International Finance Corporation (IFC), a member of the World Bank, is considering an equity investment of up to IDR 216 billion (about $15 million) in Jakarta-headquartered PT Bank KEB Hana Indonesia (KHI).
The mid-size bank has an asset base of IDR 40,654 billion ($2.7 billion) and operates 61 branches in the country.
IFC already holds a 9.98 per cent stake in KHI and holds a pre-emptive right to subscribe to new shares to maintain its holding. It has proposed to make the additional equity investment via a rights issue.
In a disclosure, IFC noted that the proposed financing will help the Indonesian bank invest in digital infrastructure and create the distribution and service channels to extend its lending services to a larger segment of users, especially small and medium enterprises (SMEs).
“The SME sector is underbanked and characterized by a relatively low level of debt. SMEs refrain from bank borrowing due to the high collateral requirements, complex procedures, stringent operational and reporting requirements and high interest rates. KHI plans to address this gap by prudently increasing provision of finance to un/underbanked SMEs in Indonesia in a structured, innovative, efficient and sustainable manner,” IFC added in its disclosure.
KHI’s other shareholders are KEB Hana Bank (KHB), which owns 89.01 per cent of the mid-size lender, and individual investor Bambang Setijo (1.01 per cent). KHB is a wholly owned subsidiary of Hana Financial Group, a major player in Korea’s banking industry.
IFC and Hana Financial Group had in December 2007 acquired a small local bank, PT Bank Bintang Manunggal, that later became PT Bank Hana Indonesia. The development finance institution made follow-on investments in KHI via participation in rights issues and through the extension of a long-term loan.
IFC recently announced that it has committed $3.4 billion in the fiscal year 2018 to countries in East Asia and the Pacific. The commitment includes $2 billion of financing from its own account and $1.4 billion raised from other investors, per an IFC statement.
IFC includes the following countries in East Asia and the Pacific — Cambodia, China, Fiji, Indonesia, Japan, Korea, Lao PDR, Mongolia, Myanmar, Papua New Guinea, Philippines, Singapore, Solomon Islands, Thailand, Timor-Leste and Vietnam.