Development of multifinance industry in Indonesia.

Current Issue
The country's multifinance industry has grown fast over the
past years. The market of the industry, however, is dominated by
consumer finance industry (financing the purchases of cars and
motorcycles cycles). Consumer finance accounts for 90% of the total
market value of multifinance industry. Factoring, is not yet popular in
the country having a small share of the multifinance market.
Based on data from Bank Indonesia (BI) in 2013 total value of
financing reached Rp 348 trillion or an increase of 14.9% from Rp302.8
trillion in the previous year. Consumer finance alone accounted for 64%
or Rp 222.7 trillion and leasing for 34.1% or Rp 118.7 trillion of the
total value of the multifinance market in 2013. Expansion of
multifinance industry followed the trend of the country's economic
growth, which is driven mainly by the consumption sector. The assets of
multifinance industry has grown rapidly. The total assets of
multifinance industry was recorded at Rp 398.9 trillion by the end of
2013, up 16.7% from Rp 341.8 trillion a year earlier.
Currently, financing business contributes greatly to sales of
automotive products and heavy equipment in the country. Almost 90% of
purchase of automotive products are financed with credit. In 2014, car
sales are predicted to reach 1.25 million units and motorcycles cycle
sales 7.7 million units. According to the Indonesian Association of
Finance companies (APPI) new car and motorcycle purchases with credits
in 2014 are predicted to reach Rp 240 trillion in value.

Meanwhile, the Financial Service Authority (OJK) has cancelled and

suspended the licenses of a number of multifinance companies in the past
two years for violation of regulations and for failing to meet the
requirements. Among the companies were PT Patra Multifinance, PT Metro
Finance, PT Semesta Citra Dana, PT Siantar Top Multifinance, PT
Cahyagold Prasetya Finance, PT Tata Internasional Multifinance and PT
Diamon Jaya Multifinance. In 2013 a number of new companies were
licensed including PT Takari Kokoh Sejahtera, PT Indonesia Internasional
Finance and PT Karunia Multi Finance.
Multifinance Products and Services
Multifinance industry in Indonesia is under the supervision of the
OJK.
Multifinance industry includes leasing, factoring and consumer
finance.
Leasing
Leasing business involves financing companies offering capital
goods to lessee that will use and will pay for the goods in a certain
period. At the end of the period, the lessee could buy the goods or
extend the leasing contract for the goods based on the remaining value
of the goods. Agreed upon by the lessor and the lessee
Factoring
Factoring companies offer to buy or take over short term claims of
other companies from domestic or international trade under a certain
price.
Consumer finance (consumer credits)
Consumer finance companies offer to finance the procurement or

purchases of consumer goods to be repaid by installments.

Development of Multifinance Companies
Number of companies
The number of multifinance companies declined sharply since 2007
after the government suspended many of them for failing to meet their
obligations such as in minimum capital requirement and in submitting
financial report regularly.
In addition, there were a number of multifinance companies have
been combined in business merger, and some have changed business and
there were also some which have been out of business or bankrupt.
Financially small companies are in difficulty in seeking financial
support from banks as banks were not easily to offer funds for less
competitive companies.
Currently the government is more selective in issuing multifinance
business license Based on the regulation of the finance minister No. 84/
2006 on Finance companies, a multifinance company is required to have at
least Rp100 billion in paid up capital. The regulation is aimed at
preventing trade in business license in the financing service industry.
Currently, there are 202 multifinance companies operating in the
country based on record by May, 2014.
Multifinance Industry by Lines of Business
Multifinance industry is dominated by consumer finance with 112
companies or 55.4% of the total number of companies operating in
multifinance industry. The second largest number is leasing company with
66 companies (32.7%), followed by factoring totaling 24 companies
(11.9%).

Among the multifinance companies, there are three companies

operating in more than two business sectors, some of them in three
sectors such as Buana Finance, which offer leasing, consumer finance and
factoring services.
Among big multifinance companies are PT. Federal International
Finance, and PT. Adira Dinamika Multifinance.
Revocation of License of a Number of Companies
Since 2009, the finance ministry has been selective in licensing
multifinance companies. A number of finance companies failing to comply
with the regulation of the Finance Minister No. 84/2006 on financing
business, have their license suspended or revoked.
With the implementation of the ministerial regulation, many finance
companies have been closed mainly on failure to meet the minimum capital
requirement. Multifinance companies with the legal status of Limited
Corporation (PT), are required to have a paid up capital of Rp100
billion. The paid up capital is Rp50 billion for one in the status of
cooperative.
The capital has to be readjusted in the event of change in the
shareholders. The requirement is obviously too difficult for investors
that there are not many new investors interested in the business.
Previously the minimum capital requirement was only Rp10 billion for PT
and Rp5 billion for a cooperative.
Second, in addition to ministerial license, a multifinance company
also need to have an equity capital of more than 50% of the paid up
capital.
Interest, however, remains strong in multifinance business with the

improvement in the country's economic condition driven mainly by

the consumption sector.
Many new finance companies have come on line. After ban on license
for new companies was lifted in 2006, the number of multifinance
companies has increased. However, many of the newly licensed companies
failed to start operation immediately.
In 2012, among the finance companies having their license revoked
included PT Patra Multifinance, PT Metro Finance and PT Semesta Citra
Dana. The main reasons is failure to meet the minimum capital
requirement.
In 2013 through the middle of 2014, the Financial Service Authority
(OJK) cancelled the business license of a number of finance companies
including PT Cahyagold Prasetya Finance, PT Tata Internasional
Multifinance, PT Siantar Top Multifinance and PT Diamon Jaya
Multifinance.
By the end of April, 2014, PT Siantar Top Multi Finance which
started operation in 2002, was banned from resuming its business in the
financial sector under a decision of the OJK No. KEP-24/D.05/2014 per 25
March 2014.
PT Siantar Top Multi Finance, therefore, changed its business line
with a new name PT Siantar Top Anugerah Sejahtera.
New License
While revoking license, the regulator also offers and issues new
license. In 2013, there were additional license issued by the regulator,
including for PT Takari Kokoh Sejahtera, PT Indonesia Internasional
Finance and PT Karunia Multi Finance.

