ADB SME
DEVELOPMENT TA
BACKGROUND REPORT
ENHANCING THE ROLE OF FACTORING AS A TOOL FOR FINANCING SMALL AND MEDIUM ENTERPRISES IN INDONESIA
WOLFRAM HIEMANN NOVEMBER 2001
Published by: ADB Technical Assistance SME Development State Ministry for Cooperatives & SME Jalan H.R. Rasuna Said Kav.3 Jakarta 12940 Tel: ++62 21 520 15 40 Fax: ++62 21 527 94 82 e-mail:
[email protected]
ADB
SME DEVELOPMENTTA
I. TABLE OF CONTENTS
I.
TABLE OF CONTENTS ........................................................................................... I
II.
TABLE OF ABBREVIATIONS ............................................................................... III
III.
TABLE OF FIGURES .............................................................................................IV
IV.
TABLE OF REFERENCES .....................................................................................V
V.
GLOSSARY............................................................................................................VI
VI.
EXECUTIVE SUMMARY .......................................................................................VII
VII.
RINGKASAN EKSEKUTIF......................................................................................X
1
FACTORING IN INDONESIA .................................................................................. 1
1.1
Background.............................................................................................................. 1
1.2
Definition .................................................................................................................. 1
1.3
Purpose.................................................................................................................... 3
1.4
Regulations and Legal Aspects ............................................................................... 4
2
FACTORING PRACTICE IN INDONESIA............................................................... 6
2.1
From Past to Presence ............................................................................................ 6
2.2
Financial Development of Factoring Companies ..................................................... 7
2.3
Factors in Indonesia................................................................................................. 9
2.4
Location ................................................................................................................. 12
2.5
Source of Finance.................................................................................................. 12
2.6
Service of Factors .................................................................................................. 13
2.7
Cost of Factoring.................................................................................................... 13
2.8
Clients of Factor..................................................................................................... 13 I
ADB
SME DEVELOPMENTTA
2.9
Marketing Efforts.................................................................................................... 14
2.10
Market Prospects and Potential ............................................................................. 14
2.11
International Factoring ........................................................................................... 16
3
CONCLUSIONS AND RECOMMENDATIONS ..................................................... 18
3.1
Problems................................................................................................................ 18
3.2
Requests................................................................................................................ 18
3.3
Recommendations and Suggested Actions ........................................................... 19
3.3.1
Access to Funds..................................................................................................19
3.3.2
Other Recommendations to Enhance SME Financing........................................20
II
ADB
SME DEVELOPMENTTA
II. TABLE OF ABBREVIATIONS ADB A/R ASEI ALI APPI BCI BEI BI BII BII-FC CEM CP FCI IBRA IFS IMF KUKMI L/C LPJK MoF MFC NIF PBT PKM PN SMM TA UKM UNCITRAL
Asian Development Bank Account Receivables Asuransi Ekspor Indonesia Asosiasi Leasing Indonesia Asosiasi Perusahaan Pembiayaan Indonesia Bakrie Capital Indonesia Bank Ekspor Indonesia Bank Indonesia Bank International Indonesia Bank International Indonesia Finance Center Client Enquiry Module Commercial Paper Factors Chain International Indonesian Bank Restructuring Agency (Badan Penyehatan Perbankan Nasional) International Factors Singapore International Monetary Fund Kerukunan Usaha Kecil dan Menengah Indonesia Letter of Credit Lembaga Pengawasan Jasa Keuangan Ministry of Finance Multifinance Company Niaga International Factor Profit Before Tax Pengusaha Kecil dan Menengah Pengadilan Negeri Sinar Mas Multifinance Technical Assistance Usaha Kecil dan Menengah (Small and Medium Enterprises) United Nations Commission on International Trade Law
III
ADB
SME DEVELOPMENTTA
III. TABLE OF FIGURES Figure 1:
The Mechanism of Factoring .............................................................................2
Figure 2:
Development of Factoring Portfolio ...................................................................7
Figure 3:
Development of Factoring Investment ...............................................................8
Figure 4:
Multifinance Portfolio Quality .............................................................................8
Figure 5:
International Affiliation of Factoring Companies ................................................9
Figure 6:
Multifinance Companies Engaged in Factoring ...............................................10
Figure 7:
Investments in Multifinance Companies ..........................................................11
Figure 8:
Source of Finance for MFC..............................................................................12
Figure 9:
Profitability of Factoring in SE Asia: International Factors Singapore (IFS) ....13
Figure 10:
Typical Factoring Clients and Customers ....................................................14
Figure 11:
Factoring Turnover (volume) for Year 2000 .................................................16
IV
ADB
SME DEVELOPMENTTA
IV. TABLE OF REFERENCES Author
Title
Anonymous
“Factoringbranche sieht sich im Aufwind”, Kreditpraxis 3/2001 p.2.
Badan Pusat Statistik Bett, K., et al.
Statistik Lembaga Keuangan 2000. “Factoring auf Erfolgskurs: Internationales Geschaeft lebhaft“, Kreditpraxis 3/1999, p. 14 f. Indonesia Banks: Survival of the Fittest, 1998, www.adb.org/Documents/Books/Rising_to_the_Challenge/In donesia/indo-bnk.pdf.
Chou, C
Data Consult Inc.
Financing Industry in Indonesia "Surviving Amidst the Crippled Banking Industry", February, 2000.
Infobank
“Hai, Multifinance Mau Diapakan”, May 1999. “Anak Tiri Bermain Motor”, January 2000. “Anjak Piutang yang tak Beranjak”, June 2000. “Peluang dan Tantangan Sama Besar”, March 2001. “Langit Terang – Milik Pihak Asing?”, March 2001. “Modal Cekak, Siapa Peduli”, April 2001. “Pasar Besar, Uang Kurang”, May 2001. “Leasing Jalan, Tetap Pusing”, June 2001. “Laju Kencang Pembiayaan Motor”, July 2001. “Pasar Motor di Jalan Berlubang”, August 2001. “Deru Mesin Pembiayaan di Kota Pahlawan”, August 2001. “Momentum Tepat Restrukturisasi Utang”, September 2001.
Kaufhold, K.
“Factoring: Gutes Umsatzwachstum“, Kreditpraxis 3/1998, p. 4 ff. “Factoring in Osteuropa: Raum fuer Expansion“, Kreditpraxis 3/1998 p. 8 ff.
Olbort, S.
V
ADB
SME DEVELOPMENTTA
V. GLOSSARYª Anjak Piutang (Factoring) BPS: Anjak piutang adalah usaha yang melakukan kegiatan pembiayaan perusahaan dalam bentuk pembelian dan atau pengalihan serta pengurusan piutang atau tagihan suatu perusahaan dari transaksi perdagangan dalam atau luar negeri. MenKeu: Anjak piutang adalah kegiatan pembiayaan dalam bentuk pembelian dan/atau pengalihan serta pengurusan piutang atau tagihan jangka pendek suatu perusahaan dari transaksi perdagangan dalam atau luar negeri. Customer Anjak Piutang (Factoring Customer) Customer anjak piutang adalah pihak yang mempunyai hutang kepada klien, di mana sebelumnya customer mengadakan transaksi pembelian barang dan jasa dengan sistem kredit kepada pihak klien. Klien (Client) BPS: Klien adalah pihak yang menjual piutang kepada perusahaan anjak piutang. MenKeu: Penjual piutang adalah perusahaan yang menjual dan/atau mengalihkan piutang atau tagihannya yang timbul dari transaksi perdagangan kepada Perusahaan Pembiayaan. Nilai Pembiayaan Anjak Piutang (Financing Value of Factoring) BPS: Nilai pembiayaan anjak piutang adalah nilai pembelian piutang yang telah disetujui kedua belah pihak antara klien dan perusahaan factoring yang dinyatakan dalam suatu perjanjian kontrak. Nilai pembiayaan umumnya lebih kecil dari nilai piutang yang dialihkan, karena diperhitungkan faktor bunga dan risiko kelancaran pembayaran. Nilai Pengalihan Piutang (Factoring Receivable Value) BPS: Nilai pengalihan piutang adalah nilai hutang yang harus ditagih perusahaan factoring kepada customer. Factoring Volume Amount of A/R purchased during a period. Factoring Portfolio or Outstanding Amount of A/R purchased but not yet settled by customers. As bills are settled after less than one year the volume will be higher than the portfolio according to the formula: Portfolio x 360 Factoring volume =
average number of days until bills are settled
ª http://www.bps.go.id/glossary/indo/lpembiayaan.shtml, 3 October 2001.
VI
ADB
SME DEVELOPMENTTA
VI. EXECUTIVE SUMMARY
Sector Descriptions ¾ Factoring is an alternative instrument to finance trade credit. Legally, it is not a credit. Factors buy accounts receivables (with a discount) from producers shipping their goods to buyers who, for various reasons do not settle their trade debt immediately. Factors pay immediately 80% to 90% to their "clients" and wait until they receive the payment from the "customer" (buyer). ¾ Factoring is a suitable instrument, in particular for SME, to develop their business through securing quick cash flow. It allows them to generously offering trade credit as a marketing instrument. Originally, the factor took over the risk that the buyer fails to settle his account ("non-recourse factoring"). Indonesian factors prefer "with recourse" factoring. They return (re-sell) the accounts receivables (A/R) to their clients if the buyer does not pay. Compared to banks, factors operate flexible, they respond immediately, and they regard A/R as collateral with a high value. They must not comply with capital adequacy rules, legal lending limits and minimum deposits. But their source of finance is limited to equity and bank loans. ¾ In Indonesia, practicing factoring is not new. Informal factors buy "bilyet giro", "bon putih" or post-dated cheques, particularly in wholesale markets. Formal factoring is an activity of multifinance companies (MFC) for which a Government regulation was issued in 1988, improved in 1995, and again rewritten in 2000. Until 1995, 245 MFC received a license. For five years no new license was issued. Three applications were received until October 2001. Many MFC did not intend to engage in factoring. Only about 20 to 30 companies are said to (have) practice "real" factoring, some on a tiny scale. ¾ End of 1997, the portfolio of factors peaked amounting to Rp 10.1 trillion or 2.6% compared to bank lending, a high figure compared to other countries. MFC were severely hit by the prolonged financial crisis. More than 130 MFC came under the supervision of IBRA (Indonesia Bank Restructuring Agency, BPPN). Data from 107 MFC, probably the healthier ones, and show that more than 37% recorded equity below the paid-up capital minimum demanded by regulations. End of June 2001, factoring advances amounted to Rp 4.0 trillion ($400 million) out of which Rp 3.0 trillion (75%, up from 0.5% end of 1996) were bad debt. It is said that this disaster is a result of "fictive" transactions, those that were not based on sale of goods and services, between large companies belonging to the same conglomerate. MFC were set up to assist circumventing banking regulations. ¾ The factoring volume (purchase of A/R, "turnover") amounted to Rp 2.6 trillion ($260 million) in 2000 whereas current advances by factors amount to Rp 1 trillion. During the first semester 2001 the transaction volume reported from 35 multifinance enterprises decreased again to Rp 716 billion. 15 enterprises recorded a volume of more than Rp 5 billion ($500,000). However, throughout discussions held in Jakarta, only two companies, both internationally affiliated, were repeatedly mentioned being engaged in factoring. Together, they hardly account for a factoring portfolio of more than Rp 100 billion ($10 million), less than 0.05% if compared to all bank loans. This is tiny. Factoring that other MFC perform is probably limited to "maintenance" of few established large clients, and to recovery efforts. Factoring seems to be hardly accessible by new clients. VII
ADB
SME DEVELOPMENTTA
¾ The actual demand, also from SME, exceeds the financing capacity of any factor. The market is far from being saturated. Within three to five years, the portfolio could easily more than triple. Still, the amount would remain very small in view of other sources of finance. ¾ Soft regulations governing factoring and the absence of any effective government supervision and intervention invited malpractice. These prompted financial losses for investors and banks, finally, through bank recapitalization, increased public debt, and resulted in a loss of trust in the industry. Sources of finance badly needed by businesses, also for the development of SME, have dried up. At the same time, consumer finance, a Rp 55 trillion market volume (year 2000), became much more attractive. ¾ In fact, factoring is dubbed as an SME finance instrument. It is a suitable alternative for financing sales of SME, not only, but in particular, when they sell their goods and services to large corporate enterprises or buyers abroad. Measures supporting factoring companies could almost certainly benefit SME. ¾ Based on results of IMF recommendations, MoF is engaged in a detailed program to upgrade regulations and procedures concerning MFC. Some of the following suggestions may repeat those already expressed by other parties. ¾ Enhancing factoring to benefit SME needs most of all improvements in the regulatory framework. It is paramount that investors and banks regain trust in financing factoring companies.
