Indonesia's Bank Mega to focus on expanding SME business

Bank Mega credited their focus on credit disbursement to SMEs in doubling its net profit to Rp 909 billion or US$96.35 million in the first half.

The lender booked Rp 431 billion in net profit in the same period last year.

“The strategy [of shifting focus to the SME segment] has proven a success,” said Bank Mega president director JB Kendarto. “In the future, we will focus on disbursing credit to SMEs to optimize our function as financial intermediary to the Indonesian people.”

Credit disbursement for SMEs now accounts for 21.7 percent of the bank's credit portfolio. In the same period last year, the SME segment accounted for only 9 percent, at that time the smallest compared to other segments such as commercial for 12.9 percent, corporations for 36.1 percent and consumers for 41 percent.

A large fraction of the 67 branches the bank will open this year will be located in less-developed areas of Indonesia so that the bank’s credit business can reach the huge, untapped potential of the SMEs segment, said Bank Mega chief operating officer J. Georgino Godong.

“We perceive the SMEs segment as more resilient to economic shocks,” he added.

Despite seeing higher net profit, Bank Mega also saw an increase in its gross non-performing loans (NPL) ratio to 1.44 percent from 0.96 percent a year earlier, indicating that the bank had more bad loans this year.

“If we focus on SMEs, I think there will be an increase in NPLs as a consequence. However, I think the figure of our NPLs at the moment is still at a manageable level,” Georgino said, referring to the fact that Bank Mega’s NPLs were still below the central bank threshold of 5 percent.

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