PT Takari Kokoh Sejahtera proposed for new license on 8 April 2013,

and PT Indonesia International Finance submitted a similar proposal on 1
October 2012.
PT Takari Kokoh Sejahtera is an affiliate of Mitsubishi UFJ Lease
& Finance, a multifinance company.
Multifinance Companies By Status
Indonesian private companies make up most or 77.3% or 156 of the
total number of multifinance companies operating in the country with
joint venture companies with foreign investors making up 22.2% or 45
companies. One of owned by the state--PT. PANN Multifinance.
With financially powerful principals abroad, joint venture
companies have less problem financially to support their operations in
the country. Among the joint venture companies have powerful principals
in Japan such as PT. Mitsubishi UFJ Lease & Finance and PT. Toyota
Astra Finance.
Owners of Multifinance Companies
Most of the multifinance companies are owned by banks, company
groups, brand holding sole agent (ATPM) in automotive sector and foreign
principals. Powerful finance companies are all affiliated to banks or
car makers and ATPM.
ATPM companies cooperate with finance companies to expand
distribution and sales of their automotive products. A number of ATPMs
have even established their own multifinance companies. The Astra Group,
the country's largest automotive company group, as a group of ATPMs
for Toyota, Daihatsu and Isuzu cars and Honda motorcycles, has
established Astra Sedaya Finance, Toyota Astra Finance for car

financing, and Federal International Finance for motorcycle financing.

The Indomobil Group also has its own finance companies--Indomobil
Finance Indonesia for car financing and Suzuki Finance Indonesia for
motorcycle financing.
Banks have the largest number of multifinance companies. Among the
banks is Bank Panin having three multifinance subsidiaries including
Clipan Finance, DKB Panin Finance and Verena Oto Finance.
Main players
Big players in consumer finance
Consumer finance companies offer to finance the purchases of
consumer goods such as cars and motorcycles, electronic goods including
TV sets, refrigerators, air conditioners, washing machines, computer
set, etc..
Federal International Finance (FIF)
This company was established in 1989 with the name of PT.
Mitrapusaka Artha Finance. In 1991 the name of the company was changed
with PT. Federal International Finance (FIF). Its majority shares are
held by PT. Astra International of the Astra Group. FIF offers to
finance the procurement of motorcycles with its product of FIF uMc
specially financiang the purchases of Honda motorcycles of PT. Astra
Honda Motorcycles, which is a subsidiary of the Astra Group. FIF
expanded its business operation to financing electronics goods through
FIF Spektra and sharia financing through FIF Syariah. FIF is financially
supported by Bank Permata, which is also a subsidiary of the Astra
Group.
In early 2014, FIF has an offer for syndicated loan Rp 8 trillion

from 19 banks with lead arranger The Hong Kong & Shanghai Banking
Corporation (HSBC). FIF, however, has not decided whether to accept the
offer or not. The fund is to be used for business expansion.
In early 2013, FIF already received a syndicated loan of US$400
million from foreign financers.
Astra Sedaya Finance (ASF)
This company was established in 1982 with the name of PT. Rahardja
Sedaya. After being taken over by Astra International, the holding
company of the Astra Group in 1992, the name of the company was changed
with Astra Sedaya Finance. ASF became holding companies for a number of
subsidiaries including Astra Auto Finance, Estetika Sedaya Finance,
Stacomitra Sedaya Finance and Swadharma Bhakti Sedaya Finance. The group
of the companies is known as Astra Credit Company (ACC) offering to
finance the purchases of cars produced by the Astra Group including
Toyota, Daihatsu, Isuzu, BMW, Peugeot and Nissan Diesel trucks.
Meanwhile, around 47% stake of General Electric Capital Corporation
in ASF was sold to PT. Astra Internasional Tbk. With the takeover PT.
Astra International, previously a 53% shareholder, became the sole owner
of ASF. In September 2010, Bank Permata took over the entire stake of
General Electric Capital International Holdings Corporation in GE
Finance Indonesia. The deal contributes to expansion of ASF business.
Bussan Auto Finance (BAF)
BAF started operation in 1997. It was originally named Danamon
Mitsui Automotive Finance, with shareholders PT. Danamon Sanggrahan and
Mitsui Co Ltd of Japan. In 1998, Danamon quit as a shareholder and at
the same time the name of the company was changed with Bussan Auto

Finance. Currently its shareholders include Mitsui Corp of Japan as a

75% owner, PT. Mitsui Indonesia (15%), Yamaha Motorcycles Co. Ltd (7%)
and PT. Yamaha Motorcycles Kencana Indonesia (3%). BAF offers to finance
the purchases of Yamaha motorcycles.
Oto Multiartha
This company was established in 1994 with the name of Manunggal
Multi Finance. In 1995, its name was Oto Multiartha. In 1996 Sumitomo
Corp of Japan took over the majority shares of the company. Oto offers
to finance the purchases of cars. Its sister company, Summit Oto
Finance, offers financing for the purchases of motorcycles.
Wahana Otomitra Multiartha (WOM)
WOM was established in 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 to finance the purchases of motorcycles including Honda,
Yamaha and Suzuki, which dominate the motorcycle market in the country.
PT. Adira Dinamika Finance (ADF)
ADF was established in 1990. Currently it is 95% owned by Bank
Danamon Indonesia Tbk, 0.4% by PT. Asuransi Adira Dinamika and 4.6% by
investing public.
ADF hoped to receive a loan of US$ 200 million from abroad in April
2014 to increase its financing capacity. It also plans to issue bonds of
Phase III and Phase IV valued at Rp4 trillion. The bonds are to be
issued in the first and second semesters of 2014 each valued at Rp2
trillion.

