2008-2009ã DATA CONSULT. All rights reserved.
MARKET INTELLIGENCE REPORT ON
MULTI FINANCE INDUSTRY IN INDONESIA
MARCH 2008

CURRENT ISSUES
The past three years saw a significant growth of multifinance industry. The Association of Financing Companies (APPI) said the multi-finance industry has expanded by 15% annually on the average. The expansion followed improved condition of the country's economy. The gradual cut in SBI (Bank Indonesia promissory note)  interest rate to 8% by the end of 2007 contributed to the growth of the multi-finance industry. The industry is dominated by leasing and consumer finance especially car and motorcycle purchase financing. The two financing systems contribute 95% to the total value of financing business in the country.

Consumer finance and leasing still dominated the industry until 2007. Non performing credits in the two types of financing business is still tolerable below 3%  and the business players are more careful  and selective in extending credits to their clients. Factoring and credit card financing have not gained significant market in the country. They are not yet sufficiently socialized. Few businesses use the two types of financing services.

Based on data the Bank Indonesia (BI), financing services were valued at  Rp 107.7 trillion  in 2007 up  15.7%  from  Rp 93.1 trillion in the previous year.  Consumer finance with a value of Rp 67.6 trillion accounted for the largest portion of 62.8%, followed with  leasing accounting for 33.9%  or  Rp 36.5 trillion of the total value. Development of multi-finance follows the fast growth of the consumption sector of the country's economy. The expansion of the multi-finance industry is reflected by its assets. Total assets of multi-finance industry was recorded at Rp 127.26 trillion by the end of 2007, up 17.5% from Rp 108.34 trillion in the previous year. The total asset value, however, still fell short of the target of  Rp 130 trillion set by APPI.

The strong growth of multi-finance industry has made it an interesting  target of acquisition by investors especially banks. Bank Danamon has acquired Adira Finance and Bank Internasional Indonesia took control of WOM Finance. The move was followed  by other banks which are interested in expanding business in consumer finance. State owned Bank Mandiri also has plans to acquire a number of multi-finance companies  and five Regional Development Bank owned by regional administrations said they would soon acquire a number of multi-finance companies.

However, it  is not all shining for multi-finance industry. In 2007, the government suspended the operation of a number of multi-finance companies for a number of reasons - poor performance and violation of regulations. Among the companies were  PT  Artamas  Multi  Finance,  PT  Air Multi  Finance  Corporation, PT Infiniti

Finance, PT JRD Finance Utama, PT Primarindo Finance Corporation, and PT Primadana Putra Finance. On the other hand a number of new companies have secured operating license including PT Al-Ijarah Indonesia Finance, PT Mega Central Finance and PT Mega Auto Finance. This report presents details about development of multi-finance industry including their types of activity, growth of financing value and assets, etc.


Development of multi-finance companies

In the period of 2003-2007, the number of multi-finance companies in Indonesia declined by 3.4% annually. Based on official data of Bank Indonesia (BI), there were 239 companies in 2004, but the number declined to 2005 in 2007. In 2007 there were a number of companies securing the license including PT Al-Ijarah Indonesia Finance, PT Mega Central Finance,  and  PT Mega Auto Finance. In 2006, there were 24 multi-finance companies suspended by the finance ministry for  failure  to  submit  audited  financial  report  for  2004.  The  companies  were allowed to continue activity only to recover  credits they already extended, but they were not allowed to offer more financing service. They were give six months to prepare and submit financial report otherwise their license would be  revoked.

Some of them succeeded in meeting the deadline in 2007 and were allowed to resume normal operation but six other  had their licenses cancelled as they could not meet the deadline. The six companies were PT Artamas Multi Finance, PT Air Multi Finance Corporation, PT Infiniti Finance, PT JRD Finance Utama, PT Primarindo Finance Corporation and PT Primadana Putra Finance. The decline in number was also caused by other factors such as merger among some of the companies, change in line of business or bankruptcy.

Multi-finance companies by status
Most or around 76.6% or 157 of multi-finance companies are Indonesian private companies and 22.9 or 45 are joint venture companies and one of state company - PT. PANN Multi-finance, which operates in the procurement of sea vessels.  Joint venture companies are generally stronger financially with support from  their  foreign shareholders.

Ownership of  multi-finance companies
Owners of multi-finance companies include banks, company group, brand holding sole agents (ATPM) of cars and foreign principals of car makers operating in financial service business. Powerful financing companies are only those affiliated to banks or car makers and ATPM.

ATPMs seek to team up with financing firms to support their sales. Some of ATPMs even have their own financing companies. The Astra Group, which is he ATPM for Toyota, Daihatsu and Isuzu cars and Honda motorcycles, has Astra Sedaya Finance, Toyota Astra Finance to operate in car financing and Federal International Finance in motorcycle financing service. The  Indomobil Group also has its own financing firms -- Indomobil Finance Indonesia for car financing and Suzuki Finance Indonesia for motorcycle financing service.

Banks have the largest number of multi-finance subsidiaries. Banks having the largest number of multi-finance subsidiaries is Bank Panin, which has three -- Clipan Finance, DKB Panin Finance and Verena Oto Finance.

Multi-finance companies by types of business
Most multi-finance companies operate in  consumer finance  accounting for 116 companies or  56.6%  of the total number of  multi-finance companies in the country, followed with 64 companies operating in leasing business  and 23 companies in factoring and 2 in credit card business.  The two multi-finance companies issuing credit cards are GE Finance  and  Dinner's Club. Multi-finance companies  operating in credit card business have to compete against around 20 banks both state banks, foreign banks  and Indonesian private banks issuing credit cards.

Main players

Big players in consumer finance
Companies operating in  consumer finance offer financing service mainly for the purchases of cars and motorcycles, and electronic goods like TV, refrigerators,  AC, washing machines, DVD players, etc.   

