In a bid to secure more profitable outcomes, Jamkrindo is refining its business strategy. The company’s ideal—to empower viable yet not-yet-bankable Micro, Small, and Medium Enterprises and Cooperatives (UMKMK)—is being realized through ventures into new markets and the forging of mutually beneficial synergies.
As the state-designated implementer of national development policies aimed at bolstering support for UMKMK, Jamkrindo (the state-owned Perusahaan Umum Jaminan Kredit Indonesia) is intensifying its focus on providing credit guarantees to these enterprises. With a network comprising 11 branch offices and 6 sub-branch offices spread across Indonesia, the firm has maintained its resilience for 28 years. Over that time, the seasoned credit guarantee provider has consistently delivered products tailored to the credit schemes for UMKMK—featuring competitive Guarantee Service Fees (IJP) and top-tier service levels—through partnerships with more than 65 institutions, including national banks, regional development banks (BPD), private national banks, Islamic banking units, and other creditors.
Jamkrindo’s performance has shown robust, year-on-year growth. Key metrics such as revenue, profit, equity, and assets have surged over the past three years. Net profit after tax leapt from IDR 33.6 billion in 2006 to IDR 58.6 billion in 2007—a 74.4 percent increase—and further to IDR 133.8 billion in 2008, marking a 128.3 percent rise. Assets expanded from IDR 442.1 billion in 2006 to IDR 1,125.9 billion in 2007, reaching IDR 1,267.2 billion in 2008.
Between 2009 and November 2009, the total value of credit guaranteed by Jamkrindo—including guarantees under the Kredit Usaha Rakyat (KUR) scheme—reached IDR 22.3 trillion, or 83.5 percent of the 2009 target of IDR 26.7 trillion. Meanwhile, outstanding credit guarantees as of November 2009 totaled IDR 68.86 trillion. Guarantee service fee revenue amounted to IDR 249.8 billion—78.7 percent of the 2009 target of IDR 317.3 billion—while earnings before tax were projected at IDR 144.1 billion, exceeding the RKAP 2009 target of IDR 120.2 billion by 119.9 percent.
Thanks to concerted efforts across all divisions, Jamkrindo has earned numerous accolades. In 2009, for the second consecutive year, the company was honored with the Best Syariah 2009 award in the specialized category for Financing Guarantees by Investor Magazine.
Expansion and Business Strategy
Responding to dynamic market demands and a rapidly evolving business environment, Jamkrindo continues to innovate. One notable development is the launch of its Sharia Guarantee Division, which operates via Sharia Authority Channeling across all branches and sub-branches. “While the sharia business unit has not been spun off, it maintains separate ledgers from the conventional unit,” explained Nahid Hudaya, President Director of Jamkrindo. “We conduct our Sharia-based financing guarantees under the principles of Utility, Selectivity, and Prudence—embodied in our motto, ‘The Key to Blessings in Transactions.’”
In 2007, the government issued Presidential Instruction No. 6 of 2007 on Accelerating Real Sector Development and Empowering Micro, Small, and Medium Enterprises. Aimed at easing the financing constraints of productive UMKMK, the government introduced the Kredit Usaha Rakyat (KUR) scheme. Jamkrindo was designated as one of the credit guarantee institutions to back the program, collaborating with six disbursing banks—BRI, Bank Mandiri, BNI, BTN, Bukopin, and BSM.
Looking ahead to 2010, Jamkrindo remains optimistic about achieving its RKAP targets. The company credits its positive outlook to government stimulus aimed at energizing the economy—especially by facilitating KUR credit facilities—as well as the continued willingness of banks to expand credit to UMKMK. Moreover, untapped markets within both the UMKMK and banking sectors present significant opportunities. Nevertheless, the firm remains cautious of external risks, particularly a potential uptick in the non-performing loan (NPL) ratio among guaranteed credits. To address this, Jamkrindo is working closely with banks on credit restructuring measures to ensure that clients are not saddled with unmanageable obligations, while simultaneously strengthening its risk management through an Enterprise Risk Management framework initiated in 2009.
