error-prone. Personnel time freed up

through approvea accounting could allow for portfolio growth without the need for additional personnel, and savings from faster processing and

fewer errors would lower the intermediation cost. Several new trial

- 3

-Amendment, these trial systems plus recommended additions will be evaluated, and the most appropriate system will be implemented

nationwide. Personnel training in accounting and automation will also be

provided.

Communications currently are extremely limited between the Unit Lesa

and ｃ｡ｾｮｧＮ＠ For instance, not one Dnit ｾｳ｡＠ has a telephone. l'his makes

cash management and reporting very difficult. Given the extent to which

information transfer ｡ｲｾ＠ communications are the basis of modern banking,

this Amendment will support the developllient of two-way communication links between the l.Jnit I..esa and the Cabang offices.

The 2,400 Unit Desa offices currently handle over one-halt million transactions a month using no automation system other than pocket calculators. Given the anticipated rapid growth of the Dnit Desa programs and the need to improve efficiency, some basic measure of

automation will soon be necessary. Since any proposed automation system

would be linked to other operations systems, the first step will be for

the specifications and level of automation to be defined in accordance

with accounting and reporting recommendations to be prepared by the

operations T /A team. After the appropriate staged automation plan is

approved, the initial system will be procured and installed, and

personnel trained to utilize the new system.

4.

Hesearch: The Amendment will finance the conduct of a major research

study which will provide guidance to the GOI and USAID concerning further development needed within the rural financial sector. This research will

be conducted in three re:r;resentative provinces under the sponsorship of

the MOF. The Ministry of Finance has played an important role in the

development of the Kupedes/Simpedes programs, and is well-positioned and motivated to sponsor this major research program.

The study is to be conducted over a three year period, and will focus on estimating the total supply of credit and savings within each

province, broken down into source (including informal credit markets), major variables of each program or source, and how each variable affects

the demand for credit and the propensity to save. The research would also define the coverage of existing programs, including a profile of

both typical borrowers/lenders by prcgram and the type of persons not now

served under any program. Given this type of information, USAID and the

GO! can then better evaluate the need for redesign, regulation or

deregulation of existing programs, the need for new programs, and the market for private banking in rural areas.

D. INHJTS:

1. Policy Assistance: The training and policy advisory team will assume

an active role in providing policy inputs for BRl, Bland MOF. USAID

staff and U.S. Federal Reserve Bank advisors being funded under the

Private Sec tor Project ( 497-0329) will also play important roles in such policy discussions.

2. Training System: 'rhe minimum initial requirement to ensure a basic

level of consistency and understanding of new Unit Iesa programs is an average of three weeks of formal training for all employees and

supervisors over the next three years. A similar level of training will continue after this Amendment period, · although course content would differ depending on training needs.

In order to improve training materials and train trairers, a major

input will be technical assistance for the training system. The T/A team

would advise on preparations for and conduct of the initial three-year program at four regional centers. They will work with the BRI training division on all aspects of curricullum development, program

administration and support, and personnel policy.

Another major input will be the establishment of four regional training centers. This will involve the construction and furnishing of new facilities at Padang and Yogyakarta, the rehabilitation, expansion and furnishing of facilities at Surabaya, and the furnishing of

facilities at Ujung Pandang. (The Ujung Pandang center was recently

constructed under the World hank SEDP project, and is very suitable for

training). These four centers were selected to minimize new staff requirements and trainee travel expenses, and to maximize the use of current facilities. The USAID contribution for construction and

furnishing will be to reimburse up to 50 percent of the total estimated

cost, to be establilshed as a predetermined fixed amount reimbursement (FAR) for each of the four sites once preliminary cost estimates and plans are reviewed.

Whereas total USAID .FAR payments are not to exceed $1,650 ,000 under this Amendment, the allocation of payments among the four regional centers may change once preliminary cost estimates and plans become

available. BlU has hired local A&1 firms to prepare these plans and

estimates. Once these estimates have been reviewed and approved by the

USAlD engineering office, then the FAR amounts will be agreed upon. A

Condition Precedent in the Loan Agreement requires the completion of

USAlD's engineering review prior to the finalization of the FAR _amounts.

Likewise the USAID engineerinE; office will inspect the buildings to

approve actual disbursement of the FAR _amounts.

ln order to meet training staft requirements, BRl has agreed to recruit 21 new regional trainers from within the BRI staff. The new

staff will be given intensive training at the central training facility

and then would be assisted by the training T/A consultant as they

initiate the regional programs. 1\ew staff will report to the regional

5

-One immediate training input, as mentioned above, is the preparation

of course materials for the Unit Desa training program. This effort will

require approximately one year, and will involve the training consultant, the BRl training staff and a BRl-contracted local publisher.

