Given the country’s large population, it is natural that Indonesia’s banks should focus on retail banking, and now competition is heating up in one segment in particular – micro. Mention micro to anyone outside of Indonesia and they may think of microfinance, microcredit, non-governmental organisations or attempts to alleviate poverty. But in Indonesia it is a commercial operation that targets the mass market and the so-called ‘bottom of the pyramid’. It is retail banking, just with small amounts on a very large scale.
By targeting this segment, Indonesia’s banks are making a bet on the future growth of the country’s economy and the source of its domestic consumption. Minhari Handikusuma, director of the self-employed mass market segment at one of these banks, Bank Danamon, points out that there are more than 50 million micro, small and medium sized-enterprises (MSMEs) in Indonesia, with each of the business owners typically supporting two or three people. This means that this market segment affects 150 million people – more than half of Indonesia’s population of 240 million. “It is the backbone of Indonesia,” says Mr Handikusuma.
