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Alex Purnadi Chandra has been in the banking sector for 28 years. When he was only 29 years old, he was promoted to be the head of the BCA branch in Bali. A year later, Alex ventured and shifted gear to become an entrepreneur. He acquired the Seri Artha Lestari Rural Bank (BPR) in Bali in 1999.
Now, Alex has grown the bank into the Lestari Group, which is in charge of the BPR Lestari (Lestari Bank) business, and the AkuBank educational institution, which creates workforce of accountants and bankers. The total assets of all (six) Lestari Bank branches reach Rp. 7 trillion.
Throughout my experience in banking, I see this crisis as the biggest challenge. During the 1998 crisis, the impact was on the corporate segment. For the 2008 crisis, the impact was greater in the United States. For us, at that point, there was indeed a feeling of market turmoil, the transmission of the Century Bank case, which was feared to have a domino effect on other banks. Now, the current crisis is very large in scale because it affects all segments. The main issue today is not economy but health.
Facing this pandemic crisis, I always tell my friends that the first focus is to stay safe. The important thing: just survive first so you don't die. And how to do that? Well, whatever it takes, at any cost. Take savings, efficiency, sell assets, cut losses, etc.
At BPR Lestari, I conducted stress test for 24 months, assuming that this situation will last for the next 24 months. I made it clear to the current employees that we are working in a survival mode. This means that the profitability aspect should not be the only priority. The important thing is to be able to survive through this crisis and maintain liquidity.
If you feel you can survive, then what's next? Do what is possible in the midst of this pandemic. In my opinion, the most relevant ideas to face this condition are digital initiatives. At BPR Lestari, we happen to have launched Lestari 2.0, electronic banking with mobile banking. Our digital initiatives have multiplied since the pandemic. Any type of business can adopt the same model as what we have done. If there's nothing that can be done, then that's okay, just rest. Later when you can work again, just start again. The important thing, again, is to stay safe first.
The point is, don't die yet, because later the economy will rebound. In my opinion, a V curve will form. That means, once the health issue is resolved, our economy will grow rapidly. Because, if the economic crisis is caused by economic reasons, its nature is sloping, falling slowly and rising slowly. Meanwhile, this time the issue is health. The decline was drastic, but later on the increase would be drastic.
Especially in the banking sector, there are two main issues, namely profitability and liquidity. These two things differ in their handling. Profitability should not be a problem at this time, because bad debts can be restructured. Indeed, the bank will have less profit. However, it doesn't matter. The public's fear due to the Covid-19 pandemic is that credit in banks will become bad. It must be explained that credit will not be bad because it can be restructured.
Other than that, the banking liquidity now looks quite good, because very little credit has been disbursed in this condition. Liquidity remains safe as long as there is no confusion that causes large-scale withdrawals of customer funds at the bank. People ask about the security of their money in banks because they are haunted by perceptions about the explosion of bad credit. However, there will be no bad credit until next year. The problem is, the liquidity is uneven. It is concentrated in Bank BUKU 4 (big banks). There are small banks that are not liquid or have limited liquidity. In my opinion, this is related to regulation.
As entrepreneurs, we must start to realize that this crisis is not the last one, and that there will be more in various forms. So, I propose a concept: Grow with Discipline. This means that when the business is growing, for example, if the bank is busy extending credit, don't forget to hold back a little. Be prepared for sudden weather changes. Entrepreneurs when their business is progressing, always want to drive as fast as they can, this type of entrepreneurs are often lulled, forgetting that at any time conditions can change.
Thus, in order to grow in a disciplined manner, business people must apply three things, namely (1) Don't get too much debt, (2) Don't get into unskilled areas, and (3) One must build cash reserve (cash supply). Why should one have a cash supply? So that if there is another crisis, one still has cash. Because in a crisis like this, cash is the king. The trick is, for example, annually allocating Rp. 300 million. Just think about it, if there wasn't income, this cash could pay the bills.
On the other hand, when many people think that all sectors have been hit, it turns out that there are also business sectors that have actually increased amid the pandemic. According to my data in Bali, maybe around 80% of my customers are affected by the crisis due to the pandemic. Meanwhile 20% enjoyed an extraordinary increase in turnover. Of the 80% affected, 50% have adequate cash reserve. So, they have no trouble paying interest because they have cash. (*)
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