Indonesian banks out to woo pensioners

Baking classes and other activities organised for such customers, seen as a safer bet for loans

Daytime karaoke sessions, seminars on how to earn extra income, and free cakes... Sounds like a typical day in a community club. But an increasing number of Indonesians are finding all that, and more, at banks as well.

Some of the 120 banks in South-east Asia's largest economy are pulling out all the stops to woo an emerging population of pensioners.

Not only are the three million or so a potentially lucrative source for the banks, but they also have a low default rate and are considered a safe bet for loans because debt instalments are directly debited from their government pension accounts.

Indonesia's largest bank, Mandiri, recently formed a joint venture with Pos Indonesia, the state-owned postal company, and state insurer firm Taspen to specifically cater to pensioners.

At BTPN Bank, the largest lender catering to pensioners, there was a party atmosphere as senior citizens took turns singing their favourite songs, while others cheered and applauded. A professional baker was even teaching customers how to apply a batik design on the outer layer of a bolu gulung, or rolled cake.

In a function hall, about 40 people were being trained to be freelance fruit-selling agents. In one corner, people were queueing up for free blood pressure checks from a doctor.

The retirement age in Indonesia is typically 58, recently raised from 55. But it is still about seven years lower than most other Asian countries'.

BTPN's deputy chief executive officer Ongki Wanadjati Dana said his bank currently lends money to 800,000 pensioners; a typical loan amounts to 40 million rupiah (S$4,000).

"If the pensioners were recently retired, their loans would likely be to fund their child's advanced education, or to renovate parts of their houses to add pavilions or rooms for rent," Mr Ongki said.

"The pensioners are sometimes the most bankable in the family. We had numerous cases where retired parents took out loans to finance their child who was applying to be a migrant worker in Hong Kong, Singapore or other countries."

A former teacher, Ms Matyati, 63, said she had picked up new cake recipes from her sessions at BTPN Bank. But for some pensioners, new streams of income have flowed.

Ms Ani Marlan, 65, a former nurse, first learnt how to make women's bags from scrapped coffee sachets and turned the skill into a lucrative business. She said: "I sell these bags for 200,000 to 300,000 rupiah each. I don't only sell here, but also in my church and neighbourhood."

Pensioners aged up to 75 can borrow money at BTPN and be covered by life insurance. Default rates in loans to pensioners are typically below 0.2 per cent, lower than the above 2 per cent generally for other types of loans, including corporate investment loans. Bank Mandiri caps the age at 70.

Mr Djasman, 73, a former domestic affairs ministry employee, borrowed money to help fund his youngest son's wedding reception. As he waited in a queue for his turn to sing, he told The Straits Times: "We have a nice place to hang out. It's like a clubhouse, but it's free."

A version of this article appeared in the print edition of The Straits Times on December 01, 2015, with the headline 'Indonesian banks out to woo pensioners'. Print Edition | Subscribe