B

ank Pembangunan Daerah Jabar Banten (BJB) and Bank Pembangunan Daerah Jawa Timur (Bank Jatim) could become the models for regional development banks given their success in nation-wide expansion.

Headquartered in the bustling Sudirman business district of the capital Jakarta, the branded “Bank BJB” looks like any other mid-sized bank in Indonesia. But its accomplishment is proof that regional lenders can be as competitive as, and a funding alternative to, commercial banks.

BJB is the regional development bank for the West Java and Banten areas, but has expanded into other provinces such as Bali, East Kalimantan, Riau and South Sulawesi, making it the nation’s only regional lender with assets of more than Rp 50 trillion (US$5.5 billion).

 Bank BJB is also the first local regional lender to go public, with the Indonesia Stock Exchange (IDX) counting the bank among its top 30 stocks.

 PT Bank Pembangunan Daerah Jawa Timur, more commonly known as Bank Jatim serving East Java, is also looking to launch its initial public offering on the exchange next month, aiming to collect between Rp 1 trillion and Rp 2 trillion for its lending expansion.

In previous years, regional banks’ services were limited to holding funds and channeling loans for regional government offices and staff, without competing with the broader commercial-banking system.

 Regional development lenders’ assets booked a three-fold increase to Rp 304 trillion in the seven years up to the end of 2011.

Their lending quadrupled to Rp 175.7 trillion in the same period, according to data from banking regulator Bank Indonesia (BI).

 “Expansion is a business need. Our customers needed to be linked to provinces outside West Java and Banten, despite the huge market in West Java,” Bank BJB corporate secretary Adang Kusnandar told The Jakarta Post.

 “When the company grew bigger, we could not act like a regional company. We had to go to outside West Java and Banten,” Adang said.

He added that it was Bank BJB’s vision to be among the country’s top ten largest banks within the next three to four years.

 Last year’s 6 percent plus economic growth in West Java and Banten, which has a combined population of 50.68 million people, supported Bank BJB’s growth, with lending and assets growing by more than 24 percent to Rp 48.09 trillion and Rp 54.45 trillion, respectively.

“There are several good regional development banks that could compete with upper-level commercial banks in the light of economic growth. They look for profits outside the box. Not only from credit disbursement but also from fee-based income,” BI spokesman Difi Johansyah told the Post.

 However, he added, there were still regional lenders whose business models still relied heavily on consumer loans for employees. “The management of regional banks ultimately depends on the commitment of their shareholders — the regional governments.”

 BI initiated a so-called “BPD regional champion” program last year to award regional banks who show good intermediary performances — collecting funds and disbursing credit — and support quality growth in the nation’s commercial banking system.