Summary
In 1974, Indonesian government launched its residential development plan. In order to support its policy, as State Owned Corporations, Bank Tabungan Negara (or Bank BTN) was appointed as residential funding institution for middle-lower income people. Based on the decree from Minister of Financial home ownership loan was launched. Since that day, Bank BTN provide subsidized home ownership loan for all Indonesian middle lower income community and also middle up home ownership. At present day Bank BTN has formulated main objective to give outstanding services in housing finance and its related industry, and also providing other products and banking services. Home loan becoming the core business of Bank BTN, by the end of 2006 it’s reached by 91% of Loan portfolio, and the rest are located as different types of loan. By the end of 2007 Bank BTN have been financing subsidized home loan more than 1.939.537 units (Retail customer) and disbursing for about Rp.20.678,48 million (equals to USD 2.248 million).
Key Dates
There are no particular dates for such main mission to be conducted. In order to conduct all corporate objection and initiatives, the home loan was disbursed all the time during office hours. Any customer may come to the Branch Office to consult with the customer service concerning their needs about housing finance at any time. The customer may also come to our partners (housing developer) who provide the housing project. Our partners will direct them to Bank Tabungan Negara branch office and give the customer with supported document or information that may needed in home loan application documentation. But the key dates for national housing movement started since
• 1974 when the government assigned Bank as residential funding institution for middle-lower income people
• 2007 When the Bank initiates the 2007 Annual Corporate planning and develop Strategic Corporate Planning 2008-2012.
Narrative
SITUATION BEFORE THE INITIATIVE BEGAN
Prior to 1974, there was no home loan for Indonesian people. Indonesian people who wish to build a residential house, must take consumption loan from the bank or saving some money. There was no special loan addressed for home ownership even a subsidized credit scheme/home loan for middle to lower income group. There was also no housing/property developers established to provide affordable housing project. Only people who have a good financial condition can build an affordable house.
ESTABLISHMENT OF PRIORITIES
Based on the year 2007 Bank Tabungan Negara Corporate Planning, with regard to corporate main objections in housing loan, the top list priorities formulated need to be conducted as follows:
• New credit line Rp.7.403,00 billion.
• Integrate marketing program campaign to improve prospect customer awareness towards Bank Tabungan Negara existing as a Bank who serves the customer with the needs for housing by applying one stop banking strategy in housing program.
• Improving the loan delivery service processes.
• Improving human resources quality in loan services delivery.
• Improving the competitive advantage of the loan product line.
• Improving loan documentation administration.
FORMULATION OF OBJECTIVES AND STRATEGIES
Based on the year 2007 Corporate Planning the management has formulated the main objectives for loan activities as follows:
• Improving loan services
• Maintain the loan quality
• Evaluating and develop the line of loan product
• Promoting the loan products
Based on the Bank Tabungan Negara 2008-2012 Corporate Planning, there are five main strategies formulated by the Management as follows:
• To give outstanding services in housing finance and its related industry, consumption loan, and Small and Medium enterprise
• Improving competitive advantage by product development innovation, services and strategic network based on ultimate technology.
• Develop a quality human capital, a professional and with high integrity
• Conducting banking management based on prudential banking principle and good Corporate Governance to improve shareholder value
• Corporate social responsibility for the rest of people and surrounding environment.
MOBILISATION OF RESOURCES
In order to support corporate operation and to achieve financial objective while still providing subsidized home loan for middle to lower income people, Bank Tabungan Negara continue to raise fund surplus and exploring all possibilities to mobilize low cost fresh fund resources as follows:
• Developing low cost retail product feature
Creating a new product feature can be very useful to preserve the customer retention. This is very important and become one factor to keep the customer loyalty.
• Low cost fund surplus
Low cost fund surplus is very important in order to keep the cost loan able fund low
• Emitting A new Obligation
New Obligation emission very useful to keep the corporate operation and financial leverage stays on its track, while the other type of retail product must be maintained carefully
• Corporate Privatization
Privatization is a way to leverage Bank Tabungan Negara its capability to disburse home loan and getting a fresh fund to support the corporate operation.
• Mortgage Securitization
Mortgage Securitization will provide a fresh fund through intensive assets turn over.
The Government as the subsidy provider for healthy and simple housing (RSH) also encourages all of Banking/Non Bank institution in Indonesia to serve RSH loan disbursement. The Government negotiates with The Central Bank to create incentive for banking institution who serves RSH loan disbursement for Middle to Lower Income Group.
PROCESS
Bank BTN corporate objection is to give outstanding services in housing finance and its related industry and also providing other products and banking services. In parallel, Bank BTN must support the Indonesian Government in National Housing Policy to Provide Subsidized Loan for Middle to lower Income people e.g. Gerakan Nasional Pembangunan Sejuta Rumah (Developing a million affordable house National Movement) and developing rental and owned low cost apartment. The Government Policy seems to be not successfully implemented because the national movement did not get fully supported by adequate national budget. Even Though Bank BTN keeps on trying to help the Indonesia Government by raising a new credit line for middle to lower income group.