Recommendations ¾ It is proposed that MFC are given the opportunity to upgrade to become specialized factoring-only companies adhering to strict regulations on one hand and allowing broader access to funds on the other hand: a) The government should issue a special decree governing single-purpose factoring companies and their activities. The regulations should incorporate lessons learned from the crisis and experience from the banking sector, e.g., concerning issues like improved rules on portfolio quality calculation, maximum exposure to individual debtors, adherence to healthy financial ratios, responsibilities of the management, etc. Special guidelines for assessing factoring companies should be developed permitting risk rating of the institution. It is suggested to improve the flexibility to respond to market demands through reviewing awkward procedures to open branch offices. b) Rules for supervision, e.g., by LPJK (Lembaga Pengawasan Jasa Keuangan), the future agency supervising financial institutions, for reporting requirements, and actions stipulating compulsory recapitalization or immediate closure should be put in place and enforced. (The MoF is already working on this.) c) In turn, risk rated single-purpose factoring companies should be allowed to compete for funds from insurance companies, foundations, pension funds and from private investors, be it in the form of equity or as liability like issuing commercial paper (CP) (for which, however, the government expressively should not take over any guarantee!). d) Rated factoring companies should be given access to funds earmarked for developing SME, for example those funds that are channeled through a secondVIII
ADB
SME DEVELOPMENTTA
tier bank (a wholesale financial institution, a proposal of the ADB-TA SME Development), with the objective to support SME. e) A regulation demanding that only banks can become clients of Bank Export Indonesia should be reviewed in favor of rated factors financing SME exports. ¾ The following are recommendations to support factors aimed at reducing risk and review of regulations concerning foreign ownership: 1) Factoring companies should be allowed access to and participation in the BI-run credit information system, a step requested by factors and banks as well. 2) The government should review regulations on legal issues: (i) The rules pertaining to assignments of accounts receivables (A/R) should be codified and a security registration system would be put in place. (ii) When codifying A/R (and other securitites) rules, the government should consider recommendations laid down in the Ottawa Convention and UNCITRAL (United Nations Commission on International Trade Law) convention on international factoring aiming at supporting export. 3) It is suggested to review whether allowing a 100% foreign factoring company ownership could be beneficial, in particular with regard to gaining foreign investment and enhancing exports. ¾ Although the data are used for different purposes, the advantages of parallel reporting to and data collecting and processing by BI and MoF remain entirely unclear. In order to streamline and improve government procedures, a review is urgently recommended so that one institution gathers the data and both have access to these data.
IX
ADB
SME DEVELOPMENTTA
VII. RINGKASAN EKSEKUTIF
Deskripsi Sektor ¾ Anjak piutang (Factoring) adalah perangkat alternatif untuk membiayai kredit perdagangan. Secara legal, anjak piutang bukanlah kredit. Factors membeli tagihan tertentu dengan perhitungan diskonto dari produser dalam pengapalan barang-barang mereka kepada pembeli yang dituju, untuk mengatasi berbagai alasan tidak diselesaikannya piutang dagang dengan segera. Factors membayar segera 80% sampai 90% kepada “klien” mereka dan menunggu sampai mereka menerima pembayaran dari “kastemer” (buyer). ¾ Anjak piutang merupakan perangkat yang cocok, khususnya bagi Pengusaha Kecil dan Menengah (PKM), untuk mengembangkan bisnis mereka melalui pengamanan arus kas (cash flow) secara cepat. Hal ini memberikan kesempatan bagi mereka menawarkan banyak sekali kredit dagang sebagai instrumen pemasaran. Sebenarnya, factors telah mengambil alih (menganjak) risiko atas piutang dari buyer yang gagal memenuhi kewajibannya membayar (“non-recourse factoring”). Factors Indonesia lebih suka dengan “with-recourse factoring”. Mereka menjual kembali piutang dagangnya kepada klien mereka jika kastemer tidak membayar. Dibandingkan dengan bank, factor beroperasi lebih fleksibel, mereka merespon dengan cepat dan mereka menghargai piutang dagang sebagai agunan dengan nilai yang tinggi. Mereka tidak mesti harus memenuhi ketentuan pemenuhan modal, batas maksimum pemberian kredit dan minimum deposit. Akan tetapi sumber pembiayaan mereka terbatas dengan modal sendiri dan pinjaman dari Bank. ¾ Di Indonesia, praktek anjak piutang bukanlah hal yang baru. Secara informal factors membeli ”bilyet giro”, “bon putih” atau cek mundur, khususnya dalam perdagangan partai besar. Secara formal anjak piutang adalah salah satu kegiatan dari Perusahaan Multifinance yang diatur dalam Peraturan Pemerintah yang diterbitkan tahun 1988, disempurnakan tahun 1995 dan diatur kembali tahun 2000. Sampai tahun 1995, sebanyak 245 perusahaan multifinance memperoleh izin. Dalam lima tahun terakhir tidak ada izin yang diterbitkan pemerintah. Terdapat tiga permohonan yang diterima sampai Oktober 2001. Banyak perusahaan multifinance tidak ingin menangani anjak piutang. Hanya sekitar 20-30 perusahaan telah mempraktekkan kegiatan anjak piutang yang sesungguhnya, suatu skala yang kecil sekali. ¾ Pada akhir 1997, portofolio anjak piutang mencapai puncaknya sebesar Rp 10,1 triliun atau 2,6% dari posisi pinjaman perbankan, suatu angka yang tinggi dibandingkan dengan negara-negara lain. Perusahaan multifinance terkena dampak hebat dari krisis keuangan yang berkepanjangan. Lebih dari 130 perusahaan multifinance pernah berada di bawah pengawasan Badan Penyelamatan Perbankan Nasional (BPPN). Data dari 107 perusahaan multifinance, kemungkinan yang lebih sehat, memperlihatkan bahwa lebih dari 37% tercatat modal sendiri berada di bawah minimum modal disetor yang diminta oleh ketentuan. Pada akhir Juni 2001, anjak piutang yang dibiayai berjumlah Rp 4,0 triliun (US $400 juta) dan sebanyak Rp 3,0 triliun diantaranya (75%, meningkat dari hanya 0,5% pada akhir tahun 1996) menjadi piutang macet. Dikatakan bahwa kerugian ini akibat dari transaksi fiktif, yang mana diberikan tidak berdasarkan penjualan barang dan jasa, ini terjadi antara perusahaanperusahaan besar milik konglomerat yang sama. Perusahaan multifinance ditata untuk membantu mereka mengelak dari ketentuan perbankan.
X
ADB
SME DEVELOPMENTTA
¾ Volume anjak piutang (pembelian piutang, “perputaran”) berjumlah Rp 2,6 triliun (US$260 juta) dalam tahun 2000 sedangkan pembiayaan lancar oleh factors sebesar Rp 1 triliun. Selama semester pertama 2001 volume transaksi yang dilaporkan oleh 35 perusahaan pembiayaan menurun lagi menjadi Rp 716 miliar. Tercatat 15 perusahaan mempunyai volume transaksi yang melebihi Rp 5 miliar (US$ 500.000). Bagaimanapun, di seluruh diskusi yang dilaksanakan di Jakarta, hanya dua perusahaan, keduanya memiliki afiliasi internasional, yang berulangkali menyatakan menangani anjak piutang. Portofolio anjak piutang kedua perusahaan ini barangkali tidak melebihi Rp 100 milyar (US$10 juta), kurang dari 0,05% jika dibandingkan dengan posisi pinjaman seluruh perbankan. Ini kecil sekali. Anjak piutang ditawarkan oleh perusahaan multifinance lainnya barangkali terbatas pada “memelihara” sedikit nasabah besar yang sudah mapan dan dalam usaha-usaha penyelamatan debitur. Anjak piutang kelihatannya sulit diakses oleh nasabah baru. ¾ Permintaan nyata akan anjak piutang juga berasal dari Usaha Kecil dan Menengah (UKM), melebihi kapasitas pembiayaan dari berbagai factors. Pasar jauh dari kejenuhan. Dalam tiga sampai lima tahun, portofolio dapat dengan mudah lebih dari tiga kali lipat. Sekali lagi, jumlahnya sangat kecil jika dilihat dari sumber pembiayaan lainnya. ¾ Penegakan peraturan pemerintah yang lunak dan absennya supervisi dan intervensi yang effektif dari Pemerintah, mengundang timbulnya malpraktek. Hal ini mempercepat kerugian finansial bagi investor dan bank-bank, akhirnya, melalui rekapitalisasi perbankan, meningkatnya piutang macet publik, mengakibatkan hilangnya kepercayaan pada industri ini. Sumber-sumber pembiayaan yang tidak baik dibutuhkan oleh kegiatan usaha, juga bagi pengembangan UKM, telah sirna menguap. Pada waktu yang sama, pembiayaan konsumsi, dengan volume pasar tahun 2000 sebesar Rp 55 triliun, menjadi lebih menarik. ¾ Dalam kenyataannya, anjak piutang dijuluki sebagai salah satu perangkat pembiayaan bagi UKM. Ini merupakan alternatif yang cocok terhadap pembiayaan penjualan, tidak hanya, akan tetapi khusus, apabila mereka menjual barang dan jasa mereka kepada perusahaan besar korporasi atau pembeli-pembeli di luar negeri. Langkah-langkah mendukung perusahaan anjak piutang dapat sangat bermanfaat bagi UKM. ¾ Berdasarkan hasil rekomendasi International Monetary Fund (IMF), Menteri Keuangan sedang sibuk dengan program rinci untuk menyempurnakan ketentuan dan prosedur mengenai perusahaan multifinance. Beberapa saran berikut ini mungkin mengulangi hal-hal yang telah dikemukakan oleh pihak-pihak lainnya. ¾ Mempertinggi manfaat anjak piutang kepada PKM membutuhkan banyak perbaikan terhadap kerangka ketentuan yang ada. Yang terpenting akan membuat para investor dan bank-bank memperoleh kembali kepercayaan terhadap perusahaan pembiayaan anjak piutang.
