Faith Based Micro Finance peru a Karim

7/31/2019 Faith Based Micro Finance peru a Karim

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20092009ForomicForomic,, Microf inance in IndonesiaMicrof inance in Indonesia 11

FAITHFAITH--BASED MICROFINANCEBASED MICROFINANCEIN INDONESIAIN INDONESIA

ByBy::

Adiwarman A. KarimAdiwarman A. Karim

((President Director,President Director, KARIM Business Consult ing)KARIM Business Consult ing)

2009 FOROMIC

Arequipa Peru, September 30 October 2


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INDONESIA : BIG POPULATION, GROWING ECONOMY, AN

ARCHIPELAGO SPREAD OUT FROM CALIFORNIA TO NEW

ENGLAND

23 million population

GDP per capita USD 7,000

70 million population


2008 : 220 million population


Geography of Indonesia

6o North Latitude 11o South Latit ude &

95o

East Longitude 141o

East Longitude


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MICROFINANCE IN INDONESIA


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MICROFINANCE IN INDONESIA :

MARKET SEGMENT

1. Mass Market Segmentation

There are around 50 mil lion households in Indonesia. These households are divided int o 2groups which are self employed and employee (consumer) segments. The consumer massmarket segment comprises of lower mass and credit class with household income rangingfrom IDR 5 150 million per annum.

EUR 1 = IDR 14000


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MICROFINANCE IN INDONESIA :SIZE OF WALLET

2. Size of Wallet

Based on our research, there are approximately 22.1 million potential customers in theconsumer mass market segment. Average financing size for credit class and lower mass is IDR8-10 mil lion and IDR 1-2 mil l ion respect ively; and the net int erest margin is around 32%bothfor credit class and lower mass with the estimated financing revenue pool is IDR 13 trillion.

Number of entities

Millions

* Lower target spread are for current tapped market. Assume thatbanks can charge a higher rate for untapped customers** Includes micro and what was formerly known as small businesses (turnover IDR50 350m) in earlier progress review

*** Ranges from IDR3-40 million. This is a weighted averageSource: Asian Demographics; BPS; US AID; Bank Indonesia; Danamon; BPR; Industry data; team analysis

Average loan size

IDR millions

Total loan potential

IDR trillions

Loan spread

Percent

Revenue pool

IDR trillions

EMPLOYEES

Credit class

Lower mass

EMPLOYEES

Credit classCredit class

Lower massLower mass

SmallbusinessSmallbusiness

Microbusiness**Microbusiness**

2.9

19.2

~0.7

18.8

1-2

~84

7-9***

19-38

~58

123-180

32%

9%-15%*

27%-32% 36-53

8-10 23-29 32% 7-9

6-12

~8

SELF

EMPLOYED

EUR 1 = IDR 14000


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MICROFINANCE IN INDONESIA :CUSTOMER NEEDS & EXPECTATIONS

3. Customer Needs & ExpectationS

From our market research, we also know that these individuals value fast turnaround and

service time, simple requirements and process and convenient service over price.

I dont borrow from bank because theprocedure is too complicated

Banks require too many documentsand verifications

I have very small amount of money tosave, and saving at the bank is too

complicated for this small amount

I am not sure if I can meet all therequirements by banks for setting upan account or borrowing a loan

I borrow because I need the moneyurgently. It takes too long for the bank

to process my loan and I cant wait

Why cant I get the moneytransferred at the bank in one day?

If I need money for tomorrow, I just

go and borrow from my friend. I canget the money immediately

There is always a long line at thebank and I dont like to wait

I save my money at home so I canuse the money any time I need it

I dont like to take my kid and takethe transportation to go to the bankwhich is far away

I borrow and keep my money with the

same bank because it is easy andconvenient for me to only make onetrip a month

I like the other non-bank lendersbecause they come to my homeinstead of for me to go to them

Simplicity Speed Convenience


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MICROFINANCE IN INDONESIA : PLAYERS

4. The Player in Microfinance

* Includes Columbia, pawn shops, financing sharksSource : Synovate market research, team analysis

This signif icant market is largely untapped by banks. While 94% of t hese customers haveborrowing needs, only 35%borrow from BRI and other commercial banks. Other than banks, they

borrow f rom BPR (people s bank), friends and relat ives, pawn shop and f inancing shark.

