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tate-owned lender Bank Rakyat Indonesia (BRI) is preparing to reopen its erstwhile branches in Timor Leste and upgrade its current office in Hong Kong this year as part of the lender'€™s global expansion,
a bank executive has said.

BRI finance director Haru Koesmahargyo said the lender, which has the largest microloan portfolio in the country, was convinced that the permit to open branch offices in Timor Leste would be obtained in the near future.

Haru said BRI would invest at least Rp 30 billion (US$2.2 million) to establish four branch offices in Timor Leste as part of its international expansion strategy.

'€œThe investment needed for our expansion in Timor Leste is not great, and includes costs for permits and office space rental,'€ he said recently.

BRI, Haru said, had operated at least 12 branches in Timor Leste when the country was still part of Indonesia.

However, the offices were closed after Indonesia'€™s 27th province voted for independence in a UN-backed referendum in 1999.

The bank would apply for a second-grade license in Timor Leste, Heru said; such licenses allow foreign banks to offer basic banking services, such as transactions and loans, including in foreign exchange (forex).

'€œWe will be allowed to install ATMs there and offer loans in multi-currencies. There is a third-grade license that includes permits to offer securities and investment products, but we don'€™t see any potential market for that,'€ he said.

Haru said BRI planned to offer US dollar loans for micro and small and medium enterprises (SME) in Timor Leste, where the income per capita is higher than in Indonesia, but which still relies on relatively simple banking services, and has limited loan penetration.

'€œThe average lending rates for US dollar loans in Timor Leste can reach 12 percent, which is far higher than the 4 percent to 6 percent charged in Indonesia,'€ he added, indicating that banking business was potentially very profitable.

BRI, the country'€™s most profitable bank, posted Rp 25.2 trillion in net profits as of Dec. 31 last year, with more than 50 percent of its loans going to the micro and SME segments.

The bank'€™s loans reached Rp 558.4 trillion as of 2015, rising 13.9 percent year-on-year, higher than the industry average of 10 percent.

Haru said the bank was also preparing to upgrade its representative office in Hong Kong, which was established in 1989, into a fully-fledged branch that could provide more advanced banking services beyond trade transactions for corporate customers.

He said the investment to upgrade the Hong Kong rep office would be twice the sum invested in Timor Leste, though he declined to specify the exact amount.

'€œTo begin with, I think we'€™ll need to invest in permits, rent, human resources and IT systems. The investment will naturally be greater than in Timor Leste,'€ he said.

Meanwhile, for next year, Haru added that the bank would seek input and suggestions from shareholders and financial regulators regarding the next destination for its continued expansion in ASEAN region, with options including Cambodia, Vietnam and Malaysia.