Rekomendasi ¾ Disarankan bahwa perusahaan multifinance diberikan kesempatan untuk ditingkatkan menjadi perusahaan pembiayaan khusus anjak piutang disertai dengan peraturan yang ketat di satu pihak, dan dibolehkan memperluas akses di bidang dana di pihak lain: a) Pemerintah harus menerbitkan ketentuan khusus yang mengatur tentang perusahaan khusus anjak piutang dan kegiatan-kegiatannya. Peraturan tersebut harus memasukkan pelajaran yang diperoleh dari krisis dan pengalaman dari sektor perbankan, seperti isu-isu yang menyangkut tentang perbaikan peranan dari perhitungan kualitas portofolio pinjaman, maksimum pembiayaan untuk satu XI
ADB
SME DEVELOPMENTTA
debitur, kepatuhan terhadap rasio kesehatan keuangan, tanggung jawab manajemen dan lainnya. Petunjuk khusus mengenai penilaian perusahaan anjak piutang harus dibuat yang mengizinkan diketahuinya peringkat risiko (“rating”) lembaga yang bersangkutan. Disarankan untuk meningkatkan fleksibiilitas dari perusahaan multifinance dalam merespon permintaan pasar melalui peninjauan kembali prosedur pembukaan kantor cabang perusahaan multifinance. b) Ketentuan untuk supervisi seperti oleh Lembaga Pengawasan Jasa Keuangan (LPJK), lembaga supervisi institusi keuangan dimasa yang akan datang, untuk kebutuhan pelaporan dan tindakan-tindakan yang wajib diambil dalam rekapitalisasi atau tindakan penutupan segera yang harus diambil dan tindakan hukum yang memaksa. (Menteri Keuangan telah mempersiapkan hal ini). c) Pada gilirannya, perusahaan khusus anjak piutang yang telah memperoleh "rating" harus diizinkan untuk bersaing agar dapat akses ke dana yang ada di perusahaan asuransi, yayasan, dana pensiun dan investor swasta, diizinkan dalam membentuk modal sendiri atau sebagai utang seperti penerbitan Commercial Paper (CP) (dalam hal ini, bagaimanapun, dinyatakan bahwa Pemerintah tidak tanggungjawab atas pembayaran hutang tersebut). d) Perusahaan anjak piutang yang telah memperoleh “rating” harus diberikan akses terhadap dana yang diperuntukkan dalam pengembangan PKM, sebagai contoh dana-dana dimaksud disalurkan melalui bank lapis kedua (second-tier bank atau bank yang hanya melayani UKM melalui fasilitator lembaga keuangan lain), sebuah usulan ADB-TA SME Development, dengan tujuan mendukung PKM. e) Persyaratan peraturan bahwa hanya bank-bank yang dapat menjadi nasabah Bank Ekspor Indonesia (BEI) harus ditinjau kembali khususnya untuk perusahaan anjak piutang yang membiayai ekspor. ¾ Rekomendasi-rekomendasi untuk mendukung “factors” dalam mengurangi risiko, dapat dilihat berikut ini: 1) Perusahaan anjak piutang harus diizinkan akses kepada dan berpartisipasi dalam sistem informasi kredit ("debtor information system") yang dilaksanakan oleh Bank Indonesia, sebuah langkah yang dibutuhkan oleh factors, dan demikian juga oleh bank. 2) Pemerintah seharusnya mengkaji-ulang regulasi juridis: (i) Hal-hal yang berhubungan dengan jual, beli, dan cesie piutang (A/R) belum diundangkan dan tidak ada sistem untuk pendaftaran jual, beli, dan cesie piutang, (ii) sehubungan dengan diundangkannya hal-hal yang berkaitan dengan AR seperti diatas, maka pemerintah seyogyanya mempertimbangkan rekomendasi yang dituangkan dalam Ottawa Convention and UNCITRAL (United Nations Commission on International Trade Law – Hukum Perdagangan Internasional dari Komisi Perserikatan BangsaBangsa--) untuk perusahaan internasional yang mendukung ekspor 3) Disarankan untuk meninjau kembali apakah diizinkan beroperasinya perusahaan anjak piutang yang dimiliki oleh 100% pihak asing, akan dapat bermanfaat, khusus yang berkaitan dengan masuknya investasi asing dan peningkatan ekspor. ¾ Walaupun data yang digunakan dengan tujuan yang berbeda, manfaat dari pelaporan paralel (pengumpulan dan pemprosesan data oleh Bank Indonesia dan Menteri Keuangan), secara keseluruhan tetap tidak jelas. Supaya merampingkan dan menyempurnakan prosedur, peninjauan kembali direkomendasikan dilaksanakan amat segera dengan demikian satu institusi menggabungkan data dan kedua instansi dapat mengakses data keseluruhan.
XII
ADB
SME DEVELOPMENTTA
1 FACTORING IN INDONESIA
1.1 Background Several instruments have been developed for entrepreneurs unable to finance their companies the conventional way, namely either with equity, including retained profits, or with loans, bank loans as well as those from other parties. Various products are available to finance or "quasi"-finance assets of enterprises of different sizes, including SME, for example, for ¾ financing (fixed) assets: leasing, venture capital ¾ financing production (current assets): trade loan and consignment ¾ financing marketing: sales or trade credit, factoring The ADB Technical Assistance for the Development of SME identified that lack of bankable collateral limits or even excludes SME form bank loans. Factoring may be one solution to this problem. The general public, the vast majority of SME, bank people and even managers working in MFC are not familiar with the term factoring. This is, however, not characteristic for Indonesia.1 Therefore, and because of its remarkable potential benefits for SME, the first part of this report will explain features and types of factoring. There is no doubt that factoring can overcome financial weaknesses of SME.2 The second part describes regulations and recent developments in the Indonesian factoring market. Reference is made to markets abroad. Due to financial restructuring, announcement of bankruptcy filing (PT Indocitra Finance Tbk.), and other reasons, only few successful interviews with factors were possible. Statistical data per end of 2000 were also not readily available. The third part summarizes acute problems and weaknesses. Proposals are presented for government actions to support factoring for the benefit of SME.
1.2 Definition Factoring is an agreement to purchase accounts receivables (A/R) for the delivery of goods and services for the purpose of financing. The factor buys the seller's A/R against immediate cash despite some people using the term "factoring loan". Factoring "bridge-finances" 80% to 90% of the invoice amount for the time from sending the goods and the invoice, or receiving the delivery note signed by the buyer, until the buyer settles the payment for these goods or services. The factoring client does not need anymore to wait for money for his goods and services until the buyer settles the invoice. Normally, collateral is not required. It is not uncommon that companies settle their bills 45 days, 60 days or even much later, after they received the goods. Buyers can process or trade these goods without using their own funds or a credit facility. The seller is pre-financing the buyer's input and as such 1
In contrast to venture capital and leasing as alternative finance instruments, factoring did not receive mentioning when discussing the financial aspects in "Policy Recommendation for SME Promotion in The Republic of Indonesia" (Shurijo Urata, July 2000 as advisor to Coordinating Minister of Economy, Finance and Industry).
2
For a summary of advantages factoring offers, in particular to SME, see Annex 1.
1
ADB
SME DEVELOPMENTTA
assumes, often not willingly, the role of a financial institution. Banks try to avoid financing goods that have already been sold. Figure 1:
The Mechanism of Factoring
1: delivery of goods
Factoring Client
Customer
2: delivery note
SELLER Producer
BUYER 3 copy bill, delivery note 4: $ initial payment 80% 4 7: $ final FACTOR payment
Due date: 5
6: $ payment
8: with recourse $ (money back if customer does not pay)
Factors offer two products that differ in principle3: a) non-recourse or without recourse factoring This is the genuine ("old-line") factoring. The factor assumes the full risk of bad debt. The money remains with the client (producer) if the buyer does not pay. In developed countries this risk cover is a main reason to co-operate with factors. For many years, practically all factoring in Germany has used this form. Internationally, 60% of A/R is bought without recourse. b) with recourse factoring The factor is allowed to return or re-sell the receivables to the client if the buyer does not pay. This is the common factoring contract not only in Indonesia but also in several other developing countries or new market economies in Eastern Europe (Poland, Hungary, etc). The factor regards it difficult to calculate the risk, among others due to lack of sufficient data on the buyer (missing track record), in particular in the absence of a credit bureau. The producer chooses recourse factoring if he relies on his trade partner. Or he regards the factor's risk margin high; fees would too much reduce his profit. The factor's advantage is that he has two sources to recover his investment. In Indonesia, client and customer are often companies of the same holding. Risks are not diversified. But the factor does not receive a risk premium. Factors finance also exports. Several factors established offices abroad or engaged in joint ventures or strategic partnerships with foreign partners. Exporters can ship their goods without using L/C procedures when they employ the services of a factor with international connections. International factoring is a particular beneficial and suitable instrument for SME if it concerns small shipments. 3
This report does not deal with other types of factoring like, e.g., in-house or bulk factoring.
2
ADB
SME DEVELOPMENTTA
It is quite common that factors offer additional services to their clients: ¾ debtor bookkeeping ¾ supervision of payments ¾ sending reminders ¾ business analysis ¾ supervising the financial situation of buyers and warning the client if indicators deteriorate
1.3 Purpose Factoring is a choice when the producer or distributor does not only sell products or services but offers also a trade loan, financial services, by allowing the buyer to settle the bill up to 60 or even 90 days later. Some buyers, often big companies, even insist on this trade loan as a prerequisite for transactions. Three reasons for factoring are dominant: ¾ Sellers can offer pre-financing their shipments as a marketing instrument. Some buyers prefer procuring goods from sources offering simultaneously financing, in contrast to those offering the lowest price. Factoring assists when the seller does not have sufficient funds and no credit line to provide a trade credit to the buyer, at the same time, the buyer has not sufficient funds, or is not willing to immediately pay for the goods and services. ¾ Non-recourse factoring frees the client from the risk that the buyer does not pay on time or even at all. It would be too expensive or even impossible for the seller to gather qualified information on the financial capacity and credit worthiness of the buyer. This makes factoring attractive to SME with few, dominant buyers, a considerable risk for any company. ¾ Regarding export factoring, the client has also sold (better: bought coverage against) the foreign exchange risk and the country risk.
Many SME welcome that the factor takes over debtor bookkeeping, cash flow monitoring and related administrative tasks. The factor is specialized and it would often not be efficient for SME to employ additional staff. SME feel weak and inferior when dealing with much larger enterprises. They feel being in a stronger position when employing the services of a factor whom they deem more at level with corporate companies.
3
ADB
SME DEVELOPMENTTA
1.4 Regulations and Legal Aspects 1.4.1
Institutional Regulations
Presidential Decision No. 61/1988 on multifinance companies (Perusahaan Pembiayaan, MFC) was the first regulating licensing and activities of MFC, namely leasing, factoring, consumer finance, credit card companies, and venture capital firms.4 MFC can engage in one or more of these activities. The MoF Decree No 606/KMK.017/1995 was the first improvement of MFC regulations. After the crisis, regulations in the finance sector have been improved again making them more comprehensive and able to support developments in this sector. The present regulation on MFC, MoF Decree No.448/KMK.017/2000 (October 2000), grew to become 51 paragraphs from 11 paragraphs before. MFC are Indonesian or joint venture shareholder companies (Paragraph 8) or cooperatives with not more than 85% foreign ownership (Par.14). MFC need to apply for a license from MoF (Par.10). A decision has to be published 60 days later (Par.11). The company has to start the business 60 days after receiving the license (Par.12). To establish an MFC, minimum paid-up capital differs: (Par.13) ¾ national private company Rp 10 billion ($1 million) ¾ joint venture company Rp 25 billion ¾ cooperative company Rp 5 billion Opening of branches requires again a license from the MoF. The plan has to be included in the MFC's annual work plan and sanctioned by the General Shareholder Meeting. Only profitable MFC are qualified. The decision on the application will be made latest after 30 days (Par.20). MFC are allowed to borrow up to 15 times equity (net worth) out of which offshore loans are limited to 5 times equity. For the sake of calculation, equity includes subordinated loans with at least 5 years maturity that have been reported to the MoF latest 10 days after they were received (Par.23). MFC are forbidden to mobilize funds directly from the public or to issue promissory notes (except as a collateral for bank loans) (Par.27). MFC have to report to MoF (copy to BI) the financial development monthly and activities quarterly. The have to publish in a newspaper balance sheet and profit/loss calculation latest four months after year-end (Par.30). MoF assisted by BI (Par.33) supervises MFC. The license can be revoked if MFC do not comply with most of these regulations. However, only administrative sanctions apply if MFC do not publish or submit their financial report (Par.41). It is important to know that MFC are not allowed to mobilize funds directly from the public, be it in the form of giro accounts, savings, deposits or similar products.5 They also cannot tap pension funds or the bond market. They are not allowed to issue promissory notes, commercial papers (CP) or provide any kind of guarantee to other parties. Equity and bank loans are their sources of finance. In contrast, the Indonesian Pawn Shop Company
4
The government issued special regulations on venture capital firms in 1995.
