A New Korean Wave in banking industry?
by Mike Mookung Kim
Foreign bank participation has increased steadily across developing countries since the mid-1990s (Cull, R., & Soledad, 2010). On average, across developing countries, the share of bank assets held by foreign banks has risen from 22 percent in1996 to 39 percent in 2005. Researches from the thinktank suggest that there are three greatest opportunities areas to invest namely, consumer financial service, SMEs, corporate bond markets (Saudjana & Todd, 2012). There is a significant increase in FDI inflow to the ASEAN region after Asian financial Crisis. (Top 5 economies in the world). Studies suggest that foreign banks tend to cherry-pick the most profitable business areas leaving the remainder to local banks.
The Morgan Stanley revealed that foreign investors have been buying close to $7 billion worth of shares in Indonesian banks since last year, almost double the entire acquisition value in the 2013-2018 period of $3.6 billion. We can take the case of the Bank Woori Saudara, a small player compared to local banking giants such as Bank Mandiri and Bank Negara. “Indonesia has been growing at an annual 5 percent on average”, the bank noted. Morgan Stanley expected the trend would continue, identifying small and medium-sized banks, with core capital of between Rp 1 trillion to Rp 30 trillion ($68 million to $2 billion), as the most likely target for foreign acquisition. This would also lift a burden on state-owned bank lenders such as Bank Mandiri, Bank Rakyat Indonesia (BRI), and Bank Negara Indonesia (BNI) as they were now less likely to be subjected to an obligation to support smaller banks. In the long run, it will also help the efficiency of the Indonesian SOE banks.
The capacity of the South Korean banks based on experience in their home country is expected to help Indonesia’s SMEs in accessing bank loans in better lending practices. The SMEs financing practices of those Korean-owned banks should set a new benchmark for other local banks in channeling the loans to SMEs in Indonesia.
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