BRI looks to Korea to increase fee income

Indonesia’s most profitable lender, Bank Rakyat Indonesia (BBRI), has agreed to team up with Industrial Bank of Korea (IBK) to tap into South Korea’s growing business activities in Indonesia, and also to assist the increase in the number of Indonesian migrant workers in the country.

The cooperation agreement was stipulated in a memorandum of understanding (MoU) signed in Jakarta on Tuesday.

“The MoU does not only cover remittance, but also trade financing, including lending, standby LCs [letters of credit], et cetera,” BRI finance director Achmad Baiquni said after the signing ceremony between BRI and IBK.

The micro-focused bank, commonly known as BRI, expected up to Rp 87.52 billion (US$9.54 million) in additional fee-based income from the new partnership, of which Rp 75 billion would come from trade finance, Rp 4 billion from remittance, Rp 8 billion from compensating balances and Rp 515 million from currency gains, corporate secretary Muhamad Ali said.

BRI has targeted for overall fee-based income to grow by between 20 and 25 percent this year after expanding almost 20 percent throughout last year to Rp 3.4 trillion.

Indonesian workers in Korea, dominated by skilled workers, are expected to increase to 47,000 by the end of this year from 37,000 last December, of which 6,000 have IBK accounts. At IBK average, their transactions total Rp 60 billion per month, with BRI charging between Rp 15,000 and Rp 25,000 fees for every transaction.

So far this year, BRI has disbursed Rp 5.38 billion in government-sponsored micro credit (KUR) for Indonesian workers in South Korea. “We will focus on remittance at first and on to trade finance, then lending,” Achmad told reporters.

South Korea has emerged as one of the country’s important trading partners, with total trade almost tripling within four years to $29.39 billion in 2011. South Korea is also the fifth-largest investor in Indonesia, with cumulative investment of $1.2 billion last year.

“If we are talking about trade finance, there are about 1,500 Korean companies here. We can be the negotiating bank and opening bank for exports and import activities within both countries,” Achmad said.

“Later, we will expect Korean companies in need of rupiah financing — we can give it here, with a guarantee from IBK,” he added. “Korean companies operating here are mostly in the industrial sector, from garments, electronics, to mining.”

Many banks in Indonesia are pushing efforts in tapping into emerging economies by cooperating with local lenders overseas, hoping to ease regulatory burdens while still maintaining presence outside the country and benefiting from rapidly growing markets.

Bank Negara Indonesia (BNII) has teamed up with 11 Japanese regional lenders to target small and medium enterprises (SMEs) there to help boost loans and deposits, while CIMB Niaga (BNGA) has partnered with one of Japan’s largest regional lenders, Shizuoka Bank.

IBK, which like BRI, is also state-owned and focuses on SMEs, would focus the partnership with BRI on Korean SMEs operating in Indonesia, as well as on Indonesian workers’ transactions and micro-credit, according to CEO Cho Jun-hee.

“Indonesia has huge potential and there have been many companies that are interested in working together,” Jun-hee said.

Source : The Jakarta Post