State-owned Bank Rakyat Indonesia (BRI) will provide syndicated loans as part of a strategy to attract Indonesian companies following the opening of the lender’s branch office in Singapore.
The lender will allocate at least US$100 million in the first year to Indonesian companies that are seeking offshore funding, an executive says.
“We are aiming to lend at least $100 million of syndicated loans in the next 12 months. We already have some prospective loans in the pipeline, but the process will not be instant,” Azizatun Azhimah, general manager for BRI’s Singapore branch, said on the sidelines of the branch opening on Wednesday.
Loans for any projects would be assessed based on their potential value, feasibility and compliance to the lender’s requirements, Azizatun said.
BRI president director Asmawi Syam said the bank saw syndicated loans as a prospective type of lending to help boost its international business as well as finance infrastructure developments in Indonesia.
“We can learn much about that type of loan in Singapore and collaborate with local and international banks here to grab opportunities.”
According to Asmawi, demand for infrastructure financing will increase as more Singaporean investors get attracted to start investing in Indonesia’s infrastructure and other sectors following President Joko “Jokowi” Widodo’s visit to the city-state on Tuesday, saying that “the launch of BRI Singapore branch is well timed with the state visit”.
“President Jokowi has invited Singaporean investors to help develop our infrastructure, so that BRI hopes to build a bridge between them and Singaporean and international banks as BRI is more experienced in financing infrastructure projects in Indonesia, such as power plants, seaports, airports and toll roads,” Asmawi said.
President Jokowi met over 150 Singapore business leaders at a dialogue on Tuesday to discuss Indonesia’s economic priorities, foreign investments and partnerships in conjunction with his state visit to meet Singapore’s Prime Minister Lee Hsien Loong.
Indonesia, Southeast Asia’s largest economy, needs to boost its infrastructure development and revitalize its manufacturing sector so as to achieve 7 percent economic growth by 2019.
Asmawi said BRI was prepared to join the competition in the international banking business as it would ensure the competitiveness of the pricing offered by its services, adding that “our overall services will cover funding and lending facilities for corporate customers, including treasury, priority banking and trade finance”.
“The Singapore market has big potential, so that we hope to break even in revenue in the second year, which is faster than the average overseas branches of banks,” Asmawi said while refusing to mention the revenue target.
The new Rp 30 billion (US$2.2 million) Singapore offshore branch adds to BRI’s four existing overseas offices — BRI New York Agency, BRI Cayman Island Branch, BRI Hong Kong Representative Office and BRI Remittance Office.
The Singapore branch will be able to provide wholesale banking services, such as trade finance and remittance as well as wholesale fund management.
The branch, which is categorized as an “offshore branch” according to Monetary Authority of Singapore’s (MAS) regulation, has limited operation in wholesale or corporate banking services. Meanwhile, foreign banks under the “full branch” category in Singapore are allowed to operate wholesale and retail banking services as well.
MAS granted the license to BRI in June after the bank applied in 2013 to be one of the players in Singapore’s foreign bank market in preparation for the ASEAN Economic Community’s (AEC) financial and banking integration in 2020, when certain grades of banks and financial companies will be allowed to operate freely across the region.
On the sidelines of the launch, Coordinating Economic Minister Sofyan Djalil said the government applauded BRI’s move in entering Singapore’s banking market as the city-state was famous for being difficult to penetrate due to tight restrictions and requirements for foreign banks.
“This action is positive because we are entering the AEC, so that our banks should prepare themselves to operate regionally. By being exposed more to the international market, BRI is expected to tap more resources to improve itself and its customers as well as to contribute to Indonesia’s economy.”