Main Players In Leasing Business

Leasing companies generally offer the financing service to heavy
equipment like tractors, loaders, excavators, etc. and capital goods
such as factory machines, etc.
Currently leasing business is growing with the expansion of mining
industry and construction sector and boost business in heavy equipment
rental.
PT. Central Java Power (CJP) is a subsidiary of PT. PLN. In May
2003 CJP and PLN continued construction of the steam powered electric
plant (PLTU) of Tanjung Jati B valued at US$ 1.65 billion after long
been left idle. The PLTU, which is located in Jepara, Central Java, has
a capacity of 2 x 660 MW.
In 2006 CJP as the lessor handed over the maintenance, power
generation and sales of power to PLN as the lessee. The leasing scheme
is for 20 years.
In 2012 the 4th units of PLTU of Tanjung Jati B in Jepara, Central
Java was commissioned. The 3rd and 4th units of PLTU of Tanjung Jati B
each with a capacity of 660 MW were built on build, lease and transfer
(BLT) scheme between PT PLN and PT Central Java Power (Sumitomo
Corporation).
Based on the contract the 3rd units of PLTU of Tanjung Jati B came
on line in January, 2011 and the 4th unit in January 2012.
Chandra Sakti Utama Leasing (CSUL) was established in the
1990's. CSUL is a subsidiary of the Trakindo Group, in which PT.
Trakindo Utama as the holding company. CSUL offers financing service for
the purchases of heavy equipment of Caterpillar from the United States

with Trakindo as the sole agent in the country. CSUL has branches in
Medan, North Sumatra and Surabaya in East Java.
Orix Indonesia Finance (ORIF) was established in 1975 with the name
of PT.Orient Bina Usaha Leasing (OBUL). This company is a joint venture
between ORIX Corporation (85%) and Yayasan Kesejahteraan Karyawan Bank
Indonesia (15%). ORIF is set to further strengthen its reputation among
customers and promote the brand as the best in financial services. ORIF
offers financing service for heavy equipment, shipping, office
equipment, industrial machines, etc. It also offer the service for the
purchases of cars, but is relatively small in proportion.
Main Player In Factoring Financing
Factoring has not grown significantly in the country. Factoring
business is much smaller compared to other financing service business in
value. There are few companies operating in factoring financing in the
country.
The main players in factoring business include Koexim Mandiri
Finance and Clemont Finance Indonesia Corp.
Performance of Multifinance Industry
The assets of multifinance industry has increased 23.2% per year
In the period of 2009-2013, the total assets of multifinance
industry grew rapidly by 23.2% per year. In 2009, the assets of
multifinance industry was recorded at Rp174 trillion, up to Rp 398.9
trillion in 2013.
The increase followed the rise in outstanding credits from year to
year. Consumer finance contributed the largest to the total value of
assets notably with the steady growth in demand for car and motorcycle

credits. In 2013, car outstanding credits rose to around Rp120 trillion.

Considerable contribution also came from leasing of heavy equipment
which is high in demand especially from the plantation sector mainly in
Sumatra and Kalimantan.
Multifinance Companies With Largest Assets
a. Total asset over Rp 1 trillion
Based on the financial report of multifinance companies, there are
more than 30 multifinance companies having assets valued more than Rp 1
trillion.
In this group, PT. Central Java Power (CJP) is the largest with
assets 9.75% or Rp 38.9 trillion of the total assets of the
country's multifinance industry in 2013. Unlike other multifinance
companies, CJP is focused only on financing PLTU of Tanjung Jati.
Other multifinance companies offer standard financing service--with
leasing, consumer finance, factoring and credit card.
PT. Astra Sedaya Finance (ASF) and PT. Adira Dinamika Multifinance
Tbk) are the second and third largest in assets respectively having
assets valued at Rp31 trillion and Rp30 trillion, with market shares of
7.8% and 7.7%. ASF is a subsidiary of the Astra Group offering to
finance the purchases of cars and motorcycles. ASF, however, offers
credits only for the purchases of Astra automotive products including
Toyota, Daihatsu, Isuzu, BMW, Peugeot and Nissan Diesel.
FIF which has assets valued at Rp21.1 trillion is also a subsidiary
of the Astra Group offering credits for Honda motorcycles.
b. Multifinance companies with assets less than Rp1 trillion
There are around 74 multifinance companies with assests less than

Rp1 trillion each. With assets valued at Rp 951.7 billion, PT. Mizuho
Balimor Finance is the largest among the group of less than Rp1 trillion
with a relatively small share of 0.29% of the total Rp 333.5 trillion
assets of the country's multifinance industry. This company offers
credits only for consumer finance.
After PT. Mizuho Balimor Finance is PT. Swadharma Indotama Finance
with assets valued at Rp947 billion (0.28%), followed by PT. SMFL
Leasing Indonesia with assets valued at Rp 939.7 billion (0.28%).
Outstanding Credit Rp 348 Trillion In 2013
A rapid growth has been recorded for multifinance industry in
Indonesia notably in consumer finance that has continued to dominate the
industry. In the period of 2009-2013 the industry grew 26.5% per year.
In 2009, the financing was recorded at Rp137.2 trillion in outstanding
credit. The outstanding credits grew strongly in the following years to
reach Rp348 trillion by the end of 2013 or an increase of 14.9% from
Rp302.05 trillion a year earlier.
The growth was slower in 2013 because of a decline in the leasing
and consumer finance sector.
Adira Chalks Up largest Value of financing credit
In 2013, PT Adira Dinamika Multi Finance Tbk (Adira) succeeded in
recorded Rp48.3 trillion in credit or a market share of 13.9%. Around
60% of the funds were for motorcycle finance with the rest for car
finance. Around one third of the total financing was for second hand
automotive products.
Altogether, Adira provided credits for the purchases of 1.9 million
units of cars and motorcycles both new and second hand. The credits for

