Concerning assets, MSME Banking managed to record a loan growth of 1.0% reaching Rp34.5 trillion compared to the previous year of Rp34.2 trillion. An increase in credit risk in 2016 also compelled MSME Banking to choose a less aggressive and more careful approach in granting new loans. Total loans in MSME Banking mostly come from SME business, at a total of Rp24.9 trillion. However, credit growth was in line with the increase of in non- performing loans with an increase in the NPL ratio to 3.7% in 2016, increasing by 73 bps from 2.9% in 2015.
Despite this increase, NPL growth was still considered to be reasonably good, given the fact that the business and economic situation was still not conducive.
2.4%
2.9%
3.7%
NPL Ratio (%)
2014 2015 2016
Total customer deposits that were successfully collected reached Rp34.3 trillion which was relatively stable compared to 2015. The decrease in customer deposits was due to a decrease in time deposits in 2016 of 5.5%
to Rp13.4 trillion compared to Rp14.2 trillion in 2015.
Whereas in 2016, low cost funds increased by 3.5% to Rp20.9trillion compared to Rp20.2 trillion in 2015. One of the drivers of large amounts of funds collected was the increase in financing volume distributed through the value chain. The value chain scheme was created through a SME policy that requires business partners to open an account with CIMB Niaga.
CASA (Rp trillion)
2014 19.5
2015 20.2
2016 20.9
Third Party Funds (Rp trillion)
2014 34.4
2015 34.4
2016 34.3
SME Banking managed to increase its income before tax by 18.1% to Rp1.3 trillion in 2016, compared to Rp1.1 trillion in 2015. The increase in income before tax mainly contributed by SME business by Rp0.2 trillion in 2016 compare to 2015.
Profit Before Tax (Rp billion)
2014 1,298
2015 1,075
2016 1,269
1. SME Banking
The SME Banking unit deals with customers who are entrepreneurs and the owners of small and medium enterprises that are scattered throughout Indonesia. Several initiatives have been undertaken by this unit, which primarily aim to enhance business growth and accelerate the credit process, while applying and maintaining prudent principles in loan distribution.
The program of financing businesses in this segment is called the Loan Booster Program and aims to increase its portfolio of clients who demonstrate a good performance, where this program can be used for the business development of customers.
Meanwhile, to get new customers in the SME sector, the unit also offers the SME program Extra.
In addition, SME banking also makes continuous improvement to credit processes, so as to provide a satisfactory level of service to customers.
The SME business unit also continues to intensify the implementation of the loan process by using approved Risk Acceptance Criteria, up to a limit of Rp10 billion, now known as the Retail Lending Program (RLP). This is in response to changes in the business environment that is increasingly competitive and growing rapidly. The system is able to provide an analysis of funding based on historical data that has been validated. The result is a process of rapid credit with the quality of potentially maintainable financing.
SME Banking also continues to make improvements in the field of loan portfolio monitoring, internal credit process improvement, and early detection systems on the credit quality of the debtor’s business, and credit analysis system on existing SMEs.
Efforts made during 2016 reaped good results, i.e., displaying a rising loan balance of 8.9%, from Rp22.8 trillion in 2015, to Rp24.9 trillion in 2016.
On the other hand, customer deposits in 2016 also recorded a growth of 2.4%, from Rp31.1 trillion to Rp31.9 trillion. Of the total customer deposits that were collected, the low cost funds was recorded at Rp20.0 trillion in 2016, an increase of 3.5% from 2015 by Rp19.4 trillion. While time deposits stood at Rp11.9 trillion, an increase of 0.6% from Rp11.8 trillion in 2015. The growth in customer deposits resulted from cooperation and good support from the Sales and Distribution (SND) unit that operates under the Consumer Banking structure as collector of funds, as well as implementation of cross-selling activities performed by SND and SMEs. Customer deposits enhancement in the SME unit was also supported by the implementation of the value chain to distributors, and suppliers of SME customers.
2. Micro Linkage
Micro Linkage is a MSME Banking sub-segment that executes an indirect approach, i.e., establishes a strategic partnership, using linkage cooperation patterns, in the form of executing, channelling and joint financing. Strategic partners who cooperate with Micro Linkage are KUD, plantations that apply the nucleus system, regional development banks (BPD), People’s Credit Banks (BPR), and other agencies that could potentially increase the scale of SME lending. The aim of this strategy is to better identify and quantify the market potential of SMEs in accordance with the diversity of their business and at the same time take advantage of the presence of strategic partners who can help the growth of the SME business segment. The strategic partner is instrumental in the process of distribution of funding and collection, which ensures that the quality of the assets will be maintained.
One example of a business model that has been applied in this scheme is the financing to farmers of palm oil. The distribution of financing to farmers is conducted by Micro Linkage with cooperatives whose members are farmers and with plantation
companies (core companies) as partners.
Through cooperatives, farmers receive loans from CIMB Niaga to be used for the launch and maintenance of oil palm plantations, where the harvest would later be purchased by plantation companies.
Meanwhile, SME Banking is a strategic partner of financial institutions including the regional development bank (BPD), People’s Credit Banks (BPR) and cooperatives. On the other hand, the end-users, financed by CIMB Niaga, are the customers from BPD and BPR, as well as members of the cooperatives. These partners are appointed as marketing, collection, and security agents for CIMB Niaga.
Linkage Business Development Micro lending is supported by 21 branches scattered throughout Indonesia, with a total of approximately 91 employees.
By the end of 2016, the total loans in Micro Linkage was relatively stable, only showing a small decrease of 0.3%, to Rp8.26 trillion from Rp8.29 trillion at the end of 2015. Meanwhile the portion of low cost funds that were successfully collected in 2016 reached Rp750 billion, an increase of 10.8%
from Rp677 billion in the previous year.
In order to overcome the challenges of a decrease in financing volume in connection with continuing unfavourable economic conditions, the work unit of Micro Linkage intensified its monitoring program and the analysis of the quality of financing through more effective communication with partners.
3. Mikro Laju
Mikro Laju is a business unit that provides direct financing. Mikro Laju serves the financial needs of micro-entrepreneurs to support business development for sustainable growth. The services offered include working capital loans and investment with a ceiling of Rp1 billion. In 2016,
Micro-Small-Medium Enterprises Banking
taking into account macroeconomic conditions, as well as the performance of the Mikro Laju finance that as still in a loss position, the Company recalibrated Mikro Laju, (closing branch offices) which will continue to be sustainable in 2017.
Through the recalibration program, Mikro Laju has closed branch offices, from 188 branch offices in 2015 to 39 branch offices by the end of 2016.
The total Mikro Laju loans in 2016 decreased by 65.1% to Rp665 billion compared to Rp1.9 trillion in 2015. However, Mikro Laju customers will still be served in conventional branches of the Company.
In addition, the needs of customers with a plafond of financing of Rp1 billion are still being offered by existing SME products.
4. Pension Loans
The Pension Credit Unit helps pensioners from TASPEN and Asabri to get back to productivity by opening a business with financial support from the Company in the form of a personal loan facility.
Total loans in 2016 decreased by 37.7%, due to improve internal process in order to increase service quality to customers. Next, Pension Credit will be run by prioritizing cross-selling to retirees who have become customers of CIMB Niaga. With the Pension Credit unit, it is expected that the number of pensioners who use the Company as a means of paying their monthly pension, through CIMB Niaga Pension Savings, is increasing and is able to add value to the retirees that have been loyal customers of the Company. It is expected that the huge market potential and with a Company- wide network, the Pension Credit unit will grow and become one of the best in Indonesia.