In line with evolving needs, Jamkrindo is broadening its product suite to include guarantees that cover risks associated with credit arrears—such as those stemming from the death of a guarantor UMKMK—through partnerships with several life insurance companies, as well as other insurers. The company is also expanding its cooperation with non-bank credit providers servicing UMKMK.
In 2010, Jamkrindo is determined to deepen its collaborations with various partners, including Regional Development Banks (BPD). “A stronger relationship with BPDs is crucial,” Nahid explained. “When we share a common perspective and understanding, BPDs feel more comfortable partnering with us—for example, by eliminating friction over claim settlements. Guarantee business is inherently conditional, contingent upon meeting all agreed-upon requirements.” He noted that Jamkrindo’s nationwide partnership with BPDs is expected to empower UMKMK, which—despite being capable of accessing financing via BPDs—often remains unbankable due to collateral constraints.
Regarding its business targets for the year, Nahid stated that Jamkrindo is striving for improved performance compared to 2009, when targets were not fully met. For 2010, the company aims for an existing guarantee volume of IDR 21.9 trillion and KUR guarantees totaling IDR 5.5 trillion, culminating in an overall guarantee volume of IDR 27.4 trillion. “This target might be adjusted if the government further injects funds into the KUR program. Fundamentally, guarantees are complementary to credit—without bank credit, there is no need for guarantees,” he observed. Jamkrindo is also a member of the Asian Credit Supplementation Institution Confederation (ACSIC), an association of credit guarantee institutions throughout Asia.
Driven by ever-expanding business targets, Jamkrindo is reinvigorating its entrepreneurial spirit from the outset. Its business strategy is geared toward not only enhancing past achievements but also expanding its product range for existing (non-KUR) guarantees. “We are exploring new markets, particularly among institutions that have not yet partnered with us—such as emerging financial institutions and Islamic banks,” Nahid stated. “Since September 2006, following a recommendation by the National Sharia Board-Majelis Ulama Indonesia (DSN-MUI), we have been the sole sharia guarantee provider. This move cements our commitment to collaborating with Islamic banks and other sharia financial institutions.”
On the KUR front, Nahid added, “We expect that the trust the government has placed in us to guarantee KUR will drive improvements in both our KUR and non-KUR guarantee performance. Frankly, in the eyes of state-owned banks, our guarantee volume has been considered modest relative to the credit extended to UMKMK. However, with KUR, we are demonstrating that Jamkrindo’s guarantee portfolio is quite substantial.”
Furthermore, Nahid outlined plans to collaborate with Regional Credit Guarantee Institutions (LPKD). “Given that the government is promoting regional credit guarantees through LPKDs, we see them not as competitors but as partners for joint ventures—similar to our cooperative efforts with insurance companies, including life insurers,” he said. “We have already implemented such cooperation with the East Java LPKD, underscoring our commitment to synergistic business efforts. Essentially, we have only captured a small share of the market potential, including that of LPKDs, which we intend to consolidate into a joint framework.”
Similar collaborative efforts are underway with PT Asuransi Jiwasraya (Persero) and PT Asuransi Kredit Ekspor Indonesia (ASEI) (Persero). “Although we could view them as competitors, we choose instead to see them as strategic partners. Whether seen as competitors—stimulating a competitive drive—or as partners—fostering mutually beneficial synergies—the ultimate goal is the empowerment of UMKMK,” Nahid concluded.
At its core, the collaboration hinges on the respective expertise of each partner. Jamkrindo brings extensive proficiency in offering credit guarantee services for UMKMK through a diverse range of products—including Micro Credit Guarantees, Commercial Guarantees, Multi-purpose Guarantees, Construction/Procurement Guarantees, Counter Bank Guarantees, and Distribution Guarantees—while its partners contribute specialized skills, ensuring that the combined efforts yield enhanced benefits.
Another key strategic objective is to consistently create an environment in which banks feel at ease working with Jamkrindo. “Banks trust us when we settle valid claims promptly,” Nahid remarked. “This reassurance is essential to our motto—‘The Key to UMKMK Success’—and it reflects our unwavering commitment to empowering UMKMK.”
Source: Majalah Infobank