Reality check reveals winning formula
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Reality check reveals winning formula

The Indonesian banks that best coped with the 1997 crisis were focused on retail and small business customers. Now those banks that are restructuring are intent on the same sector.

LAST YEAR MANOJ Nanwani, a research analyst at BNP Paribas Peregrine, had almost completed the depressing task of surveying the distressed Indonesian banking sector when he stumbled across a nugget in the dross. "It's a real bank!" he announced to his clients, proof that there was still a flicker of life in the country hit worst by Asia's 1997 financial crisis.

The commendable bank was a small regional operation based in Java, one of a select group that came through the crisis almost unscathed. Bank NISP's success sprang from its concentration on lending to small and medium-size companies and latterly retail consumers; its base in Bandung, which meant it was closer to and knew more about the affairs of its customers; and its long-term adherence to good governance.

Now, five years after the crisis, a lot more banks are facing up to reality, spurred on by lower interest rates and the inescapable conclusion that the old conglomerate-dominated corporate sector will not revive soon. Driven by the sale of several banks to foreign strategic investors, Indonesian banks are getting down to developing a more discriminating approach to lending. Not surprisingly, many are following Bank NISP's example.

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