5
If the intention was to protect the public from losses than this rule has missed its objective. The public, through the government recapitalizing banks, took indirectly over losses of MFC.
4
ADB
SME DEVELOPMENTTA
(Perum Pegadaian), another source of alternative short-term finance, is allowed to offer bonds, which obtained a high rating. For comparison, MFC in Thailand and in many other countries are allowed to mobilize funds from the public. In Germany, factors applied even for bank licenses.6 The Indonesian Law on Banks (No. 7/1992, amendment No. 10/1998) does not allow banks to engage in factoring. As a result of fictive transactions and cross funding, BI supervises MFC based on a joint MoF/BI decree (No 607/KMK.017/1995 and No 28/9/KEP/GBI). In practice, factoring companies do not feel supervised by BI nor could any recall being audited by BI as banks are. A technical guideline (Surat Edaran Nomor SE-1087/LK/1996) determines, among others, how to classify factoring advances (see No. 4.2 Attachment II). Following this guideline, with recourse factoring is never to be classified (doubtful or loss). The MoF also reviews this loophole. 1.4.2
Legal Issues Regarding Factoring
Regulations on MFC do not refer in detail to factoring and the legal implications of the transactions. This results in problems if factoring company client and customer differ on contractual issues. In the absence of specific regulations court decisions are unpredictable (see Annex 5). Legally, the factor becomes the new creditor based on the seller's cession and sale of the receivables. It is a purchase agreement, which, for the seller (client), has a financial impact. It does not affect the buyer (or customer). Factoring is not a credit. Assignments of A/R are recognized by the Indonesian law but there are no clear provisions governing their use or rights. Consequently, it is difficult to determine if this security has been given previously. At present, it is possible that a third person acquires “in good faith” A/R and collects the money. The factor has to approach his client who by that time might be already insolvent.7 Rules on selling A/R and cessions differ among nations. For example, in order to receive preferred legal status, the American Law demands the notification of cessions to be registered and accessible to the public, also to credit information bureaus. The Ottawa Unidroit Convention8 on the acquisition of receivables for the purpose of financing and the UNCILTRAL (United Nations Commission on International Trade Law) Convention shall facilitate and ease international short-term financing, among others through regulations on cessions of A/R. As a consequence of the Ottawa Convention, factoring will have advantages against bank financing of receivables. Indonesian factors are not aware of these conventions. Indonesia did not yet ratify or even sign this convention.
6
At least 4 of 15 major factoring firms are banks.
7
See: eee.insolvencyasia.com/insolvency_law_regimes/Indonesia/section_c.html p 4, and 7
8
Unidroit = International Institute for the Unification of Private Law.
In 1988, representatives from 50 nations convened in Ottawa and decided on the "Unidroit Convention on International Factoring". Among these nations were leading industrialized countries (UK, Italy, USA, Germany) but also developing countries like Nigeria, Guinea etc. For more details see http:www.unidroit.org/english/implement/I-88-f.html (24/10/01).
5
ADB
SME DEVELOPMENTTA
2 FACTORING PRACTICE IN INDONESIA
2.1 From Past to Presence Archeologists found documents that about 5000 years ago merchants already practiced factoring in today's Iraq. Factoring as it is now known in the world of finance origins from Chicago, USA, where Heller Bank started factoring in 1919. Today, this factor claims to be the biggest worldwide. In Germany, the first factor started in 19589. Formal factoring offered by a finance company is also relatively new in Indonesia.10 Regulated factoring started 1988 with the decree on multifinance companies (MFC). The first factoring company, PT Niaga International Factoring (NIF) commenced business in November 1990. Until end of 1995, a total of 245 MFC obtained licenses allowing these companies to be active in any of the five forms of alternative financing. The following years, until 2000, no new MFC licenses were issued. The market was considered saturated. Some companies intercepted 1996, probably using licenses obtained earlier.11 In 2001, three MFC applied for a license and two of them received it until October. Few MFC ever offered their services to the general public. Most of these enterprises were established to fund the particular interests of conglomerates and businesses of owners of these MFC. It is evident that, with bank regulations becoming stricter, activities of factoring companies ballooned.12 Reportedly, about 80% of the transactions recorded as factoring were not backed up by trade transactions. They were "fictive" or constituted "double financing". They served to un-collateralize lending to enterprises, de-linking from capital ratio requirements, and avoiding supervision by authorities. Although MFC as financial institutions have to report to BI, they have not access to BI's credit information system. Therefore, double financing could remain undetected. The MFC also allowed circumventing the banks' legal lending limits. It is no wonder that the entire industry crashed when the financial crisis hit Indonesia. However, for most of the MFC, in particular factoring companies, the crisis is deeper and it lasts much longer. The government did not develop a rescue package to bail out MFC. One reason mentioned is that no public funds are directly involved in financing MFC.13 Per 22 March 2001, IBRA (Indonesian Banking Restructuring Agency, BPPN) supervised 118 MFC.14 One should mention that not all MFC are culprits and that some of them are victims. Until June 2001, only 107 companies released financial figures for 2000. 35 multifinance companies report factoring activities, 20 of them turn over less than Rp 5 billion. Only two companies are known to be engaged in offering factoring to the public. Unlike other MFC products, factoring did not yet pick up after the 1998 peak of the crisis. Until now, factoring was not very much promoted. It has not gained popularity in Indonesia or among SME as - seen apart from some exceptions - factors were not focusing SME.
9
Still some years before in 1962 the first leasing company was established in Germany!
10
See also: Cash Management in Indonesia by W. Adji Wibowo, Head of Cash Management, Deutsche Bank Jakarta, in: Treasury Management International, Special Report, p 8 f. 11
For example, PT Sinar Mas Multifinance, a wholly owned subsidiary company of Sinar Mas Multiartha, was established in 1996 "with Leasing and Factoring as its core business." Source: http://www.sinarmas.com/annual_99_8.htm dated 03 Oct. 2001. 12
See: Annex on Sinar Mas Multifinance.
13
This argument is, in the Indonesian context, not completely right. MFC cannot repay bank loans origining from deposits. Banks cannot return deposits and are therefore assisted by the public through a blanket stae guarantee and recapitalization. 14
http://ibra.bppn.go.id/indonesia/loan_restructuring/FinInst.asp.
6
ADB
SME DEVELOPMENTTA
Out of 482 SME that were interviewed in Medan and Semarang in May/June 2001 only one ever used the services of a factoring company.15 In fact, most of them would not know what factoring is all about. The term and its meaning remain widely unknown, even to bank people.
2.2 Financial Development of Factoring Companies Between 1992 and 1995, MFC experienced the sharpest growth in factoring with tripledigit annual average growth. In 1996, factoring declined, most probably due to regulations limiting lending. One year later, factoring increased 25%. Data Consult wrote: "Factoring investments grew amazingly." The development of factoring portfolios shows a deep decline following the financial crisis. According to data published by BI16 and those obtained from the MoF, the quality of the factoring portfolio is worst if compared to other multifinance products like leasing, consumer finance, or credit cards. Figure 2:
Development of Factoring Portfolio Rp billion
Year
1996 1997 1998 1999 10/2000 12/2000 06/2001
Reporting MFC
230
232
N/A.
N/A.
N/A.
183
201
Pass
8,00
9,76
5.37
2.32
1.51
2,80
1,01
Doubtful
0,02
0,19
0.45
0.33
0.22
0,28
0,24
Loss
0,02
0,15
2.18
3.74
3.57
3,48
2,78
Total
8.03
10.10
7.99
6.40
5.30
6,55
4.03
Source: Bank Indonesia, Annual Report, Ministry of Finance Remark: Several MFC do not send their reports to MoF regularly!
The figures show a decline in factoring advances. If converted to $, the factoring market receded 85% from $3.3 billion to $400 million. Compared with the total multifinance investment the factoring share declined from 30% (1996) to 13%. The outstanding amount of active factoring (pass) compares to about 0.4% of total bank loans (Rp 258 trillion). The figures need to be interpreted. According to several sources, the amount of unrecoverable factoring receivables results from malpractice among conglomerates, a cooperation between suppliers, buyers, banks and MFC. The business volume of factoring, the amount of A/R purchased, is normally much higher than the outstanding amount. It depends on the average time until a customer pays or until the money can be "turned over". If one relates Rp 2.6 trillion factoring volume (year 2000) to Rp 1 trillion outstanding, this takes about 360/2.6 = 140 days or nearly 5 months.
15
The company's characteristcs are: operating in the service sector in Semarang, number of employees between 5 and 19 (small), existing since more than 10 years, never received a bank loan, it reported growth during the past two years. Source: ADB TA SME Development, ACNielsen, Jakarta, Study of Small Medium Enterprise In Semarang and Medan, June 2001.
16
Bank Indonesia, Laporan Tahunan (Annual Report) 2000, p. 123.
7
ADB
SME DEVELOPMENTTA
This is in line with reports that Indonesian factors receive payments only after about three to six months. For comparison, German customers pay within 40 to 50 days only. It is assumed that most of the Rp 1.0 trillion outstanding and classified as "pass" does not concern factoring of goods and services actually delivered during the past six months. In fact, regulations provide a loophole for "with recourse factoring". These advances need not to be classified as doubtful or loss at all. It is estimated that certainly less than Rp 300 billion outstanding, equivalent to 0.1% of total bank lending is based on actual factoring. The factoring volume would not exceed Rp 1 trillion. For comparison, German factors report receivables amounting to Euro 3 to 4 billion against bank loans amounting to Euro 3,600 billion, a similar small ratio! Development of Factoring Investment
Figure 3: Rp trillion 12.00 10.00 8.00 6.00
Loss Doubtful Pass
4.00 2.00
10 /2 00 0 12 /2 00 0 06 /2 00 1
19 99
19 98
19 97
19 96
0.00
Factoring is a tiny niche product among financial instruments, in particular concerning support to SME. At present, the conclusion of a new factoring contract is a rarity. The market still shrinks as long as banks insist on repayment of loans to MFC and consumer finance offers safer incomes. Multifinance Portfolio Quality
Figure 4:
Consumer finance promises highest repayment ratios
100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
Leasing Factoring Credit Card
00 1 /2 06
00 0 /2 12
00 0 /2 10
99 19
98 19
97 19
19
96
Cons. Finance
8
ADB
SME DEVELOPMENTTA
2.3 Factors in Indonesia Factoring is, and may have been, the dominant activity of several MFC, but not the only one. There is no MFC in Indonesia anymore offering exclusively factoring since PT Niaga International Factoring (NIF) merged with its sister company Niaga Leasing recently. Factoring is a market dominated by national enterprises, for example: -
PT Sinar Mas Multifinance claimed to be the biggest factor with a portfolio exceeding Rp 1 trillion in 1996.
-
Indonesian conglomerates founded several multifinance companies, for example PT Indomobil owns and co-owns a number of MFC, and four of them are licensed to engage in factoring.
-
Joint ventures finance only about 5% of factoring activities, in contrast to leasing (60%).
-
Only three enterprises are affiliated to international factoring chains. Even ORIX, a Japanese MFC operating in more than 20 countries, is engaged in factoring, e.g., in Sri Lanka, but not in Indonesia through its PT Orix Indonesia Finance joint venture. The international affiliation allows engaging in international export and importing factoring, and offers access to experience and training facilities. Figure 5:
International Affiliation of Factoring Companies
Name of company
National affiliation
Niaga International Factors, Bank Niaga (NIF), a joint venture with IFS –Intern. Factors Singapore Ltd.
