CIMB Niaga saw a 65.1 percent year-on-year (yoy) drop in its microloans portfolio to Rp 665 billion (US$49.95 million) last year, compared to Rp 1.9 trillion in 2015. The bank had decreased the number of its micro-banking units under the Mikro Laju brand to 39 units until December 2016, from 188 units it held nationwide in 2015.

“Other banks, such as BRI, are so focused in the micro-banking business, so let them continue with that,” CIMB president director Tigor Marsahala Siahaan said in a press conference in Jakarta on Tuesday, adding that the bank would shift its focus to small and medium enterprises (SMEs), leaving out the micro segment.

As of December 2016, the bank disbursed Rp 164.6 trillion in loans, 21.26 percent of which was contributed by micro and SME loans worth Rp 35 trillion. However, the amount was far lower than BRI’s loans in the same segment at Rp 351.4 trillion, with Rp 211.5 trillion from microloans.

CIMB Niaga is not the only lender that faced difficulties navigating the microloan business last year. PT Bank Danamon, a private lender that also tried to get a bigger chunk of micro-lending market shares, saw its microloan segment decline by 30 percent to Rp 10.2 trillion in 2016.

CIMB Niaga strategy and finance director Wan Razly Abdullah said the bank stopped offering new microloans early this year and would continue to reduce the Mikro Laju outlets.

“We will, however, enlarge existing branches, let’s say from 1 ruko [shophouse] to 2 ruko. Our existing microloan portfolio will naturally shrink as customers pay back their loans to below Rp 100 billion by the end of this year from the current Rp 665 billion,” he said.

As a private bank, Wan Razly continued, CIMB Niaga needed to focus channeling its loans into sectors that offered wider opportunities. It would focus on SME and consumer banking, both of which accounted for 48
percent of total loans disbursed, and expected to grow past 50 percent in 2017.

In the consumer segment, specifically with mortgages and credit cards, the bank already has a strong presence. In the first quarter of the year, CIMB Niaga saw a 7 and 15 percent yoy growth in the two segments, respectively.

“Thus far we have issued 2.2 million credit cards with 13 percent of market shares, the third biggest after BCA [PT Bank Central Asia] and PT Bank Mandiri. Our rank is unlikely to rapidly increase as both of our competitors already hold 18 to 20 percent of market shares, but we may see a slight increase to around 15-16 percent this year,” Wan Razly said.

Tigor added that the choice to focus on the SME and consumer segments could help the bank avoid an excessive non-performing loans (NPL). Last year, the lender’s major segments, the commercial and corporate segments, slowed down, and thus its NPL ratio climbed to 3.9 percent, from 3.74 percent in 2015.

The bank, part of Malaysian financial institution CIMB Group, has also decided not to expand into the infrastructure segment, which is now dominated by state-owned lenders, especially PT Bank Negara Indonesia (BNI).

The decision to ditch the micro segment seems to be appreciated by public investors and traders, as the publicly listed lender’s shares in the Indonesia Stock Exchange (IDX) have increased by 35 percent year-to-date to Rp 1,300.

CIMB Niaga is currently among the top five banks in the BUKU IV category after BRI, Bank Mandiri, BCA and BNI, with Rp 32 trillion in core capital.

Popular

To my horror, it’s just a movie!

RI, Australia strengthen partnership on taxing crypto assets

Pentagon chief congratulates Prabowo on being elected President