motorcycles was dominant but showed no growth. The credits for cars
still grew 6% based on the number of units financed.
In the same year, 2013, Federal International Finance (FIF)
recorded value of financing at Rp21.5 trillion. FIF had a 6.2% share of
multifinance market in the country. FIF finances the purchases of Honda
motorcycles.
In 2014, FIF sets financing target at Rp 21.5 trillion the same as
in 2013. Most or Rp18 trillion of the credits would be for motorcycles,
Rp 2.5 trillion--Rp 3 trillion for electronic goods and household
equipment through FIF Spektra, with the rest for cars.
In a bid to strengthen its working capital in April 2014, FIF
issued a bond valued at Rp1 trillion. The bond underwriters included PT.
Danareksa Sekuritas, PT Khresna Graha Sekurindo, PT. Indo Premier
Securities and PT. Mandiri Sekuritas.
Java is the largest market for FIF accounting for 70% of the
credits its has disbursed. However, the composition is expected to shift
in favor of regions outside Java with the growing purchasing power
following improved economy in the outer regions.
BCA Finance, with a total credit of Rp 30 trillion had a market
share of 8.6%. BCA Finance offers to finance the purchases of cars both
new and second hand.
Astra Sedaya Finance (ASF) followed with a market share of 6.9%
valued at Rp 24 trillion in credit. ASF offers credits only for cars of
Astra Group including Toyota, Daihatsu, Isuzu, etc.
NPL Low
The non performing loans (NPL) of multifinance companies have

remained low and in a safe level despite the rapid growth in assets,
according to the Indonesian Association of Finance companies (APPI).
In 2013, the country's economy was under heavy pressure on an
increase in the prices of oil fuels (BBM). By June, 2013, the NPL of
multifinance industry was recorded at 1.3-1.4% but by the end of 2013,
the NPL rose to 1.62%.
Consumer Finance Has The Largest 64% Share Of The Market
In 2013, consumer finance had a 64% share of the multifinance
market with financing valued at Rp222.7 trillion or an increase of 13.8%
from Rp191.8 trillion in the year earlier.
The domination by the consumer finance in value was attributable to
continued increase in demand for motor vehicles. In 2013, car sales
peaked at 1.22 million units and sales of motorcycles reached 7.7
million units. The interest rate was also relatively low at 6.55%. More
than 80% of the value of consumer finance was for motor vehicles (cars
and motorcycles), with the rest for electronic goods.
Leasing companies posted outstanding credit of Rp118.7 trillion
with a market share of 34.1%. In the past three years leasing
transactions have tended to increase to follow the recovery of the
corporate sector. The mining, construction and manufacturing grew fast
boosting demand for heavy equipment and machines.
Factoring business had only a market share of Rp6.6 trillion or
1.9%. The business is not yet popular in the country.
In 2014, consumer finance is predicted to grow 9% to Rp242.7
trillion with car sales predicted to reach 1.25 million units and sales
of motorcycles are forecast to reach 7.7 million units.

Multifinance Companies Reporting Largest Profit

Based on the financial reports issued by the OJK, in 2013
multifinance industry posted Rp 14.46 trillion in profit. The largest
contribution to the profit came from 20 large companies.
Adira Dinamia Multifinance led with a profit of Rp1,695 billion,
followed by Federal International Finance with a profit of Rp1,200
billion and Astra Sedaya Finance Rp 1,086 billion.
Performance of Publicly Traded Multifinance Companies
According to data at the Indonesian Stock Exchange (BEI), there are
10 publicly listed multifinance companies including PT Adira Dinamika
Multi Finance Tbk, PT BFI Finance Tbk, PT Batavia Prosperindo Finance
Tbk, PT Clipan Finance Indonesia Tbk, PT Amstelco Finance Tbk, PT
Mandala Finance Tbk, PT Trust Finance Indonesia Tbk, PT Verena Oto
Finance Tbk, WOM Finance Tbk and PT Buana Finance Tbk.
A number of the publicly traded multifinance companies are
expansive. In 2013, PT Buana Finance Tbk diversified business in
consumer finance by offering special housing credit (KPR) in Java. Buana
Finance set target for KPR at Rp 100 billion that year .
The company financed KPR with internal fund totaling Rp1.014
trillion by the end of December 2012. The company offered KPR after a
decline in its financing business in 2013.
PT Batavia Prosperindo Finance Tbk (BPF) cooperated with Malacca
Trust Limited to establish a joint venture company in multifinance
industry specially to finance heavy equipment. The joint venture company
PT Malacca Trust Finance (MTF) is to be operational in mid 2014. MTF
will be focused in financing heavy equipment procurement. BPF will hand

over financing of the procurement of heavy equipment to its subsidiary.

