By Mikail Mo, Researcher at The Asian Institute for Capital Market and Investment
“Heaven is on the soles of bankers’ feet” was the first sentence uttered by a debtor who had been a bank debtor for more than 11 years. During his time as a state-owned bank debtor, Paijo (not his real name) never “coughed”. Especially to the point of default. This was also recognized by a bank officer who only contacted Paijo once after 11 years as a debtor.
The story of Paijo, a good debtor, is interesting. Moreover, the government also wants to write off MSME bad debts. Interestingly, because state-owned banks are “showing off” jumbo profits. Wong is in the midst of a crisis due to COVID-19 which has made the business world “stagger”, the profits of banks, especially state-owned banks, are actually large. Bank follow the trade no longer seems to apply here.
The source of profit is no longer important, whether from the “harvest” of write offs, or indeed from interest income. The point is, bank profits continue to climb. You can guess where the source of profit comes from – credit is not growing, yet profits are growing by double digits. It is none other than the result of provisioning from loans that were “grounded” before.
Long story short, Paijo is a good debtor. He was doing well. Every month his account was automatically debited. Only twice was Paijo late with his installments. It was not more than a week. At that time, according to Paijo’s story, in a discussion, he was late due to “forgetfulness”, because he was on business. But a fine was also paid by Paijo for being late due to his mistake.
At that time, the account that was used as a debit account for “forgetfulness” was filled. Understandably, the bank that gave Paijo the loan was not a major bank, even though Paijo had long been a depositor at the bank. Even then, the delay was no more than a week. Paijo was not a bad debtor, or uncooperative. It could have been only twice that his credit category was under special attention.
Paijo was an ordinary person. An employee who owns a Ayam Geprek business. His source of income comes from two wallets. One as an employee and the other as a “basket” of Geprek Chicken. But, the bank did not recognize the source of the small business. The source of credit installments is purely from salary.
The story begins in 2012. At that time, Paijo wanted to buy a piece of land in Bekasi. Paijo happened to have an acquaintance at the state-owned bank.
So, Paijo applied for a Multigunna credit facility of Rp1.2 billion with the collateral of his wife’s shop in the Fatmawati area. The collateral value amounted to Rp3.8 billion. That was in 2012. After seven years as a smooth debtor, Paijo wanted to buy shares from his workplace. He drained all his savings at the main bank, but there was still a shortage.
Then, Paijo contacted his friend who used to provide credit facilities. Paijo wanted to ask for a top-up loan of another Rp1 billion so that his outstanding credit would be Rp2 billion. The bank agreed and asked him to change the collateral from a shophouse to a house in Ciawi, which had more “meat” when sold. Paijo also swapped the collateral from the shophouse to a house in Ciawi.
That was in 2019. During 2019 the installments were smooth, both interest and principal. There was no problem. Good credit. Interest rate of 9% fixed (fixed rate) three years after that floating rate. Paijo signed the entire credit agreement. Agreed without being able to protest about the standard agreement.
Then, came the storm of COVID-19. The Financial Services Authority (OJK) implemented a credit restructuring policy. Paijo also applied for credit restructuring, because the salary paid by the company where he worked was only 80%. The bank agreed by only paying interest. Anyway, it was postponed first. Agreed.
Thrice “Sucked” by the Bank
However, the “horror” story starts from here. Apart from the state-owned bank, Paijo’s wife had a credit facility at a large private bank. Paijo’s wife asked for restructuring. The private bank, which has the lowest cost of funds in Indonesia, also agreed.
Where was the “horror”? Paijo’s wife was offered a 3% interest subsidy or discount. She said it was from the government that disbursed the National Economic Recovery (PEN) funds. MSME customers get a discount. Meanwhile, Paijo, who is a current debtor at a state-owned bank, is not even offered an interest deduction.
Paijo’s question, as told to the author, is that this difference may lie in the loan facility: Paijo Rp2 billion and his wife Rp1.5 billion. But, when asked by a state-owned bank officer about the government’s interest rebate, the bank replied lightly. “It’s your own fault for not asking for a deduction,” the bank officer said.
This is where the difference lies. The private bank informs the debtor, while this state-owned bank takes advantage of the debtor’s ignorance. It is also like the increase in credit interest rates that is not announced to debtors. Especially with this debit account. The bank takes advantage of the debtor’s ignorance. This may not only be experienced by Paijo, but also by Paimin, Pariyo, Pardi or Parlan, whose numbers are certainly not small.
Banks become the first “suckers” when they are not given PEN facilities, which are sourced from the state budget. Tax money to help debtors who are victims of COVID-19 is “pocketed” by banks. It could be that banks want to make big profits after dropping credit quality by forming large reserves. The banks are frenzied and unfair.
The second “Dracula”, from an installment of Rp25 million to Rp36 million. Paijo just realized that his account usually deposited Rp50 million for a two-month installment, but since April 2023 he had to deposit at least Rp72 million. Paijo finally checked his account, and indeed since April 2023, after every payday, he immediately cut his account to Rp36 million from Rp25 million. So, what usually fills Paijo’s account with Rp50 million is always enough for one installment.
