Bank Pembangunan Jawa Barat & Banten, Indonesia’s biggest provincial lender, plans to buy a majority stake in 51 rural banks this year as it aims to tap the huge potential of small and micro businesses, its chief executive said on Thursday.
The lender, known as Bank Jabar, is aiming to become a one-stop financial services bank and wants to expand into Shariah banking, multifinance and insurance, chief executive Bien Subiantoro said.
“The strategy is to become a majority [owner] in all 51 rural banks,” Subiantoro said, adding that Bank Jabar already held a minority stake in several rural banks it wanted to buy.
“We’re waiting for the central bank’s approval as most of the rural banks are not in a financially good condition, but we wanted to use the banks’ networks to expand our microloan business.”
Rural banks are small and largely based outside cities, offering loans to micro and small businesses.
Indonesia had 1,665 rural banks as of March 2012 with Rp 54 trillion ($5.7 billion) in total assets, according to the central bank’s latest data.
Bank Indonesia is working on regulations to cap ownership in banks at a maximum of 40 percent per shareholder from 99 percent currently, which could hinder new banking acquisitions.
The central bank has indicated it will exempt any banking acquisition if the target bank needs a bailout or restructuring. BI has been coaxing the country’s commercial lenders to consolidate through mergers and acquisitions.
Shares of Bank Jabar fell 1.2 percent to Rp 860 on the Indonesia Stock Exchange on Thursday.
Bank Jabar was established in 1961 when the government nationalized a Dutch bank. It has since shifted its focus to small and micro-businesses. Prior to that it gave transactional and loan services to local governments in West Java and Banten.