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NEWS UPDATES Asean Affairs   22  December 2010

Indo regional banks to push growth

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Indonesia's Vice President Boediono on Tuesday urged Indonesia's regional development banks to boost accessibility to people across the country.

Each of the nation's regional development banks (BPD) signed a commitment on Tuesday to strengthen their institutional resilience, become development agents in their regions and increase access to all of society .

"BPD are not regular commercial banks. BPD have a special mission to develop their own regions, and that needs full commitment from the shareholders and management," Boediono said during a speech at Bank Indonesia.

Chief commissioners from every BPD and governors from each of Indonesia's provinces signed the agreement, which is aimed at boosting regional development across the country.

The vice president also asked regional banks to focus on their own territory before reaching into other regions.

"There is no reason for BPD not to be champions in their own regions. They have the support of the regional leaders and BPD know the region well enough to do business in the area," he said.

Darmin Nasution, governor of Bank Indonesia, said regional banks had grown in strength. Market share in BPD increased from 7.2 percent in December 2005 to 8.9 percent this October, and lending jumped from 6.5 percent to 8.5 percent in the last five years.

Darmin added that BPD would become agents of growth in their regions by financing development, especially for small- and medium-sized businesses, and increasing accessibility to financing by opening more branches in rural areas.

The agreement was initiated by the Regional Development Banks Association (Asbanda), which also expects regional banks to improve their services and expand by providing Internet banking and other electronic services. It also encouraged the banks to increase cooperation to overcome problems, particularly in managing their capital adequacy ratio.

Bank Indonesia reports there were 26 BPDs with 1,404 offices across the country as of October 2010.

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