International affiliation Heller Factoring
Status active
BII Finance Center (BIIFC)17
Bank International FCI (Factors Chain International) Indonesia (BII)
active
Salindo Perdana Finance
Salim Group
closed
FCI
PT BII Finance Center is besides NIF the only other often-mentioned serious supplier of factoring services to SME. No figures were obtained, but it was mentioned that advances of less than Rp 30 million were managed. Meanwhile, it was felt necessary to diversify. No funds could be obtained for the factoring market. Both firms entered the profitable consumer finance segment, lately a booming, profitable and more promising sector thanks to increasing demand for motor vehicles. NIF handles a factoring volume that amounted to Rp 73 billion in 2000 and achieved Rp 110 billion by end of September 2001. It is expected to even grow to Rp 200 billion in the last quarter.18 The factoring volume of BIIFC amounts probably to between Rp 50 and Rp 100 billion. Provided that the average maturity is about three months or more, the average amount lent (outstanding) by these two companies is Rp 60 to 80 billion.19 They could
17
The wholly-owned subsidiary was formed on February 13, 1991, as a multi-finance services company to engage in leasing, factoring and venture capital. It is also licenced to provide credit-card services and consumer finance. 18
According to Parman Nataatmadja, director of Niaga International Factors, the company has already achieved a volume of Rp 110 billion until end of September, Bisnis Indonesia, 29 Sept. 2001: "NIF targetkan leasing Rp 130 miliar". 19
Rp 250 billion loans (volume) x 90 days average turnover (maturity) period / 360 days per year = average outstanding of Rp 62.5 billion.
9
ADB
SME DEVELOPMENTTA
immediately increase financing, also to SME, if they could obtain more funds. The liability/equity ratio of far below 15 would allow this (see table below). Six MFC are listed on the Jakarta Stock Exchange. Four of them engaged in factoring. Few figures could be gathered20 on these and two other Indonesian firms offering factoring. The four publicly listed companies responded that their enterprises undergo "internal discussions" about their future. As mentioned above, the doubts that any of the loss-making listed companies is involved in substantial financing of trade receivables seem to be confirmed. At present, they are not offering factoring to the general public. Activities are limited to "maintenance" of clients, i.e., recovery, prolongation and restructuring of bad A/R as well as negotiating with creditors. Figure 6:
Multifinance Companies Engaged in Factoring
Per December 2000
Rp billion
Assets
Leasing Factoring Consum. Liabilities Finance
Equity
Profit (Loss)
Public Companies BBL Dharmala Finance21
871.4
313.0
Indocitra Finance
67.1
1.7
Manly Unitama Finance
98.4
Panca Overseas Finance22
908.6
35.1
15.2
114.0
63.0 69.9
11.5
559.0
0.0
1,158.5 (287.1)
(202.7)
47.3
19.8
(3.5)
33.2
57.7
(6.2)
1,019.8 (111.2)
(46.9)
Other Companies involved in factoring BII Finance Center (BIIFC)
103.5
data not available
Niaga International Factors 34.4 data not available Source: InfoBank, Biro Riset, Edition June 2001 p 63 ff. and p.72ff.
95.2
8.3
2.1
12.9
7.1
(3.9)
In contrast to leasing firms, factoring companies did never set up their own association. They are members of the Asosiasi Perusahaan Pembiayaan Indonesia (APPI), the MFC association that integrated ALI (Asosiasi Leasing Indonesia) in April 2000.
20
Biro Riset InfoBank, published figures.
21
This company has recorded the highest loss of 107 MFC presented in a recent comparison. At the end of 2000, the equity of 40 out of 107 MFC included in this survey does not anymore reach Rp 10 billion. 20 MFC record negative equity. About 100 other MFC did not publish their balance sheet on time, supposedly, because figures are even worse. For details see InfoBank, Special Issue No. 262, June 2001. 22
The Jakarta Stock Exchange has fined PT Panca Overseas Finance for not reporting, e.g. Rp 141 million ($14,100) in March 2001, and later again Rp 10 million ($1,000) for failing to submit the first half financial report to the bourse (Jakarta Post, 12 October 2001.
10
ADB
Figure 7:
SME DEVELOPMENTTA
Investments in Multifinance Companies
J o in t V e n tu r e s
P r iv a te N a tio n a l
1 2 .0 0
Rp trillion / $ billion/10
1 0 .0 0
8 .0 0
L e a s in g F a c to r in g C u s to m e r F . C r e d it C a r d
6 .0 0
4 .0 0 S o u rc e : In fo b a n k 0 4 /2 0 0 1
2 .0 0
*) J u n e
1997
2 0 0 0 *)
1997
2 0 0 0 *)
It is remarkable that joint venture companies financed factoring in Indonesia with Rp 333.4 billion only compared to Rp 5,784 billion made available by national companies. If compared with 1997, the ratio did not change considerably during the post-crisis years. Factoring firms are dominantly private national enterprises.
11
ADB
SME DEVELOPMENTTA
2.4 Location All of the 35 active factors are domiciled in Jakarta. BIIFC and NIF offer factoring only to enterprises within the area of and around Jakarta (Jabotabek). Transaction costs would be too high for financing enterprises outside this area. Formerly, factoring companies domiciled in Jakarta offered factoring to enterprises in Surabaya, Bandung and Semarang through representatives and branches. The Indonesian Yellow Pages on Internet lists 13 MFC, with eight located in Jakarta. Those listed at other locations, three in Semarang and one each in Balikpapan and Bandung, are branches of Jakarta based companies. Only one of these, NIF is engaged in factoring.
2.5 Source of Finance MFC are funded with equity and bank loans. The following table depicts sources of finance. It is an aggregated picture of all MFC. Figure 8:
Source of Finance for MFC Rp billion
Year 12/1997
06/2000
Joint ventures Equity
12/1997 06/2000 Domestic MFC
2,062
750
5,396
(1,258)
128
(1,486)
187
(4,871)
Bank loans
13,814
6,721
20,824
11,656
Other loans
960
2,426
1,765
2,859
Profit (Loss) end 1996/1999
The crisis hit all companies and especially those receiving finance from abroad. With the Rupiah losing value, foreign exchange liabilities increased and eventually exceeded assets. The crisis interrupted the cash flow. Even cautious MFC became illiquid. Lack of access to funds is perhaps the most crucial problem MFC are facing: -
Banks are still extremely reluctant to finance MFC as a result of the past traumatic experience with a huge portfolio of non-performing loans.
-
Formerly, factors secured the loans with their assets, namely A/R against creditworthy buyers. Many banks regard this type of collateral to be not anymore sufficient or secure. At the same time Bank Indonesia severed collateral requirements for bank loans.
-
Foreign investors are still hesitant to extend new loans to factoring companies in Indonesia.
-
Despite regarding the prospects for their Indonesian associate "not so great yet"23, IFS increased its share in NIF from 40% to 47% in 2000.
23
see: http://asiaonemarkets.com/matrix/wallstraits/microcap/microcap_ifs.html, 03 Oct 2001.
12
ADB
SME DEVELOPMENTTA
2.6 Service of Factors Seen apart from the fact that factors in Indonesia normally do not take over the risk of non-payment (with-recourse factoring only) one might mention one particular feature that is characteristic for the SME situation in Indonesia. The factors have to advice many of their SME clients in administration and bookkeeping, in particular handling of A/R, invoicing etc. They also perform audits so that they regard financing otherwise nonbankable clients being responsible. Outsourcing of administrative tasks like bookkeeping is not yet popular among Indonesian SME.
2.7 Cost of Factoring The convenience of factoring is paid with a discount on the invoice's face value. It is higher if compared to the interest equivalent of a bank loan. However, with accelerated cash flow the factor's clients can increase sales and profits. Normally, these additional profits exceed the higher costs of factoring. For a cost comparison between a bank loan and factoring see Annex 2. The discount, mostly a fee and interest, depends on: ¾ the credit worthiness of seller (client) and buyer (customer) ¾ the time it takes until the bills are settled (factors keep current accounts with their clients) ¾ prevailing bank interest rates for non-collateralized loans ¾ average invoice amount (international standards applied, it should not be less than $500)
The discount, if compared to a bank loan, translates to a 40% to 60% p.a. interest rate. It is no wonder that factoring is a profitable business as PBT (Profit Before Tax) margins of IFS, Singapore, demonstrate: Figure 9:
Profitability of Factoring in SE Asia: International Factors Singapore (IFS)
Year PBT margin
1995
1996
1997
1998
1999
27.9%
28.2%
16.0%
-11.1%
24.7%
Source: http://asiaonemarkets.com/egi-bin/utils/printf.pl?almktipowatch, 03 Oct 2001.
International factoring is said to be more expensive if compared to a bank loan insured by an export credit insurer like Asuransi Ekspor Indonesia (ASEI).
2.8 Clients of Factor According to textbooks factoring is suitable for small businesses with a weak capital foundation and limited bankable collateral but excellent market prospects in a dynamic, growing market in the fields of manufacturing, distribution and services that generally sell on credit, in particular when dealing with big companies.
13
ADB
SME DEVELOPMENTTA
In Indonesia, SME with low technology and changing market conditions have found access to factoring. They have to finance delivery of goods and services if they want to sell them to large enterprises. Large enterprises seek pre-financing from SME! Figure 10: Typical Factoring Clients and Customers
Client
Customer
handicrafts manufacturer
department stores, exporters
furniture manufacturer
wholesaler, exporters
transport service providers
mining companies
food processor
Supermarkets
Scavengers
pulp and paper factories
Detailed data could not be obtained. For example, in 1998, German factoring clients were wholesale enterprises (46%), industry and manufacturing (40%), and services (14%). In general, factors regard many of their clients qualifying as SME (less than 100 employees). Often the client's enterprise is smaller than the buyer's is. Not all factors accept clients as individuals, but statistical evidence shows that they constitute the majority (see Annex 6). The factor relies heavily on the name and reputation of the customer (buyer) assumed to be identical with its credit worthiness. All customers are incorporated enterprises (CV, PT). In fact, the customer list includes well-known large national and international companies. Based on experience, factoring with one client already starts to become profitable with annual volumes as small as Rp 50 million. This underlines the fact that factoring is a suitable alternative also for small and medium enterprises. Reportedly, some enterprises, characterized as medium-sized family-managed entities, did not allow their suppliers to use factors. They fear negative effects, be it that the factor could obtain business data, impacts on credit lines with the bank the factor is affiliated to, or only that they believe settling payment delay problems directly with the supplier being easier.
2.9 Marketing Efforts The requests of applicants for factoring services exceed by far the financial capacity of the active factoring firms. Therefore, factors do not need to undertake any marketing efforts. On the other hand, factoring does not become a well-known facility. The alliance of NIF with IFS allows participating in SE Asia's first online factoring services. This can be regarded as a marketing effort. However, it is questioned whether Indonesian SME exporters can benefit from this facility soon.