Concurrently the combined training team will select and begin intensive training of the new regional training staff.

in _{addition to the above mentioned input, funds will be required for}

actual training expenses. 1hese expenses will include student travel and

per diem, facility rental, and course teaching materials. In addition BRl must fund teacher salaries, administrative support, domestic staff

salaries and building upkeep. 1otal annual non-recurring expenses for

the initial three-year program are estimated at slightly over $1,000,000. AlD will reimburse BRI for non-recurring training expenses such as

trainee travel and per diem, course materials and expenses, and facility rental, up to a maximum of 3500,000 per year, for a three year total of $1.5 million. BRl will fund all recurring costs, such as salaries and upkeep, plus the balance of non-recurring costs.

3.

Operations: Along with intensive training, the Unit Desa need the

following additional operational inputs.

o Technical assistance for accounting, reporting, automation and audit

systems is essential. 1o develop these, BRl will contract an operations T /A team, comprised of two long -term advisors in accounting and bank automation, one long-term audit advisor, and several short-term advisors for a total of 7 • .) p-y. This team will assist with the technical aspects of the regional training programs, advise on procurement, installation and operation of commodities discussed below, assist BRl in the redesign of all operational

systems, and consult with individual unit Desa on an as needed basis.

o Commodity assistance in the form of radio communications and

automation equipment are also required. with respect to

communications, BRl proposes to provide each Unit De sa with a 10-v.att two-way VHF radio set capable of communicating with the Cabang

office. Antenna will be required in most cases. This will allow the

Unit De sa to report to the ca bang office on a daily basis, to request

cash transfers from other Unit Desa as required, and to receive

information on loan applications and other management needs. BRI

will prioritize Unit Desa and probably phase in the communications

systems as funding permits. AlD would provide up to 50 percent of

the actual procurement cost, subject to availability of funds.

Automation inputs will be required as the system expands. while the

specific automation plan and timetable will require initial

investigation by the accounting and automation advisors, the probable configuration is a desk-top micrv computer at each Unit Desa,

possibly employing some form of cash entry system such as register. Supporting automation equipment at the CabanE,s or central .bRl office

will probably be developed in order to balance system cost with funds available. AID agrees to pay up to 50 percent of the total actual cost, subject to abailability of funds.

4. Research: 1he focal point of the Amendment research activity will be

the l-'10F Directorate General of Lomestic Monetary Affairs, which will serve as the GOI contracting agent and research supervisor. The research

will most likely be ｣ｯｲｾｾ｣ｴ･､＠ by a consortium of locally contracted

institutes and firms. To assist the local research team, AlD will fund 5

p-y of expatriate T/ A, presumably 2 resarch experts working periodically

over a three year period. The T/A contractor will primarily assist in

research and survey design, data verification and data analysis.

E. END OF PROJECT S1ATUS:

As a result of the above Amendment inputs and outputs USAID expects

the following results to be achieved by the end of the Amendment in June,

1990:

2.

3.

4.

1/

To triple Kupedes loans outstandiny to Rp. 800 billion while

maintaining a long-term loss ratio_/ of

ｾＮＵ＠

percent or less;

To increase Unit Desa savings deposits to cover at least 50 percent of I<upedes loan volume;

To reduce Unit Desa administrative cost portion of intermediation cost by 2 percent, e.g. from 14.5 to 12.5 percent; and

1o have established an on-going research and reporting network to monitor rural financial pro5rams and trends within three provinces.

I N F U T

I

1. 'lechnical Assistance

I

2. 1raining

I

3. _Commodities

&

_1quipment

I

4. FAR Construction

I

5. Capital

I

6. Contingency

I

7. 1valuation

I

TOTAL I

Attachment 1

FINANCIAL l.NSUTl.JTlOO DEVEI.DIMENr PROJECT NO. 49i-0341

I<Y 86 OBLIGA'llON

GRANl'

I

LOA.N

2,000

--

500

-

500

-

--

--

--

-2,000

I

1,000

I

HNANCIAL .HAN

(3000)

AID

I

10TAL OBLIGA1ION TO DATE

I

GRANT

I

LOAN

I

I

4,000

I

3,500

I

I

I

500

I

7,450

I

I

I

-

I

1,250

I

I

l

-

I

-I

I

I

-

l

3,000

I

I

j 500

I

1,300

I

I

I

-

I

-I

I

l

5,000

I

16 ,500

I

I

I

T01AL

I GOI*

I

I TO DATE

I

500

I

I

3,500

I

I

3,250

I

I

500

I

I

3,500

I

i

-I

I

-I

I

11,250

I

I

I T 0 TAL

I

I

8,000

I

I

11,450

I

I

4,500

I

I

500

I

I

6,500

I

I

1,800

I

I

-I

I

32,750

I

*I _{lt is anticipated that the contribution by the (,()1 for each line item will come from the Ministry of Finance,}

Ministry of Home Affairs and the provincial government. The exact contribution of each agency will be determined

on the yearly review of the project.