30 %

31%

8%

25 %

Currentlyborrow

Never borrowbut interested

Borrowedbefore but notnow

Never willborrow

100% = 306

BRI

OtherCommercialBank

Rural Banks

Quasi-financialinstitution*

Friends &relatives

28 %60%22%

12%

6%

94% of themarket have

borrowing need

Banks are onlyserving 35% oftotal


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ISLAMIC MICROFINANCE IN INDONESIA


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ISLAMIC MICROFINANCE : BUSINESS MODEL FOR

SELF EMPLOYED (MICRO BUSINESS)

MODEL 4MODEL 3MODEL 2MODEL 1

ISLAMIC

BANK

MICRO, SMALLMEDIUM

ENTERPRISE

ISLAMIC

BANK

MICRO, SMALLMEDIUM

ENTERPRISE

ISLAMIC

BANK

MICRO, SMALLMEDIUM

ENTERPRISE

ISLAMIC

BANK

MICRO, SMALLMEDIUM

ENTERPRISE

BMTVENTURE

ISLAMIC RURALBANK (BPRS)

ISLAMIC MICROFINANCE (BMT)

ISLAMIC MICROFINANCE (BMT)


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ISLAMIC BANK - BMTISLAMIC BANK - BPRS

ISLAMIC

BANK

MICRO, SMALLMEDIUM

ENTERPRISE

ISLAMIC

BANK

MICRO, SMALLMEDIUM

ENTERPRISE

ISLAMIC MICROFINANCE : ISLAMIC RURAL BANK(BPRS) & BMT SYNERGY WITH ISLAMIC BANK

48 BPRS(42,1%)

66BPRS

IDR 73 bio

1344 BMT(42,0%)

1856BMT

IDR 169 bio

Total BPRS - Dec

2007 : 114(Bank Indonesia)

Total BMT - Dec2007 : 3200(Absindo Association ofIslamicMultifinanceInstitution)

EUR 1 = IDR 14000


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ISLAMIC MICROFINANCE :

BMT VENTURE

BMT VENTURE

38 BMT asshareholders

establish

FUNDRESOURCES

135 BMTSPARTNER

BMT

BMT

BMT

PRODUCTS

Dompet DhuafaRepublika

BMT Center

Bank andFinancial Service

Individual Private

Placement

Institution PrivatePlacement

Governments /

Others

Micro, Small, andMedium Enterprise





Micro, Small, and

Medium Enterprise

Financing

Return & Profit

FINANCIALSERVICES :1. Financing

2. Investment3. Linkage

RESEARCH &INNOVATION

NET-WORKING

TECNICALASSISTANCE :1. Capcty Build

2. Networking

3. Rating


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FEATURES OF ISLAMIC MICROFINANCE


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SEGMENTED MARKET

BMT A BMT B BMT DBMT C

UNIVERSITYSTUDENTS

RELIGIOUSGROUP

POULTRYTRADERS

MICRO BUSINESSIN MARKET - X

TARGETMARKET :

MOSTLY

ISLAMMIXED MIXED ISLAM

MONTHLY GATHERING ON BUSINESS ETHICS

RELIGIOUS

BACKGROUND :


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BEYOND MICRO FINANCE

BUSINESSDIVISION CHARITYDIVISION

B M T

PAWN SHOP FINANCINGS SAVINGS NON PROFIT

LOANS

DONATIONS

BUY-SELLFIXED RETURNBASED

PROFITSHARINGBASED

PROFITSHARINGBASED

SUCCESSFUL CUSTOMERS PAY DONATIONS TO BMT (ON THE TOP OF THEIR COMMERCIALOBLIGATIONS)

UNSECCESSFUL CUSTOMERS MAY GET DONATIONS FROM BMT TO REPAY THEIR COMMERCIALOBLIGATIONS (IF ELIGIBLE)


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PERCEIVED AS GOD-BLESSED TRANSACTIONS

BMT

NO USURY

PROFIT SHARINGBASED

GATHERING ONBUSINESS ETHICS

NOT INVOLVED IN

UN-ISLAMIC BUSINESS :PORK, ALCOHOLIC BEVERAGES,GAMBLING, TOBACCO, PORN, ETC

NON PROFIT LOANS

DONATIONS TO REPAYOBLIGATIONS OF UNSUCCESSFULCUSTOMERS

DONATIONS FOR THE POOR

INVOLVED IN RELIGIOUS ACTIVITIES :RELIGIOUS GATHERING, RELIGIOUSCLASS, ETC

BUSINESS DIVISION CHARITY DIVISION

Faith Based Micro Finance peru a Karim

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