It will no longer provide financing service for heavy equipment.
MTF will finance the procurement of heavy equipment in the
infrastructure, plantation and mining sectors. The portion would be
larger for the plantation and infrastructure sectors. In the mining
sector MTF would choose financing in nickel and coal sectors.
Interest Rate
The increase in the benchmark interest rate to 7.5% early 2014 put
pressure on multifinance industry, as the financial sources of which are
mainly banks.
The interest rates on car credits are around 5.49%--5.99 %, and
those of motorcycle credits are from 21.5%-23.5% and the interest rates
on credits for electronic goods are 1.5%--3.75%.
The interest rates are 16%--18% on leasing and the interest rates
on factoring are 11% for dollar transactions and 20%-21% for rupiah
transactions.
Marketing Strategy and Competition
Competition among finance companies is in services, interest rates,
credit terms, number of dealers, promotion, etc. The services and
interest rates have to be competitive, credit term must be flexible and
number of dealers must be as many as possible and prizes need to be
offered in promotion to attract consumers, etc.
In facing competition, finance companies need to have various
strategies such as :
* Improvement of services for customers and potential customers.
Multifinance companies offer facilities in installments such as through

ATMs, guarantee for the security of certificate of ownership of motor

vehicles (BPKB), facility to obtain motor vehicle license (STNK), quick
service for customers and dealers.
* Expanding distribution networks
By opening branches as many as possible in large and small cities
to be close to and facilitate customers. Most of the customers of
finance companies are middle income and low income people.
* Customer relationship
Finance companies have to pay attention to customer relationship.
Special prices are offered for old customers seeking new credits..
* Skip installment Package
This is a new breakthrough launched by ACC not yet ever offered by
competitors. ACC is the first to offer skip installment package under
which consumers are freed from paying installment in certain months such
as during Idol Fire, Christmas and new academic years. Progressive
installment is a system in which first installments are smaller than
normal installment, digressive installment is one under which consumers
are to pay less amount of installment every six months to prevent
consumers from risks at the end of the installment contract and balloon
payment is a system under which early installment is smaller than normal
installment and remaining debt would be paid at the final installment. *
*
* Customer to customer financing
Astra Credit Company (ACC) has expanded market by adopting the
Customer to Customer Financing, which is a financing facility of ACC
that helps in buying second hand motor vehicles from some individuals.

The documents could be easier secured with approval would be given

generally in less than 8 hours. More than 80% of consumers of Astra
automotive products use credit from ACC.
Cooperation With Dealers
Multifinance companies need to cooperate with car or motorcycle
dealers to guarantee supply of goods to be offered to customers wanting
to buy cars or motorcycle with credits.
* Developing networks with banks
In order to facilitate payments of installments by customers,
multifinance companies cooperate with banks that customers could make
payment through the banks' ATM.
* Reducing interest rate
Multifinance companies would lower their interest rates charged on
their customers if bank interest rate is cut lowered. Lower interest
rate would draw customers and expand the market.
Competition between multifinance industry and banking industry will
put pressure on financing business. Banks lately are more aggressive in
expanding their business operation to financing in the car market so far
the captive market for multifinance companies. A number of banks have
offered cars credits such as Bank Mandiri, Bank BCA and Bank Danamon.
Sources of Fund
Multifinance industry still need capital support from financiers
including banks. In the past two years, funds received by multifinance
industry has increased 7% per year. In 2012, multifinance industry
received a loan of Rp597.8 trillion, up to Rp639.9 trillion in 2013.
Sources of funds for finance companies include banks, non bank

loans, bonds, private placement and other sources.

Bank Loans
Loans from local and foreign banks have continued to increase to
reach Rp 227.8 trillion in 2013 from Rp211.1 trillion in 2012. Banks
account for 35.6% of the total funds from all fund sources in 2013.
In 2013, domestic bank loans totaled Rp136.4 trillion or 21.3% of
the total loans used by multifinance companies and foreign loans
accounted for 14.3% or Rp91.4 trillion with other loans accounting for
the rest.
Joint venture finance companies generally use foreign loans from
their principals, financial agencies affiliated in the venture. Foreign
joint ventures are the largest users of foreign loans.
Joint Financing
Multifinance companies finance their operation with joint financing
or non joint financing. In joint financing a multifinance company has
bank partners. Companies operating with non joint financing could
strengthen their capital through issuance of bonds or syndicated loans.
Lately, banks are more aggressive in seeking cooperation with
multifinance companies in channeling out consumer credits especially in
the form of car and motorcycle credits. The cooperation scheme is known
as joint financing or channeling. Under the scheme banks channel out
their car or motorcycle credit through finance companies. Generally
banks provide 90% of the fund with the multifinance company putting up
the remaining 10%.
Consumers prefer to deal with multifinance companies than with
banks as multifinance companies generally offer simpler procedure.

Banks, therefore, need partnership with finance companies. Even

currently many banks, especially ones oriented to expansion of consumer
credits, seek to acquire multifinance companies. Generally banks are
interested in acquiring finance companies having assets between Rp500
billion and Rp1 trillion. Multifinance companies having assets of more
than Rp1 trillion would not need bank support as they generally have
financially powerful shareholders.
Currently many banks consider it safer to increase consumer credits
than corporate credit as there is less risk of non performing loan
(NPL). A number of banks such as Bank Mandiri, Bank Danamon and BCA have
succeeded in acquiring and expanding multifinance companies.
So far, multifinance companies have cooperated with banks under
joint financing on in syndicated loans. BCA Finance finances its
operation with 70% of fund needed from its parent company BCA and from
Bank Mandiri.
FIF finances its operation with bank fund that makes up 65% of the
fund needed under joint financing scheme. The rest would be covered with
bond fund or loan. FIF has cooperated with 12 banks including Bank
Permata, Bank Mega, Bank Mandiri and NISP. Under joint financing, Bank
Permata provided 12% of the fund needed.
A multifinance company could also have joint financing scheme with
other multifinance companies. APPI said syndication among finance
companies have ever been used by 10 companies, but the scheme is more
cost efficient.
Bonds
Funding with bond fund has increased from year to year. In 2013

bonds issued by multifinance companies reached Rp50.1 trillion up 14.6%

from Rp43.7 trillion in the previous year.
Some of the multifinance companies have been aggressive in seeking
to draw public fund through the sales of bonds. In 2013, a number of
multifinance companies issued bonds such as BCA Finance, Adira Dinamika
Multi Finace TBk, Astra Sedaya Finance, Artha Prima Finance, and Bima
Multi Finace.
In 2014, multifinance companies have issued bonds such as BII
Finance Centre, CIMB Niaga auto Finence, BFI Finance Indonesia Tbk,
Mandiri Tunas Finance, Wahana Ottomitra Multiartha and Mandala
Multifinance Tbk.
Government Regulation and Policy Regulation on multifinance
business
The first government regulation on multifinance industry was issued
in 1974. The regulation concerns only on leasing. Later the regulation
was revised and amended.
The government issued regulations under a decision of the Finance
Minister No. 448/KMK.017/2000 per October 2000 and No. 178/LMK.06/2002
per April 2002. The two decisions regulated the activities of
multifinance companies including their establishment, capital, ownership
and board of directors, opening of new branches, loan and investment and
restrictions on activities and other aspects.
* Activities of multifinance companies
Based on a decision of the Finance Minister No. 448/KMK.017/2000,
the scope of financing business include multifinance which includes :
--Leasing