2.10 Market Prospects and Potential The "real" Indonesian factoring market is far from being saturated. The companies interviewed see a huge immediate and medium-term market potential. It cannot be realized, simply due to lack of funds. 14
ADB
SME DEVELOPMENTTA
The director of a factoring company presented the potential size of the Indonesian market for export factoring as follows. For example, financing 1% of non-oil/gas exports alone would result in a monthly volume of more than Rp 60 billion ($6 million).24 However, one firm claims that the realized local export financing does not exceed $50,000 to $100,000 per month. Requests to increase factoring facilities have to be turned down because banks do not extend new loans to factoring companies. The Singapore partner of an Indonesian factoring firm also expressed still wariness regarding injection of additional funds. The director of another firm engaged in factoring claims that he could easily finance an additional volume of Rp 5 billion monthly but banks do not make available funds, because "they do not comprehend the MFC business." As mentioned before, few factors operate outside Jakarta and its vicinity. However, they confirm a potential to sell factoring also in other cities. One factor agreed that he would not need a feasibility study to start immediately a profitable branch in, for example, Semarang. However he needs the study for the application of a license to open a branch.25 Factoring is still widely performed outside the formal sector. Moneylenders are advancing funds to sellers from whom they receive post-dated cheques, "bon putih", or, preferably, "bilyet giro" against immediate cash against a discount.26 This paper is accepted as collateral and the "discounter" can hand it to another financier should he urgently need money. The size of this market is quite difficult to assess. For example, the market for cloths and garment in Tanah Abang, Jakarta, alone would easily take up some Rp 10 billion. In the absence of other data, some assumptions are made on which a projection for the near-future volume for SME factoring is based: ¾ About 70,000 enterprises in Indonesia qualify as medium-sized enterprises with a workforce of between 20 and 99 employees. ¾ Assuming that perhaps 5% or some 3,500 enterprises, the upper-end medium-sized enterprises, are suitable candidates for factoring and ¾ their average monthly factoring turnover would amount to Rp 100 million, ¾ their buyers settle the invoices within two to four months ¾ the financing required by factors (permanent outstanding amount) could amount to some 3,500 enterprises x Rp 100 million x 2 - 4 months = Rp 700 billion to Rp 1,400 billion ($70 - $140 million).
This is in line with projections of practitioners estimating a market potential for SME factoring amounting to about Rp 1 trillion within three to five years.
24
January 2001 non-oil/gas exports amounted to US$ 637 million, 1% is equivalent to about Rp 60 billion.
25
See MoF Decree 448, Paragraph 20.
26
The issuer of a "bilyet giro" orders his bank to charge his account in favour of the account of the person and account mentioned in the "bilyet giro" at the date mentioned in this paper.
15
ADB
SME DEVELOPMENTTA
2.11 International Factoring Factoring is offered in 54 countries by 986 companies.27 Each country keeps records on factoring in a different way and the blending of information is said to be almost impossible. It seems however that factoring is more popular in some countries whereas it is less in others. Differences are apparent among European countries and also among Asian countries. Figure 11: Factoring Turnover (volume) for Year 2000 Million Euro (or approximately million $)
Country
#
National International
Total
United Kingdom
70
117,700
6,070
123,770
Germany
15
18,660
4,823
23,483
7
11,500
4,400
15,900
Thailand
16
1,260
8
1,268
Malaysia
12
570
15
585
Indonesia
2
+20?
3
23
Netherlands
Indonesia (MoF)
40?
+260?
Indonesia (MoF) Jan-Juni 2001
35
+72?
# Number of leading factoring companies included in an international survey by factors.com (figures in italics are own estimates).
Factoring is not a matured market, even in industrialized countries. The worldwide factoring volume increased 1999 by more than 20% and 2000 again by about 12%. For example, factors in Germany saw their market grow from DM 19.1 billion in 1993 to DM 46.0 billion (Euro 23.5 billion) in 2000 or more than 13% compounded annually over an 8year period. International factoring records highest growth rates, namely 40% in 2000, but compared with the total volume, about $600 billion, it accounts for only 7%. Strategic alliances and cooperation among factors as well as on-line factoring offer services in particular for exporters. The factor takes over the risk of non-payment, currency fluctuations, and country risk. SME, often just producing and relying on a relationship between an export company and its counterpart abroad, can directly ship their goods to their final destination. Factoring allows to save trade margins and to increase the client's price-competitiveness. Factors Chain International (FCI), an Amsterdam based entity, has 144 members in 51 countries. They claim to cover 47% of the factoring world market. Their members serve 111,000 clients and collect payments from 5,800,000 customers. The member’s process more than 100 million invoices. Typical sectors served by FCI members include: textiles, wood and furniture, food and beverages, metalworking, plastic industries, paper, and machinery. FCI offers training through correspondence courses. Seminars are held in many regions in the world, including South East Asia (Singapore). In Germany, the factoring association counts 15 members. A typical factoring company employs about 100 persons, processes 1 million invoices annually and achieves a turnover (financing value) of $2.5 billion (average $2,500 per invoice). The average turnover period is 40 to 50 days (national 30-40 days, international 60-90 days) resulting 27
Deutsche Factoring Bank AG, Annual Report 2000.
16
ADB
SME DEVELOPMENTTA
in a financing/outstanding ratio of 8 to 9. About 20% of the business concerns international factoring. Several factoring companies applied for a bank license allowing them to access cheaper funds. The biggest factor is DG Diskontbank (market share about 25%), which has its roots in the cooperative banking sector. Heller Bank, a subsidiary of the US based founder of modern factoring, comes second (15%).
17
ADB
SME DEVELOPMENTTA
3 CONCLUSIONS AND RECOMMENDATIONS Factoring is an instrument that can assist profitable, but financially still weak, SME to compete with financially stronger firms. It offers an attractive alternative if access to bank credits is restricted, among others due to lack of bankable collateral. The market potential is remarkable and easy to satisfy. However, factors in Indonesia depend heavily on local bank credits. Banks are reluctant to finance factoring companies due to past delinquencies. Factoring companies cannot support SME at times when bank loans are limited in general, and especially for MFC. In addition, consumer finance offers also a lucrative but much a safer market. The removal of problems faced by MFC engaged in factoring will benefit SME.
3.1 Problems MFC cannot get funds for factoring: ¾ In general, demand for bank loans exceeds supply. ¾ Banks are reluctant to finance MFC because of past delinquencies provoked by mismanagement due to vested interests without considering that many MFC became victims themselves. ¾ Banks do not differentiate very much between MFC and their fields of activity. Some consider factoring companies as unfair competitors as they must not follow strict banking regulations. ¾ Several government regulations are not supportive. The quality classification of A/R gives few clues on the soundness of an MFC practicing the common withrecourse factoring. With few exceptions, bank loans are the only source of funds from third parties available to MFC. ¾ IBRA has not yet resolved severe problems of several prominent MFC thus contributing to reluctance to finance similar enterprises with equity. ¾ Some fear that an agency supervising financial services firms (LPJK, Lembaga Pengawasan Jasa Keuangan) might result in more administration and bureaucracy. ¾ A credit bureau system providing a track record with data about prospective clients is badly missing.
3.2 Requests MFC cannot get funds for factoring: MFC request for government actions. They consider the following matters to be urgent: 1. Complaints are expressed that government institutions like courts, judges, and police are not well informed about IBRA and the institution's objectives. Too often they side with debtors. This delays the clean up of defunct companies and the recovery of a more stable MF industry. 2. Healthy factoring companies need financial support, i.e., access to funds. This access has a higher priority than preferential interest rates. 18
ADB
SME DEVELOPMENTTA
3. At present, bank loans and equity are the only source to fund multifinance companies. Rules should allow that MFC would be given access to other sources of finance, e.g., pension funds or investments from foundations, etc. 4. The tax regulation should not treat leasing, factoring, and consumer finance differently. For example, the tax directorate accepts only 2.5% provision for bad debt of leasing companies as they are regarded being finance companies in contrast to factoring and consumer finance activities.
3.3 Recommendations and Suggested Actions Insufficient access to funds for factors is the most important single limiting factor. Recommendations concern access to funds through measures aimed at increasing the banks' confidence, not in the entire factoring industry but at least in individual companies with superior governance. There should be a reward for better management. In addition several minor other proposals will be presented.
3.3.1 Access to Funds Not all factoring practicing MFC played foul but banks had good reason losing trust in this line of business. It is proposed to offer a platform for MFC engaged in factoring to expose their ability to serve SME. Not all factoring companies should be treated the same way. The tap of funds should only be opened for MFC that follow several transparency and good governance criteria. Not all MFC might like to follow this line. Therefore, it is justified if access to funds is only improved for superior companies. It is proposed that interested MFC are given the opportunity to upgrade or qualify to become a specialized factoring company adhering to strict regulations on one hand and, in turn, allowing broader access to funds on the other hand. ¾ It is proposed that the government should issue a special decree governing singlepurpose factoring companies and their activities. (A similar decree has already been issued for venture capital companies.) The regulations should incorporate lessons learned from the crisis and experience from the banking sector, e.g., concerning issues like improved rules on portfolio quality calculation, maximum exposure to individual clients and customers, adherence to healthy financial ratios, responsibilities of management and commissioners, etc. ¾ Special guidelines for assessing factoring companies should be developed permitting risk rating of the institution. It is assumed that rating increases competition among MFC in order to qualify for a bank loan. It is suggested to improve the flexibility of MFC to respond to market demands through reviewing procedures required for opening branch offices. ¾ Regulations for calculating the soundness of factory firms should be developed following the blueprint and rules applicable for banks. ¾ Rules for supervision, e.g., by LPJK (Lembaga Pengawasan Jasa Keuangan), the future agency supervising financial institutions, for reporting requirements, and actions stipulating compulsory recapitalization or immediate closure should be put in place, enforced and practiced. (The MoF is already working on this.)
19
ADB
SME DEVELOPMENTTA
¾ In turn, risk rated single-purpose factoring companies should be allowed to compete for funds from insurance companies, foundations, pension funds and from private investors, be it in the form of equity or as liability like issuing commercial paper (CP) (for which, however, in contrast to banks, the government should expressively not take over any guarantee!). ¾ Rated factoring companies should be given access to funds earmarked for developing SME, for example those funds that are offered by a specialized second-tier bank (a wholesale financial institution, a proposal of the ADB-TA SME Development), with the objective to support SME. A special window should be made available to allow factors to prove profitable and sustainable business relationships with SME, which may attract more funds. ¾ A regulation demanding that only banks can become clients of Bank Export Indonesia (BEI) should be reviewed in favor of rated factors financing SME exports.
3.3.2 Other Recommendations to Enhance SME Financing The following are recommendations to support factors aimed at reducing risk enhance supply of factoring services, and improve monitoring: 1. Factoring companies (and other MFC) should be allowed immediately access to and participation in the BI-run credit information system, a step requested by factors and banks as well. This will reduce the risk of banks and factors when extending loans. Double financing can be detected and avoided. 2. The government should review regulations on legal issues: (i) It would be helpful in the development of lending on security of various types of property, including A/R, if also the rules pertaining to A/R were codified and if a security registration system was put in place to record such security interests as a means of perfection of security interests in these types of assets.28 (ii) Based on recommendations laid down in the Ottawa Convention and UNCITRAL (United Nations Commission on International Trade Law) convention on international factoring aiming at supporting export the government should implement a system that record other than immovable assets. 3. It is suggested to review whether allowing a 100% foreign factoring company ownership could be beneficial, in particular with regard to gaining foreign investment and enhancing exports. Although the data are used for different purposes, the advantages of parallel reporting to and data collecting and processing by BI and MoF remain entirely unclear. In order to streamline and improve government procedures, a review is urgently recommended so that one institution gathers the data and both have access to these data. It is expected that data on activities of multifinance companies are available latest two months after the reporting period ended instead of more than ten months at present.
28
See also: www.InsolvencyAsia.com/insolvency_law_regimes/indonesia/sectio_c.html
20
ADB
SME DEVELOPMENTTA
List of Annexes
Annex 1
Advantages of Factoring for SME
Annex 2
Income and Cost Comparison (Example)
Annex 3
PT Niaga International Factors, A Company Profile Conglomerates: The Indomobil Group
Annex 4
PT Sinar Mas Multifinance (SMM), Full Service Multi Finance
Annex 5
Legal Problems
Annex 6
Statistical Data on Financial Institutions
21
ADB
SME DEVELOPMENTTA
ANNEX 1
Advantages of Factoring for SME Factors or factoring companies are multifinance corporations offering their services to producers or suppliers who have typically to wait between 30 to 90 days, in some cases even longer, until the buyer settles the debt. The seller or has several advantages when becoming a client and using the services of a factor: -
Assets of the company are not fixed in A/R or loans to buyers, which is not the objective of the enterprise.