What happened? Besides the credit restructuring program has ended, the interest discount program has also ended. The flat interest rate became floating. The interest rate went from 9% to 14%. Without prior notice, until Paijo asked the bank officer, to which the bank officer replied, “Interest rates have gone up.”
At this point, Paijo could understand. Then, Paijo was about to pay off his loan. This is where the third Dracula appeared. What is it? The repayment request was more difficult than “entering heaven”. In addition to being pushed around, the turn to answer, Paijo was hit with a 5% deduction. Not to mention these fees. Partial and full repayment are said to be the same as outstanding. Not fair.
Counting from the Rp2 billion loan that was not received in full, because of notary fees, provisions, and insurance. Even more horrifying – from 2019 to August 2023, Paijo’s loan was still at Rp1.870 billion. In fact, he has never defaulted, never been in arrears. This means that Paijo, from a loan of Rp2 billion (which he did not receive in full due to discounted fees) over four years, only repaid the principal of around Rp130 million. If taken into account with provision fees and other costs, Paijo has only repaid the principal of Rp50 million. The rest is interest.
Paijo could be wrong. The standard agreement has been signed. Both the 5% repayment penalty and the floating interest rate increase after three years of fixed. But, the interest subsidy from the state budget for debtors affected by COVID-19, which is not given to good debtors, is a form of bank “greed”. What does that mean?
It is clear. Good and smooth debtors are sucked. This treatment is different from high-profile debtors who can be restructured over and over again. The conglomerates that are in default are definitely restructured, even repeatedly, just to maintain the bank’s performance. Want proof?
Please pay attention to the behavior of state-owned banks since 2005. Go ahead and change the management. It doesn’t have to be all of them. Just one of the state-owned banks from another group. Guaranteed, the new management will do its deadly move, which is to reduce credit quality. The next step is to make large reserves. The first year or two the profit will definitely go down, after entering the third year, the profit “harvest” period will fly high. The applause was thunderous because they were able to increase profits, even though the write off step was still running.
OJK Must Participate in “Cawe Cawe”
Back to the matter of Paijo who wanted to repay his loan, which was complicated and subject to repayment penalties. Another reason is that banks always have liquidity issues that are used for long-term loans. Short-term funds for the long term. Since Indonesia’s independence until its 78th anniversary, the issue of short-term funds for long-term funds has always existed and been used as an excuse. In fact, the name of the bank is also like a chain of arisan – as long as there are savers, it is not a problem. That the mismatch of funds exists, but why exaggerate what is actually not big. And, the bank’s life is fine.
Of course, Paijo is not the only good customer. There is Paiman, Paimin, Paimun, Paidi, Paidu, Paido, or others who are good customers. These days, the interest promo to ensnare debtors could be over. The interest rate from 9% (fixed rate) to 14% (floating rate) is calculated from where. In fact, the cost of funds did not increase by 2%. OJK needs to look at fraud in calculating this interest rate increase. Banks are often dishonest when lending rates fall, but if interest rates rise, the increase is immediate. That’s why OJK must “cawe-cawe” about the batman’s trap strategy in selling mortgages with this promo interest term.
Paijo has been willingly “sucked” by the bank. However, what OJK needs to pay attention to is the standard agreement. About the repayment penalty. The 5% fine is big. Moreover, both partial and full repayment. If you want to make a loan, you will be charged with fees and commissions, and if you want to pay off, you will be fined. Even paying smoothly does not get a reward. In fact, it is getting “sucked”. Banks are like pinjol on a different scale.
Is it necessary to be a “sontoloyo” debtor? Paijo still chooses to pay off his loans even though he is hit by “palak” fines. Paijo prefers not to enter SLIK, even though the government is currently washing the warehouse of bad credit write-offs proposed by state-owned banks that suck up good debtors like Paijo.
Also, forget about the “arbitrary” interest rate hike without prior notice. Paijo, who is retired, willingly does not remember the treatment of bank officers who do not provide interest subsidies from the state budget because of the PEN program in 2020, 2021, and 2022. The subsidy for debtors was taken by the bank for profit contribution.
Hopefully there will be no other Paijo, the smooth debtor, who due to his ignorance ends up being sucked by the bank. And, Paijo is right. If we become small debtors, then “Heaven is on the soles of the banker’s feet”. On the other hand, if you are a big debtor, “Heaven is at the feet of the conglomerate” Then, who exactly are the conglomerates whose credit is through state-owned banks but whose deposits are in Singapore banks?
These conglomerates with huge loans are adored by state-owned bankers. And, Mr. Jokowi, the President of the Republic of Indonesia, must know the fate of small debtors who are smooth and fine who are “sucked” by banks for fear of entering the OJK black list (SLIK). Mr. Jokowi must participate in “cawe-cawe” about this matter, and not only “cawe-cawe” about the presidential and vice presidential candidates.