--Factoring
--Consumer finance, including motor
vehicle and electronic goods
credits and KPR
* Establishment of finance companies
Finance companies could be
established and owned by:
--Indonesians and / or Indonesian
companies
--Foreign companies and Indonesians and /or Indonesian companies
(joint venture). A company is required to have the status of Limited
Company or cooperatives
Proposal for license to establish financing company is addressed
the Finance Minister.
The decision of the Finance Minister No. 185/KMK.06/2002 in April
2002, banned issuance of license for new finance companies in Indonesia.
However, the ban was lifted in 2006 through a new decision of the
minister No.84/PMK.012/2006 per September 2006.
* Ownership
Foreign companies are allowed to have shares in a finance company
not more than 85% of the paid up capital.
The maximum capital participation of corporate shareholders is 50%
of the equity.
The equity capital of the shareholders in the status of limited
company (PT) is the total of paid up capital, additional paid up
capital, reserves and profit/loss balance.

Equity capital of shareholders of multifinance industry in the form

of cooperative is the total of savings, including obligatory savings,
reserves and grants.
* New Regulation of the finance minister No. 84/2006
The regulation of the Finance Minister No. 84/2006 issued in
September 2006, contained a new policy on capital and concerned private
placement.
Under the policy, paid up capital or initial saving and obligatory
savings for a finance company were set as follows:
--The paid up capital for an Indonesian private company or joint
venture was at least Rp100 billion and the savings for a cooperative was
at least Rp 50 billion .
--Private placement is a form of debt agreement or medium term note
(MTN) that could serve as an alternative source of fund in various real
sectors including housing credits (KPR). With the alternative source of
fund, finance companies could offer a lower price for the people.
* Capital participation
The capital market and finance agencies watchdog (Bapepam-LK) is
now more selective in licensing multifinance business. Based on the
regulation of the Finance Minister (PMK) No. 84/ 2006 on finance
companies, the pair up capital for a multifinance company is at least
Rp100 billion to prevent license from being traded.
Conclusion and Prospects
In general multifinance industry in 2013 grew fairly strong and was
still dominated by consumer finance service. Total value of financing in
2013 was Rp 348 trillion, up from Rp302 trillion in 2012. In 2013,

consumer finance accounted for 64% or Rp 222.7 trillion of the total

market value of multifinance industry. Financing for the automotive
sector contributed around 80% to the total value of consumer finance,
with the rest financing for electronic goods. Leasing accounted for
Rp118.7 trillion (34.1%) and factoring for Rp 6.6 trillion (1.9%).
With the increase in the BI rate now 7.5%, business in multifinance
industry is under heavier pressure as finance companies have to adjust
their interest rate on their credit for their consumers. Averagely a
finance companies have raised their interest rate by 1-2 percentage
points for motor vehicle credits. The increase in interest rate is
predicted to result in a decline in the growth of income of multifinance
companies to 9% in 2014 from 14% in 2013.
In 2014, consumer finance is expected to continue to dominate the
market of multifinance business mainly in financing the purchases of
cars and motorcycles. According to the Indonesian Association of
Motorcycles Industry (AISI), sales of motorcycles in 2014 is predicted
to rise to 7.7 million units, and the Association of Motor Vehicles
Industry (Gaikindo) said car sales in 2014 would also increase to a new
peak at 1.25 million units. The increase in sales of motor vehicles
would push up demand for credits as around 90% of purchases of motor
vehicles in the country are with credits.
Leasing service is predicted to continue to grow with growing
demand for heavy equipment such as tractors, excavators, and loaders.
Heavy equipment is needed mainly in coal mining and general mining
(nickel and iron ore mining) and oil palm plantations.
With expected annual growth of 9%-12%, total financing in the next

five years is predicted to reach Rp379 trillion in 2014 and Rp 576

trillion in 2018. Car and motorcycle credits would contribute mainly to
the total credits of finance companies.

Table--4
Number of multifinance companies, 2009-2013

Year Number (companies) Growth (%)

2009 198 -
2010 192 -2
2011 195 1.6
2012 200 2.3
2013 202 1

Source : OJK/ICN, processed

Table--5
Multifinance industry by business sectors, 2014

Type of business Number of companies Share (%)

Consumer finance 112 55.4

Leasing 66 32.7
Factoring 24 11.9
Total 202 100

Source: Finance Ministry

Table--6
Multifinance companies banned from operation,
2012--2014

Companies Status Period

PT Patra Multifinance License revoked 2012

PT Metro Finance License revoked 2012
PT Semesta Citra Dana License revoked 2012
PT Cahyagold Prasetya Finance. License revoked 2013
PT Tata Internasional Multifinance License revoked 2013
PT Siantar Top Multifinance License revoked 2014
PT Diamon Jaya Multifinance License revoked 2014