-
The factor buys A/R; there is no need for any physical collateral.
-
Increased liquidity increases the sellers' standing and credit worthiness
-
Immediate replenishment of goods increases and accelerates turnover resulting in business expansion and allowing higher capacity use resulting from higher efficiency due to lower idle capacity of fixed assets.
-
Inputs are cheaper thanks to cash discounts and/or bulk purchases.
-
Outsourcing of non-essential tasks to specialists, like approving accounts, administration of A/R, and reminding slow paying customers, increases efficiency. Overhead costs can be reduced.
-
A weak seller is less psychologically burdened in his negotiations. He avoids direct confrontation with buyers regarding follow-up of settlements of bills.
-
Credit insurance against bad debt is possible.
-
The factor is constantly watching the financial capacity of the buyer and warns in time against "risky" transactions or if the buyer's situation deteriorates.
-
Factoring companies are specialized in handling bad debt thus reducing the amount of necessary write-offs.
-
Factoring is a fast and adaptable instrument that allows to flexibly benefiting from short-term opportunities without waiting for a bank's credit decision and timeconsuming collateralization.
-
No additional debt or loan burdens the balance sheet and the company's financial ratios, and subsequently the credit worthiness or credit rating, is improved.
22
ADB
SME DEVELOPMENTTA
ANNEX 2
Income and Cost Comparison (Example) The comparison is based on assuming a $1,000 shipment on, for example, 1 August for the alternatives with bank financing or with factoring. Activity
Bank loan
Goods shipped, and invoice send on
Factoring
1 August
1 August
-
$800 initial cash payment
Payment: 2 August, transfer (advance from factor) Interest charge 1.5% p.m. 2 months x $1,000 x 1.5%
($ 6) = $200 x 1.5% p.m. x 2 months ($ 30)
interest (bank finance is required)
Interest earned
$16 = $800 x 1% p.m. x 2 months
(in case no bank credit is required) Debt collection supervision of reminders 1 October,
the amount is the advance from the factor and may be deposited
efforts, A/R,
($ 10)
from factor from buyer
$1,000
Net transaction income
./. $
$ 960
task and expenses of factor are deducted from final payment
157
$ 951
balance deducted by the factor's fee*) after the buyer (customer) has settled the bill Difference $9 or 1%
*) The $43 discount is the factor's gross income and reduces the producer's income, e.g.: - interest for 2 months x $800 x 1.75% p.m.
= $28
- plus fee 1.5% x $1,000
= $15
Commonly, the discount is based on the following particulars: -
A handling fee is charged amounting to 0.5% to 2.0% of the invoice value to compensate the factor's cost for administration. For small invoice amounts (below $1,000), the handling fee percentage will be high.
-
The factor charges interest at a rate similar to the prevailing interest rate for uncollateralized commercial credits. Therefore, the nominal interest rate can be higher if compared to interest charged for collateralized credit (see example above: 1.75% versus 1.5% p.m.)
-
In case of non-recourse factoring (100% risk cover) risk premiums of between 1% to 5% would be deducted depending on the credit worthiness of the buyer.
Some factors charge fees for assessing the credit worthiness of new buyers amounting to $10 to 30 per investigation.
23
ADB
SME DEVELOPMENTTA
ANNEX 3a
A Company Profile PT Niaga International Factors
Gedung Bank Niaga Gajah Mada, Lt. 3 Jl. Gajah Mada No. 18 Jakarta 10130 Tel: 021-7398617
PT. Niaga International Factoring (NIF) was the first multifinance company (MFC) founded after the 1988 decree on MFC with factoring as the only activity. It is a subsidiary company of PT Bank Niaga, a bank founded already in 1955. The company started its business in November 1990 as the first of its kind in Indonesia. PT Niaga International Factoring (NIF) is a joint venture between - 60% - 40%
PT Bank Niaga29 and International Factors (Singapore) Ltd. (IFS) with 40% equity.
In 2000, IFS increased the share to 47% in order to comply with equity regulations. However the company still misses the Rp 25 billion capital requirement for joint ventures. NIF is the only Indonesian Member of International Factors Group s.c.ifgroup with more than 50 members in nearly 40 countries The performance of the company was greatly affected by the scarcity of funding sources for the multi-finance industry. It called for an injection of capital from shareholders amounting to Rp 5.6 billion in October 2000 (IFS injected S$0.6 million (Rp 2.63 billion). The increase was necessary to meet the regulatory requirements set by the Indonesian MoF to upgrade NIF's license from that of a factoring company to a multi-finance company.30 During the year 2000 the company managed to book a factoring volume of Rp 73 billion. Collection efforts of non-performing accounts yielded recoveries of approximately Rp 2 billion but additional provisions for doubtful debts led to a loss of Rp 3.9 billion. Meanwhile, following the announcement, the company engaged in other financial services such as automotive financing.31 The Niaga Leasing CoRp, meanwhile merged with NIF, has its own homepage in contrast to Niaga International Factoring CoRp. The company takes part in online factoring via its e-commerce platform, "IntFactor". The B2B e-commerce became operational in 2000. IntFactor's Client Enquiry Module (CEM), operational in 2001, allows the client’s checking account status and requesting funds through Internet. NIF collaborated with KUKMI (Kerukunan Usaha Kecil dan Menengah Indonesia, an SME association) in financing SME with factoring. The target for 2001 is Rp 200 billion. Parman Nataatmadja, president director of NIF, explained that until September 2001 his clients took advantage from factoring amounting to Rp 110 billion. The Company Niaga Leasing will be merged with NIF as a necessary step to restructure the business of Bank Niaga. Z. Ivan 29
Besides PT Bank Niaga is 100% owner of PT Niaga Leasing Corporation and 79.65% owner of PT Saseka Gelora Finance (a MFC). (Source: Far-East Corporate Database capitaline.com/cs0612.htm, 03 Nov 2001). PT Bank Niaga is owned by several companies with PT Austindo Teguh Jaya as major shareholder (42%) and about 20 more shareholders (among them insurance companies, international trusts) owning each less than 13% (data per 1996). 30
Lua Cheng Eng, Chairman IFS, 16 March 2001 dev.expressmulitmedia.com/Ifs/annualreport00_1d
31
Yosef Ab Badilangoe, Vice Chairman of PT International Factors, http://dev.xpressmultimedia.com/Ifs/annualreport00_1e.pdf
24
ADB
SME DEVELOPMENTTA
ANNEX 3b Apthioman, credit director NIF, announced that the MF industry is driven by financing motor vehicles so that starting September NIF will not only engage in factoring but also in leasing. Activities will focus on Kalimantan Timur (through Saseka Gelora Finance), because interest rates that can be earned are higher than in Jakarta.32 Mr. Arwin Rasyid joined PT Niaga Factoring in 1990 as a Managing Director after 8 years with Bank of America. He became vice chairman of the Indonesian Bank Restructuring Agency in January 2000. The president director from 1994 to 1999, Ms. Gunarni Soeworo, became president of the private banker's association Perbanas. Among other appointments (Institut Bankir Indonesia, Lembaga Manajemen PPM, member of BPPN Oversight Committee, since 1999) Ms. Gunarni Soeworo acted also as commissioner of PT Niaga Factoring.
Conglomerates The Indomobil Group At least four enterprises with "business line: financing and factoring company for lease and purchase Indomobil Group's products" are part of the Indomobil Group: PT Bringin Indotama Sejahtera Finance, Jl Hayam Wuruk 108, Jakarta 11160,
Tel 6498218, 7397088, Fax 6408235;
PT Indoarta Multi Finance Wisma Indomobil 6 fl., Jl Undaan Wetan 50 Surabaya 60272
Tel 031 45600, 46923, 41035, 40273 Fax 514272
PT Indomaru Multi Finance Wisma Indomobil, 11 fl., Jl Haryono Kav.8, Jakarta 13330
Tel 8564846, Fax 8564382
PT Swadharma Indotama Finance Central Plaza, 11 & 15 fl., Jl. Jendr. Sudirman 47 Jakarta 12930
32
Tel 5702228, 5207990, Fax: 5702236
Bisnis Indonesia, 29 September 2001, "NIF targetkan leasing Rp 130 miliar".
25
ADB
SME DEVELOPMENTTA
ANNEX 4
PT. Sinar Mas Multifinance (SMM), Full Service Multi Finance (A self-presentation of a company linked to BII Bank International Indonesia33)
Sinar Mas Multifinance, a wholly owned subsidiary company of Sinar Mas Multiartha, was established and operated in 1996 with Leasing and Factoring as its core business. With its total assets reaching Rp1.0 trillion (1999), the company was one of the largest multifinance companies in Indonesia in terms of assets. The company has a solid customer base, more than top 60 companies also including a few companies under Sinar Mas Group. The multifinance operation supports the banking network, thus provide financial support to the holding company structure. The high reputation of Sinar Mas Group has gained the confidence, the trust and support of foreign investors, which lead to the successful negotiation of Loan Rescheduling Facility of our Medium Term Note (MTN) amounting to USD 46.17 million on December 1999.
Factoring Factoring is a recent addition to the SMM business portfolio through the establishment of PT Sinar Mas Multifinance. There has been a significant gain on the performance of competition since the introduction of factoring to the Indonesian finance sector in 1994. At this time, factoring constitutes over 90% of the SMM total earning assets. SMM through its subsidiary SMF is now the largest factoring company in Indonesia with a volume of receivables doubling from Rp 629 billion in 1995 to Rp1.2 trillion in 1996. This extraordinary growth has been fueled by the Sinar Mas Group’s vast network and client based in which SMF can tap on. Enhanced by a fast credit draw down approval system of less than a week, it is especially attractive to companies in need of working capital in a hurry. With the absence of a lending limit as imposed on banks extending standard instrument of credit, a further advantage is the lighter collateral requirements compared to a normal bank loan requirement. Factoring is profitable for the company with minimized risks, since SMF lends to the 35 to 40 of their top corporate clients whom have established a long business relationships with the Company and the Sinar Mas Group. At the same time, the Company maintains a policy of not extending factored receivables of more than 25% of its total portfolio in any sector. Presently, SMF has no plans to extend its factoring service to the retail sector.