Bank BTN had made some financial projection for five years to come in order to meets the needs for affordable housing. Bank BTN has initiate an option needs to be done in order to meets such need for affordable housing through Privatization and Mortgage Securitization. An Independent consultant also invited to do some study to review and to develop visible options for Bank BTN with regards to financial projection result. The privatization through Initial Public Offering right now is waiting for the government approval, meanwhile the mortgage securitization will be launched as soon as all supporting regulation clearly set up. Privatization and Mortgage Securitization will leverage Bank BTN financial capability to provide low cost fresh fund and will make the home loan disbursement through the Bank’s partner (Housing Developer) more affordable.
Another problem for Bank BTN to support the outlet expansion is limited amount of human resources. New employee need to be recruited to fill the position on a new outlet. This problem gradually alleviated, and the outlet opening launched as scheduled as soon as the Bank Indonesia granted the outlet opening licensed. Internal resources of low cost fresh fund are limited. To deal with this problem Bank BTN continue to improve its marketing campaign and creating a new product feature to preserve the customer loyalty.
SUSTAINABILITY
A critical point about the affordable housing program in Indonesia is limitation of low cost fresh fund. There are some ways to minimize the limitation.
a. This kind of great work has been established since 1974. The Government Housing Agency realize that Bank Tabungan Negara resources is limited and realize that must be way out to support government policy provide affordable housing for all Indonesian people. In 2004 The Government Housing Department initiate Memorandum of Understanding with 33 Banking Institution in Indonesia to distribute or disburse KPR RSH (home mortgage for affordable housing) for Middle to Lower Income Group with Interest Rate subsidy mechanism.
b. Bank Tabungan Negara Privatization
Privatization is a way to leverage Bank Tabungan Negara its capability to disburse home loan, and getting a fresh fund to support the corporate operation. But this is has not been done yet even though its get fully supported by the Indonesian House Representative.
LESSONS LEARNED
• In order to fulfil the needs of affordable housing for middle to lower income people an adequate low cost fresh fund need to be mobilized. The Government and the private sector should have to work together to create a conducive economic condition where as the low cost fresh fund mobilization will prevail intensively. Low cost Fresh Fund can be mobilized easily through stock market. Long term government obligation can be used as subsidized home loan resources. The mortgage securitization will receive fresh fund if supporting regulation was set up already.
• Housing/property market should be deregulated by government to minimize the housing demand gap. The government should also give the incentive for subsidized home loan developer. Unnecessary regulations sometimes discourage developer to develop a housing project, and this situation will lead to higher price/unit of the house.
• A Great support for Bank Tabungan Negara for privatization to provide commercial and subsidized home loan. Indonesian House representative fully support the government and the Bank Tabungan Negara management policy to conduct the privatization via initial public offering. Initial Public offering will leverage the Bank Tabungan Negara loan disbursement capability. The higher amount loan would be disbursed the greater amount of middle to lower income people will be served.
• Bank Tabungan Negara as state owned enterprise, with developer as partner and Government Agency have worked together to provide affordable housing for middle to lower income groups. Even though the lack of supply Affordable Housing still hard to meet the housing demands. All of support still needed to mobilize all resources to provide affordable housing for middle to lower income groups.
TRANSFERSABILITY
Bank Tabungan Negara as state owned enterprise, with developer as partner and Government Agency have worked together to provide affordable housing for middle to lower income groups. Even though there still a lot of lack of Affordable Housing market supply it is still hard to meet the housing demands. We still need a big support to mobilize all resources to provide affordable housing for middle to lower income groups.
This kind of great work has been established since 1974. The Government Housing Agency realize that Bank Tabungan Negara resources is limited and realize that must be way out to support government policy provide affordable housing for all Indonesian people. In 2004 The Government Housing Department initiate Memorandum of Understanding with 33 Banking Institution in Indonesia to distribute or disburse KPR RSH (affordable Housing) for Middle to Lower Income Group with Interest Rate subsidy mechanism.
RELATED POLICY/IES OR LEGISLATION
This practice had been getting fully supported from the Government Housing Department and Indonesian House of representative. Recent government policy on National affordable Housing program is:
a. Ministry of Housing Regulation No. 05/PERMEN/M/2007 regulate subsidy facility for Middle to lower income group who wish to build their own house to get support from subsidy housing loan from the bank institution.
b. Ministry of Housing Regulation No. 06/PERMEN/M/2007 regulate subsidy facility for Middle to lower income group who wish to build their own house to get support from subsidy housing loan with syaria institution principle.
c. Ministry of Finance Regulation No. 36/PMK.03/2007 regulate about value added tax which exclude on purchasing RSH below Rp. 49 milion.
Bank Tabungan Negara had been fully support by Indonesian House of representative to do the privatization option to leverage Bank Tabungan Negara loan disbursement capability to provide affordable housing loan for middle to lower income group.
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