Source : Bapepam-LK

Table--7
A number of recipients of new multifinance license
2013

No Name of companies Line of business

1 PT Takari Kokoh Sejahtera Consumer finance

2 PT Indonesia Internasional Finance Consumer finance

3 PT Karunia Multi Finance. Consumer finance

No License issued

1 2013
2 2013
3 2013

Table--8
Multifinance companies by status, 2014

Status Number of Companies Share (%)

State company (BUMN) 1 0.5

Indonesian private companies 156 77.3
Joint venture companies 45 22.2
Total 202 100

Source: Financial ministry

Table--9
Owners of multifinance companies, 2014

Owners Number of Companies Share (%)

Banks 63 31.5

Group of ATPMs 14 6.7

Foreign principals 9 4.6
Other 116 57.2
Total 202 100

Source: ICN, processed

Table--10

Multifinance companies and owners

Groups of Shareholders Name of multifinance companies

owners

Banks

Bank BII Wahana Ottomitra Multiiartha

Bank BNI --BNI Multifinance

--Financing Arta Negara
BCA BCA Finance

Bank CIMB Niaga --Saseka Gelora Finance

--Niaga International Factor

Bank UFJ Indonesia U Finance Indonesia

Bank Permata --Bali Tunasfinance

--KDLC Bancbali Finance

BRI UFJ BRI Finance

Bank Sumitomo Exim SB Leasing
Mitsubishi Indonesia

Bank Mandiri Koexim Mandiri Finance

ABN Amro Bank ABN Amro Finance Indonesia

Bank Panin --Clipan Finance,

--DKB Panin Finance
--Verena Oto Finance
--Dai-Ichi Kangyo Panin
Leasing

BRI --BRI Finance

Groups of Shareholders Name of multifinance companies

owners --BTMU- BRI Finance

Citibank Citigroup Finance Indonesia

Maybank --Wahana Ottomitra
Multiartha Tbk
--BII Finance Centre

Bank of Tokyo Bumiputera BOT Finance

Group
PT CT Corpora --Mega Auto Finance
--Mega Central Finance
--Para Finance

PT. Bhakti Bhakti Finance

Investama Tbk
Group of
ATPMs
Astra --Astra Auto Finance
--Astra Multi Finance
--Stacomitra
--Toyota Astra Finance
--Federal International
Finance Tbk
--Surya Artha Nusantara
Finance
--Komatsu Astra Finance

Indomobil --Indomobil Finance Indonesia

--Suzuki Finance Indonesia
--Swadharman Indotama Finance
--Swadharma Surya Finance
Mitsubishi --Tiga Berlian Auto Finance
--Dipo Star Finance

Foreign
principals
Credit Suisse-Morgan BFI Finance Indonesia Tbk
Asia Financial Pte Ltd --Adira Dinamika
Multifinance Tbk
--Adira Quantum Multifinance

Sumitomo Corp --Summit Oto Finance

--Oto Multiartha

Fuji Ltd Jaya Fuji Leasing Pratama

Caterpillar Financial Caterpillar Finance
Mitsui Corp --Mitsui Leasing Capital
--Bussan Auto Finance

Source: OJK

Table--11
Growth of assets of multifinance industry, 2009-2013

Year Total assets (Rp trillion) Growth (%)

2009 174.0 --
2010 * 230.3 32,4
2011 291.4 26,5
2012 341.8 17,3

2013 * 398.9 16,7

Average growth 23.2

Source: BI

Note * until September

Table--12
20 largest multifinance companies in assets
worth more than Rp1 trillion, 2014

Multifinance Assets (Rp trillion) Share (%)

Central Java Power 38.9 9.8

Astra Sedaya Finance 31.0 7.8
Adira Dinamika Multifinance 30.9 7.7
Federal International Finance 21.1 5.3
Oto Multiartha 14.0 4.7
Toyota Astra Financial Services 12.7 3.2
Bussan Auto Finance 10.9 2.7
Summit Oto Finance 8.9 2.2
BFI Finance Indonesia 7.7 1.9
Surya Artha Nusantara Finance 6.9 1.7
BCA Finance 5.8 1.5
Clipan Finance Indonesia 4.8 1.2
Wahana Ottomitra Multiartha 3.9 0.9

Mandala Multifinance 3.7 0.9

Buana Finance Tbk 3.5 0.9
Mitra Pinasthika Mustika Finance 3.4 0.9
Sinar Mas Multifinance 3.0 0.8
Multindo Auto Finance 2.1 0.5
Verena Multifinance 2.1 0.5
Artha Prima Finance 1.97 0.5
Andalan Finance Indonesia 1.95 0.5
Sasana Artha Finance 1.37 0.3
Armada Finance 1.3 0.3
Dipo Star Finance * 18.9 4.7
Orix Indonesia Finance * 4.9 1.2
Chandra Sakti Utama Leasing * 3.2 0.8
Suzuki Finance Indonesia * 3.1 0.7
Caterpillar Finance Indonesia * 5.5 1.4
Komatsu Astra Finance 4.7 1.2
Sub total 262.2 65.7
Other 136.7 34.3
Total 398.9 100.0

Source: OJK

Table--13
20 largest multifinance companies with assets less than Rp 1 trillion
2012

Multifinance Asset (Rp miliar) Share (%)

Mizuho Balimor Finance 951,7 0,29

Swadharma Indotama Finance 947,8 0,28
SMFL Leasing Indonesia 939,7 0,28
Internusa Tribuana Citra Multifinance 885,9 0,27
Bima Multifinance 869,4 0,26
Central Sentosa Finance 858,7 0,26
Bumiputra BOT Finance 787,9 0,24
Bentara Sinergies Multifinace 763,2 0,23
Sahabat Finasial Keluarga 734,8 0,22
Bringin Srikandi Finance 714,2 0,21
First Indo American Leasing 663,0 0,20
Clemont Finance Indonesia 624,7 0,19
Al Ijarah Indonesia Finance 605,4 0,18
Karya Technik Multifinance 604,9 0,18
Dharmatama Megah Finance 553,9 0,17
Equity Finance Indonesia 553,1 0,17
Batavia Prosperindo Finance 529,2 0,16
IBJ Verena Finance 497,7 0,15
Permata Finance Indonesia 488,1 0,15
Sub total 13.573,3 4,1
Lain-lain 319.955.7 95,9
Total 333.529 100