Among big players in  consumer finance service are:
Federal International Finance (FIF) which was established in 1989 with the name of PT. Mitrapusaka Artha Finance. In 1991, its name was changed with PT. Federal International Finance (FIF), with the majority shares held by PT. Astra International of the Astra Group. FIF operates in financing the purchases of Honda motorcycles, which are produced by PT. Astra Honda Motor, a subsidiary of the Astra Group. FIF has expanded operation to financing the purchases of electronic goods through FIF Spektra and in sharia financing through FIF Syariah. FIF has financial support mainly from Bank Permata, which is partly owned by the Astra Group.

Astra Sedaya Finance (ASF), which was established in 1982 with the name of  PT. Rahardja Sedaya. After being taken over by Astra International, its name was changed in 1992 with Astra Sedaya Finance. ASF became the holding company for a number of subsidiaries including Astra Auto Finance, Estetika Sedaya Finance, Stacomitra Sedaya Finance and Swadharma Bhakti Sedaya Finance. The combination of the companies is known as Astra Credit Company (ACC) offering financing service for the purchases of car products of the Astra Group including Toyota, Daihatsu, Isuzu, BMW, Peugeot and Nissal Diesel trucks.

Bussan Auto Finance (BAF), which  started operation in 1997. It was originally named Danamon Mitsui Otomotif Finance, with shareholders including PT. Danamon Sanggrahan and Mitsui Co Ltd  from Japan. In 1998, Danamon quit and the name of the company was changed with Bussan Auto Finance. BAF offer financing service for specially the purchases of Yamaha motorcycles. Oto Multiartha, which was established in 1994  with the name of  Manunggal Multi Finance. In 1995, its name was changed with Oto Multiartha. In 1996 Sumitomo Corp from japan took over the majority shares  of the company. Oto offer financing service for the purchases of cars. Its sister company Summit Oto Finance offer financing service for the purchases of motorcycles.

Wahana Otomitra Multiartha (WOM), which was established 1982 with the name of PT. Jakarta Tokyo Leasing by PT. Fuji Semeru Leasing. In 1997 the company was 50.03% acquired by Bank International Indonesia (BII) and its name was changed with Wahana Otomitra Multiartha. WOM offers financing service for the purchases of Japanese motorcycles including Honda, Yamaha and Suzuki, which dominate the domestic market. Leasing companies generally offer financing service for  heavy equipment  such as tractors, loaders. excavators, and other capital goods.  Leasing business grew fast lately with the brisker business in the mining and plantation sectors as well in construction sector. 

Main players in leasing business  are Central Java Power (CJP) which is a subsidiary of PT. PLN. In May 2003 CJP  and  PLN resumed the construction of a coal fired power plant (PLTU) of Tanjung Jati B, which was valued at US$ 1.65 billion after being long delayed. The 2x660 megawatt PLTU is located in Jepara, Central Java. Agreement between CJP  and  PLN in the form of leasing  was on  build, lease and transfer (BLT) scheme. In 2006, CJP as a lessor handed over the maintenance, production and sales of power  to PLN as a  lessee. The leasing is for 20 years.

Chandra Sakti Utama Leasing (CSUL), which was established in the 1990s. CSUL is a subsidiary of the Trakindo Group with PT. Trakindo Utama a a holding company. CSUL offer leasing service for the purchases of Caterpillar heavy equipment from the United States with Trakindo as the agent. CSUL has  branches in Medan and Surabaya.

Orix Indonesia Finance (ORIF), which was established in 1975 with the name of PT.Orient Bina Usaha Leasing (OBUL). The company is a joint venture between    ORIX Corporation (85%) and Yayasan Kesejahteraan Karyawan (workers' welfare foundation) of  Bank Indonesia (15%). ORIF offers financing services for the purchases of heavy equipment, ships, office equipment, industrial machines, as well as cars.

Main Players in Fcatoring Financing
Factoring financing business has not expanded as expected in the country. There are few transaction of companies transferring claims to financing companies. Therefore, business players in this sector are few in number.

The main players in this business sector are:
"        Koexim Mandiri Finance
"        Clemont Finance Indonesia Corp

Credit card financing companies offer service for the purchases of goods and service using credit cards. Based on data at  Bank Indonesia (BI), the principals of credit card in Indonesia at present are Visa International, Mastercard International, Diners and Amex. There are 22 issuers of credit cards in the country including 20 banks and two multi-finance companies.

GE Finance Indonesia is a subsidiary of GE Capital, a multinational company with assets more than US$ 425 billion based in the United States. GE Finance is the issuer of Master Card. GE Finance also issues a number of other credit cards  such as Smart Card in cooperation with Sumber Kredit and Kartu Belanja in cooperation with Carrefour, a French based hypermarket having many outlet in Indonesia. Currently GE Finance has around 1.1  million card holders.

Diner Jaya Indonesia International is the issuer of credit card under license of  the U.S. based Diners Club. Diners Club's share of the market in Indonesia is relatively small compared with those of Visa and Master Card.


Performance of  multi-finance industry

Assets of  multi-finance industry growing by  27.4% per year
In the period of 2003-2007 total assets of multi-finance companies grew by 27.4% per year. In 2003, assets were valued at Rp 50.1 trillion. In 2007, the assets shot up to Rp 127.3 trillion. 

The consumer finance sector is the largest contributor to increase in the assets of multi-finance industry. In 2007, demand for car financing service grew from 2006. Leasing also contributes considerably lately especially with the growing business in the plantation sector notably in Sumatra and Kalimantan................................



 
INDONESIAN COMMERCIAL NEWSLETTER
MONTHLY REPORT
HOME       Head Line        Focus        List of Contents       To Subscibe