Indonesia's best bank for SMEs 2020: Bank Rakyat Indonesia
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Indonesia's best bank for SMEs 2020: Bank Rakyat Indonesia

Bank Rakyat Indonesia

Sunarso, President Director, Bank BRI.jpg
Sunarso, Bank BRI

Indonesia’s oldest bank has found itself on the frontlines of the nation’s newest risks. The coronavirus fallout is certainly the immediate danger, but the longer-term hurdle for the economy is making sure that small and medium-sized enterprises – those drivers of economic growth – are not crowded out of the financial system in the wake of the pandemic.

This year, the 126th of BRI’s history, will be unlike any other for the micro, small and medium-sized companies that were already reeling from the global trade war of the last two-and-a-half years.

The Covid-19 shock is a different beast from the last two financial crises. Previous meltdowns were triggered by currency troubles, bad loans, Wall Street crashing and chaotic interest moves. The coronavirus is evidently not a financial crisis at its root, but there is a real risk it can create one.

President Joko Widodo’s government has so far pumped nearly $50 billion into the economy. But how BRI and its peers respond will be critical to keeping the country’s smaller businesses afloat. In 2019, the micro-to-midsize universe accounted for 79% of BRI’s loan portfolio.

The so-called MSME sector on which BRI is so focused accounts for roughly 99% of Indonesia’s 62 million businesses. Barely 30% of these companies, or roughly 18 million of them, have accessed bank financing. Some 9 million are BRI debtors.

The bank, run by president director Sunarso, is not happy with its already dominant position in the SME market. The bank wants to “go smaller, go shorter, go faster, go cheaper,” as Sunarso puts it.

BRI’s loans grew 8.3% in 2019 and another 7.1%, year on year, in the first two months of 2020. It appears that big things can come from thinking small.

As the pandemic threatens the per-capita income gains Indonesia made over the last two decades, a thriving microfinance scene has rarely been more important. That’s why all eyes are on BRI, the largest Indonesian bank by assets – and a pivotal player in the small-scale lending and microfinance spaces.

The bank’s deep and multifaceted corporate social responsibility efforts may end up making the real difference. Its community development programme, known as BRI Peduli, is still the industry leader.

The programme focuses on several vital sectors – disaster response, environmental stability, health, poverty reduction and making sure public facilities are up to code. In 2019, the bank disbursed more than $15.4 million for BRI Peduli activities.

Increasingly, the bank’s focus is on issuing sustainability bonds, financial literacy training, helping to fund tertiary education and reducing the use of plastic. In 2019, BRI issued the nation’s first sustainability bonds. It continues to lead the market. It consistently meets the Asean Sustainable Bond Standards guidelines and global green bond norms.

The bank’s commitment to CSR has been noticed. Last year, BRI’s rating in MSCI’s ESG index – which gauges environmental, social, corporate governance policies – was upgraded to A from BBB. BRI also won a sizeable upward bump from the Dow Jones Sustainability Index, thanks to its support of government programmes focusing on community health and welfare via loans and grants.

In the last 12 months, BRI has been on the lookout for innovators working on new renewable energy technology, with special emphasis on those in solar and hydroelectric power.

Among BRI’s many transactions over the last year, two stand out. The first was in the sustainable transportation space, where it worked on a $37 million deal to finance a light rail infrastructure project in Jakarta. The second is a green-buildings project in central Jakarta, worth $41 million.

These deals may have been small, but they offered a clear example of BRI’s commitment to important changes.

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