Source : Ministry of Finance

Table--14
Developments of finance industry, 2009-2013

Year Value of financing Growth (%)

(Rp trillion)

2009 137.2 -
2010 186.4 35.9
2011 245.3 31.6
2012 302.8 23.4
2013 348.0 14.9
Average growth 26.5

Source: BI, ICN processed

Table--15
20 largest multifinance companies in value of credits
2012 and 2013

Multifinance Value of financing Share(%)

(Rp trillion)

Adira Dinamika Multifinance 48.3 13.9

BCA Finance 30.0 8.6
Astra Sedaya Finance 24.0 6.9
Federal International Finance 21.5 6.2

Toyota Astra Financial ** 9.36 2.7

BFI Finance 8.9 2.6
Wahana Ottomitra Multiartha 5.6 1.6
Clipan Finance 5.6 1.6
Mandala Multifinance 4.8 1.4
Bussan Auto Finance 3.7 1.1
Surya Artha Nusantara Finance 3.5 1.0
Komatsu Astra Finance 3.5 1.0
Mitra Pinasthika Mustika Finance 3.17 0.9
Suzuki Finance Indonesia 2.9 0.8
Oto Multiartha * 11.6 3.3
Dipo Star Finance * 16.7 4.8
Summit Oto Finance * 8.2 2.4
Andalan Finance Indonesia 2.3 0.7
Sinar Mas Multifinance 2.1 0.6
Verena Multifinance 1.7 0.5
Caterpillar Finance Indonesia * 5.5 1.6
Orix Indonesia Finance * 4.3 1.2
Chandra Sakti Utama Leasing 1.8 0.5
Sasana Artha Finance 1.25 0.4
Sub total 230.3 66.2
Other 117.7 33.8
Total 348 100

Note: *) 2012

Source: Finance Ministry

Table--16
NPL of multifinance companies, 2013

Description June 2013 December 2013

NPL 1.4 1.62

Source: ICN processed

Table--17
Value of financing business by types, 2012-2013
(Rp trillion)

Types of multifinance Financing Market share

(Rp trillion) 2012 (%)

Consumer finance 191.8 63.5

Leasing 105.1 34.8
Factoring 5.1 1.7
Total 302.0 100

Types of multifinance Financing Market share

(Rp trillion) 2013 (%)

Consumer finance 222.7 64.0

Leasing 118.7 34.1
Factoring 6.6 1.9
Total 348.0 100

Source: BI, ICN processed

Table--18
Multifinance companies posting largest profit
2013

Multifinance Profit (Rp billion)

Adira Dinamika Multifinance Tbk 1,695

Federal International Finance Tbk 1,200
Astra Sedaya Finance 1,086
BCA Finance Tbk 935.2
BFI Financial Indonesia 252.5
Oto Multiartha ** 249.2
Toyota Astra Financial Services ** 233.7
Surya Artha Nusantara Finance *** 181
Summit Oto Finance ** 180,4
Buana Finance Tbk 112

Source: OJK

Note: * March, ** June, *** September

Table--19
Performance of publicly traded multifinance companies
2013

Name of companies Value of financing (Rp trillion)

Adira Dinamika Multi Finance Tbk 48.3

BCA Finance Tbk 30.0
Federal International Finance Tbk 21.5
BFI Finance Tbk 8.9
WOM Finance Tbk 5.6
Mandala Finance Tbk 4.8
Clipan Finance Indonesia Tbk 5.6
Verena Oto Finance Tbk 1.7
Buana Finance Tbk 0.754
Batavia Prosperindo Finance Tbk 0.218
Trust Finance Indonesia Tbk * 0.192
Amstelco Indonesia Tbk ** 3.4

Source: ICN processed

Note : * June 2013, ** 2012

Table--20

Interest rates on multifinance credits

2014

Types of multifinance service Interest rate (%)

Consumer finance :
Car credits 5.49-5.99
Motorcycle credit 21.5-23.5
Electronic goods credits 1.5-3.75
Leasing 13.12-13.47
Factoring 10%-20%

Source: ICN processed

Table--21
Funds received and sources of funds for
multifinance industry 2012-2013
(Rp trillion)

Source 2012 2013

1. Domestic loans : 124,5 136,4

a. Bank 115,3 132,2
b. Other financiers 9,2 4,2
2. Foreign loans: 86,6 91,4
a. Banks 76,4 79,7

b. Other financiers 10,2 11,7

Total loans 211,1 227,8

3. Bonds 43,7 50,1

4. Subordinated Loans 343 362
a. Domestic 323 307
b.Foreign 20 55
Total fund 597,8 639,9

Source: OJK

Table--22
Bonds issued by multifinance companies, 2013-2014
(Rp. billion)

Companies Year of issuance

2013 2014

PT. BCA Finance 1,800

PT Astra Sedaya Finance 1,800
PT Adira Dinamika Multi Finance Tbk. 1,500
PT BII Finance Center 1,500
PT CIMB Niaga Auto Finance 1,000
PT BFI Finance Indonesia Tbk 700
PT. Artha Prima Finance 300
PT Bima Multi Finance 125
PT Mandiri Tunas Finance 600
PT Wahana Ottomitra Multiartha Tbk 600
PT Mandala Multifinance Tbk 211

Source: BEI, ICN

Table--23
Estimate of total financing
2014-2018

Year Total financing

(Rp trillion)

2014 379
2015 417
2016 467
2017 523
2018 576

Source: ICN processed

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