Kartika Wirjoatmodjo, President Director, Bank Mandiri: Interview

Interview: Kartika Wirjoatmodjo

What has been the impact of the economic slowdown in non-performing loan (NPL) ratios?

KARTIKA WIRJOATMODJO: The NPL ratio in the banking sector is around 2.8%, but we will still see three or four quarters of weakening in the quality of loans. However, we believe the current cycle in Indonesia is better than what has been seen in other countries like Brazil, Russia, India and China. Despite the decrease in income from commodities, Indonesia still has strong domestic consumption, and we still see healthy household consumption, which is why GDP growth, despite the slowdown, is still 4.9%, creating room for corporations and small and medium-sized enterprises to enjoy profits. The transition, in terms of how we see the manufacturing and services sectors replacing commodities income, will take slightly longer, around two to three years. The economic packages launched by the government have been good, but their implications will not be direct. There will be a period of adaptation for investors and for the market to acknowledge and deploy investment and use the opportunities provided. Within the period of structural change we will see a weakening in loan quality, but hopefully by the end of 2017 it will start to show some progress.

How can Indonesia’s banking sector support infrastructure development?

WIRJOATMODJO: Infrastructure has to be pushed through three different mechanisms. The first is through state-owned enterprises and public spending, but we are still lacking on public-private partnerships (PPPs). We hope the 35-GW power generation development will be pushed through a PPP structure, and are already in talks with potential bidders. We are also likely to support independent power producers (IPPs), because there is a new regulation whereby current IPP operators that are performing well can be awarded by being allowed to expand their existing facilities without tender. Capital of the banking sector is around 20%, and our bank capital adequacy ratio is over 20%, creating room to absorb a short-term economic cycle downturn, and at the same time still enabling us to push for growth. We plan to grow at around a healthy 12% in 2016, and we want to concentrate more on infrastructure projects.

We have supported many developments in the past three years – for example, three projects directly overseen by the president: the construction of Terminal 3 at Soekarno-Hatta airport, the modernisation and expansion of the Kuala Tanjung Port in Belawan, and the construction of the new port of Makassar. These projects are top priorities for our corporate expansion, and we are also active in projects such as power plants and toll roads. In total we have already provided Rp80trn ($5.9bn) in project funding.

To what extent will big data impact banking?

WIRJOATMODJO: There has been significant change in the past years to the way that people use electronic channels. In the past people used branches, so most of our volume came from these. Then six to eight years ago people started using ATMs, and in the past two years, mobile banking has taken over in terms of the volume of transactions. In our bank the number of transactions has shifted more and more towards mobile banking. This shows that the proficiency of Indonesians using mobile channels is becoming stronger. We believe that in the next five years most transactions will shift to electronic channels. This will also provide us with a scope to cross sales, because we will have big data and much more precise customer profiling. We will then be able to extend different types of products in line with customers’ needs. The way we will do sales will be geared more towards individual cross-selling via electronic channels, based on understanding customer behaviour. Big data will be a game-changer once we learn the behaviours of customer transactions and process them analytically.