33
copy from: http://www.sinarmas.com/subsidiaries.htm., October 2001
26
ADB
SME DEVELOPMENTTA
ANNEX 5
Legal Problems 02-01-2000 17:11:09 Reported by Beta Ramses Riswan
The plaintiff is accused Penggugat Berbalik Menjadi Tergugat Pengusaha nasional Nirwan Dermawan Bakrie, selaku penjamin hutang PT. Bakrie Capital Indonesia (BCI) digugat pailit oleh PT. Sinar Mas Multifinance (SMM). Upaya pailit ditempuh oleh PT. SMM karena Nirwan selaku Direktur Utama PT BCI yang juga selaku penjamin hutang PT. BCI lalai dalam memenuhi kewajibannya. Selain itu, sebelumnya malahan PT. BCI menggugat PT. SMM secara perdata ke Pengadilan Negeri (PN) Jakarta Pusat menuntut agar PT. SMM menunda penagihan. Sialnya lagi, tuntutan PT. BCI itu dikabulkan, Oleh majelis hakim PN Jakarta Pusat dalam putusannya tertanggal 28 Desember 1999 memerintahkan PT. SMM agar menunda penagihan hutang atas PT. BCI sampai dengan adanya putusan berkekuatan hukum tetap dalam perkara ini, dan apabila melanggar ketentuan tersebut maka PT. SMM dihukum denda Rp10 juta per hari. "Putusan itu jelas tidak masuk akal dan memberikan dampak buruk karena membuat perusahaan yang bergerak di bidang pendanaan merasa was-was untuk memberikan dana kepada debitur, karena debiturnya bisa ngemplang dan dilindungi oleh pengadilan. Mereka berlindung di balik putusan tersebut. "Masa’ klien kami sebagai kreditur dilarang menagih padahal sudah jatuh tempo," kata Abdul Hakim Garuda Nusantara, SH, LLM, pengacara PT. SMM Nirwan. Menjamin Karena itulah gugatan pailit terhadap Nirwan Bakrie selaku penjamin hutang PT. BCI pun dilancarkan oleh PT. SMM ke Pengadilan Niaga (PN) Jakarta Pusat. Dalam sidang yang diketuai oleh hakim Sihol Sitompul, SH, pengacara PT. SMM membeberkan bahwa pada tanggal 13 Agustus 1997 di hadapan notaris FX Budi Santoso Isbandi, PT. SMM dengan PT. BCI menandatangani perjanjian anjak piutang (factoring agreement). Masih di hadapan notaris yang sama, PT. SMM juga menandatangani perjanjian garansi yang isinya antara lain menyatakan bahwa Nirwan
Dermawan Bakrie selaku Direktur Utama PT. BCI tanpa dapat dicabut kembali dan tanpa syarat menjamin kepada PT. SMM selaku kreditur. Isinya, pelunasan yang tepat waktu jatuh temponya jumlah uang yang dari waktu ke waktu wajib dibayar oleh PT. BCI berdasarkan ketentuan-ketentuan dalam perjanjian anjak piutang dan setuju pada setiap waktu fiminta oleh PT. SMM selaku kreditur untuk membayar kepada PT. SMM setiap dan semua jumlah yang wajib dibayar oleh PT. BCI. Dengan adanya garansi atau jaminan yang diberikan Nirwan itu, PT. SMM berdasarkan perjanjian anjak piutang telah memberikan pinjaman kepada PT. BCI sebesar Rp60 miliar. Dengan demikian PT. SMM berhak untuk menagih secara langsung kepada Nirwan sebagai penjamin pribadi untuk melunasi hutang PT. BCI. Adapun jumlah hutang (baik pokok, bunga dan denda) yang harus dibayar Nirwan kepada PT. SMM per tanggal 30 Desember 1999 adalah sebesar Rp277,35 miliar, dan jumlah tersebut masih akan terus bertambah sampai dibayar lunas. Jangka waktu perjanjian anjak piutang itu sendiri adalah 12 bulan terhitung sejak tanggal 21 Agustus 1997 sampai dengan 21 Agustus 1998. Dengan demikian jatuh tempo hutang Nirwan kepada PT. SMM adalah tanggal 21 Agustus 1998. Karena Nirwan tidak melaksanakan kewajibannya kepada PT. SMM pada saat jatuh tempo, maka PT. SMM memberikan surat peringatan kepada PT. BCI untuk segera melunasi hutang tersbut. Pihak PT. BCI menjawab bahwa pihaknya mengakui adanya kewajiban kepada PT. SMM, namun belum dapat memenuhinya karena keterbatasan likuiditas akibat krisis ekonomi dan moneter yang melanda negeri ini. Karena baik PT. BCI maupun Nirwan tetap tidak melaksanakan kewajibannya kepada PT. SMM meskipun berkali-kali diberikan peringatan, maka pada tanggal 9 Desember 1999 dan 30 Desember 1999 pengacara PT. SMM melayangkan somasi kepada Nirwan yang intinya meminta agar yang bersangkutan melaksanakan seluruh kewajibannya kepada PT. SMM.
27
ADB
SME DEVELOPMENTTA
Namun, bukannya kewajiban yang dilaksanakan oleh PT. BCI maupun Nirwan, malahan mereka lewat pengacara Gayus Lumbuun, SH, mengajukan gugatan perdata terhadap PT. SMM ke PN Jakarta Pusat yang sialnya lagi gugatan mereka dikabulkan oleh majelis hakim. Jelas pengacara PT. SMM merasa keberatan atas putusan provisi (pendahuluan) yang dijatuhkan oleh majelis hakim PN Jakarta Pusat tersebut. Adapun keberatan pengacara PT. SMM adalah putusan provisi tersebut tanpa mempertimbangkan keharusan adanya sifat mendesak (urgent) yang menjadi syarat bagi sebuah putusan provisi. "PT. BCI dan Nirwan adalah debitur PT. SMM yang sudah mengakui hutangnya tetapi tidak mempunyai itikad baik untuk melunasi hutangnya tersebut. Adalah tidak lazim dan tidak adil pengadilan memerintahkan para kreditur untuk menunda menagih hutang bahkan menghukum denda bila melanggar ketentuan tersebut. Padahal dasar hukum kami kuat, jadi apa sesungguhnya dasar hukum dan pertimbangan pengadilan mengeluarkan putusan provisi tersebut," tukas Abdul Hakim.
jatuh tempo dan dapat ditagih. Kewajiban seorang penanggung (penjamin) untuk melakukan pembayaran atas hutang tertanggung baru akan muncul jika si tertanggung telah diwajibkan untuk membayar dan terbukti tidak mampu melakukan pembayaran atas hutangnya," kata Freddy.
Lebih lanjut Abdul Hakim menyatakan, putusan provisi tersebut telah disalahgunakan untuk melindungi para debitur yang tidak mempunyai itikad baik untuk menyelesaikan kewajibannya melunasi hutang-hutangnya. Putusan provisi itu akan menimbulkan rasa takut dan tidak aman bagi investor jasa keuangan, para kreditor baik domestik maupun internasional karena tak adanya kepastian hukum yang memberikan jaminan dalam berbisnis. Karena begitu kompleksnya perkara, maka dalam gugatan pailit ini pengacara PT. SMM meminta kepada pengadilan niaga agar menghadirkan hakim adhoc. "Padahal kita tahu seluruh kekuatan bangsa ini sedang digerakkan untuk menggairahkan kegiatan investasi modal untuk mengatasi krisis ekonomi," ujar Abdul hakim.
Apakah Nirwan akan terbebas dari kewajiban membayar hutang sampai menunggu perkara gugatan perdata sebelumnya memperoleh inkraaht (berkekuatan hukum tetap). Apakah PT. SMM mau menunggu putusan perdata atau tetap melanjutkan gugatan pailit, lihat saja perkembangan selanjutnya.
Dengan demikian, dengan adanya putusan provisi tersebut maka, lanjut Freddy, berdasarkan hukum PT. BCI belum mempunyai kewajiban untuk melakukan pembayaran kepada PT. SMM. Dengan demikian, Nirwan pun tidak mempunyai kewajiban untuk melakukan pembayaran hutang sampai dengan gugatan perdata sebelumnya itu mempunyai kekuatan hukum tetap. "Karena gugatan perdata sebelumnya yang menjatuhkan putusan provisi belum mempunyai kekuatan hukum tetap, maka menurut hukum, klien kami tidak mempunyai hutang yang jatuh tempo dan dapat ditagih. Sehingga permohonan pernyataan pailit yang diajukan oleh PT. SMM harus ditolak," tukas Freddy.
Gugatan Harus Ditolak Pengacara Nirwan Dermawan Bakrie, Freddy T. Simatupang, SH, dalam tanggapannya atas permohonan pailit PT. SMM menyatakan bahwa gugatan pailit tersebut harus ditolak. Hal ini semata-mata karena adanya putusan pengadilan yang menyatakan bahwa hutang belum jatuh tempo dan dapat ditagih sesuai putusan provisi Pengadilan Negeri Jakarta Pusat. "Telah jelas dan tegas bahwa hutang yang menjadi tanggungan klien kami belum
28
ADB
SME DEVELOPMENTTA ANNEX 5b
The plaintiff is accused (Summary) On August 13, 1997, in presence of a notary, the multifinance company SMM signed a factoring agreement with BCI. At this opportunity, the president director of BCI, Nirwan, signed a personal guarantee unconditionally guaranteeing to SMM as creditor the scheduled payments BCI has to pay to SMM according to the factoring agreement. Based on this guarantee and based on the factoring agreement SMM extended a loan to BCI amounting to Rp 60 billion. The factoring agreement was to end after one year on 21 August 1998. Neither BCI nor Nirwan did not dispute the debt being overdue and explained that the liquidity situation does not allow settling the amount. Several reminders to pay were fruitless. A somation was SMM's reaction. According to her lawyer, SMM is entitled to directly ask from Nirwan as private guarantor the settlement of principal, interest and fines amounting to Rp 277.35 billion until 30 December 1999. SMM filed for declaring BCI bankrupt. In turn, BCI asked a court to decide that SMM has to stop collecting the outstanding amount. The request of BCI was granted based on a "provisional decision" (putusan provisi/pendahuluan). However, the urgency, the prerequisite for a "provisional decision" (putusan provisi), is questioned. The judge decided that SMM has to delay the efforts to collect the outstanding amounts until a final court decision has been made. Otherwise SMM has to pay Rp 10 million fine per day. The instrument of a "provisional decision" has been used to protect the debtor. Nirwan's lawyer stated that, because of the "provisional decision", the debt was not yet due. Therefore, SMM cannot collect the money or file for bankruptcy.
29
ADB
SME DEVELOPMENTTA
ANNEX 6 Data Statistik Lembaga Keuangan Statistical Data on Financial Institutions The statistical data presented below origin from a survey published by BPS (Badan Pusat Statistic) on which 41 MFC (37 domiciled in Jakarta) responded. The figures are averages per MFC. The report did not mention how many of the 41 enterprises were actually engaged in factoring.
1998
1999
Remarks
Factoring clients - individuals
8
- enterprises
2
Factoring customers - individuals
0
- enterprises
42
average/client: 4.234
Received from customer - individuals
Rp
311 million
- enterprises
Rp 3,382 million
A/R bought from clients - individuals
Rp 3,634 million
average/client: Rp 454 million
- enterprises
Rp 3,535 million
average/client: Rp 1,767 million
Operational income
Rp 4,548 million
Rp 1,585 million
incomes decreased drastically
Factoring advances
Rp 46,742 million
Rp 41,003 million
book values decrease only slightly
(according to balance sheet)
Based on factoring advances the survey covered only about 1% of the factoring market as reported by BI/MoF.
34
Despite practicing "with-recourse" facoring, factors buy only A/R to be settled by selected customers.
30
ADB
SME DEVELOPMENTTA
Portfolio of Multifinance Companies Rp billion
12/1998
12/1999
06/2000 12/2000 06/2001
9,698
6,004
7,142
334
224
333
Consumer finance
1,753
1,401
2,309
Credit card finance
173
109
130
Leasing
5,281
4,006
4,204
Factoring
7,638
6,183
5,784
Consumer finance
3,496
2,922
3,551
Credit card finance
241
228
220
14,979
10,010
11,346
13,731
15,164
Factoring
7,972
6,407
6,117
6,553
4,030
Consumer finance
5,249
4,323
5,860
8,515
10,767
Credit card finance
414
337
350
403
558
63%
65%
60%
61%
63%
5%
4%
3%
4%
5%
Consumer finance
30%
33%
32%
36%
39%
Credit card finance
39%
42%
32%
35%
37%
Joint Ventures Leasing Factoring
Private National Enterprises
Total Leasing
Joint Ventures in % of Total Leasing Factoring
Portfolio Quality (% of assets classified "pass")
1996
1997
1998
1999
10/2000 12/2000 06/2001
Leasing
95.6%
94.7%
72.8%
70.3%
69.2%
69.0%
72.7%
Factoring
99.5%
96.7%
67.1%
36.3%
28.5%
42.7%
25.2%
Credit Card
91.9%
90.0%
59.5%
31.4%
52.9%
66.8%
67.4%
Cons. Finance
98.5%
97.6%
92.6%
90.9%
93.7%
94.7%
95.9%
Source: MoF, BI.
31
