Social Networks and Credit Access in Indonesia

Summary: In this paper, we investigate how family and community networks affect an individual’s access to credit institutions usingnew data from the Indonesia Family Life Surveys. Our theoretical framework emphasizes the family and community’s role in providinginformation, thus loweringthe search costs of the borrower and monitoringand enforcement costs for the lender. From our empirical results, community and family networks are important in knowinga place to borrow, as well as for loan approval. Consistent with an information-based explanation of networks, family and community networks have a larger impact on credit awareness of new credit institutions with a lower impact on awareness of established credit sources. Interestingly, we find that women benefit from participatingin community networks more than men. There is no evidence that the rich benefit from community networks more than the poor. Our results on the benefits from participation in the community network are robust to the inclusion of community fixed effects.

 

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Check Out Indonesia

BRIC countries (Brazil, Russia, India, and China) can offer a potentially high-growth, long-term investment opportunity. Their large populations, rich natural resources, and strong export growth typically attract attention and, in general, these emerging markets have produced solid performance over the past several years. However, with the limelight on the BRIC countries, investors may be missing out on a less-discussed, but potentially stronger performing market: Indonesia. The same factors that have driven high performance in BRIC countries exist in Indonesia. Additionally, each of these factors has the potential to substantially increase the future output of the Indonesian economy

• Population. Indonesia is currently the world's 4th most populous nation with roughly 240 million people, behind only China, India, and the United States. This provides ample domestic demand, and a large pool of low-cost laborers to fuel productivity. 
• Rich natural resources. Large domestic oil and metals deposits provide a substantial base of resources for domestic production. As the world's largest producer of tin, and with the second largest natural gas reserves and the third largest coal reserves, commodity exports play a large role in the Indonesian economy
• Strong economic fundamentals. The Indonesian economy has benefited over the past several years from a democratization movement which began in 1999. The government instituted economic reforms, which have led to a substantial reduction in the country's debt-to-GDP ratio, now at roughly 30 percent. Interest rates are low, signaling a central bank focused on economic growth. And while inflation has been steady between 5 and 6 percent annually, the GDP growth rate has continued to be strong. In fact, despite the 2007-2009 financial crisis, Indonesia's economy avoided recession.  
• Differences from the BRICs. Although Indonesia has large domestic oil reserves, they have recently become a net importer of oil. This means that the supply of crude in the economy is mostly insulated from the wild price swings and productivity costs that many of the BRIC economies have faced. It also means that Indonesians don't have to compete with China and other emerging markets for access to the global supply of oil. The democratization movement that took hold in the late 1990s has made significant progress in liberalizing the country. As an added benefit to investors, the government has recently enacted pro-growth policies and economic stimulus programs that have improved growth rates and general economic stability. In fact, some estimates range as high as 20 percent annual growth in private investments year over year. Energy independence and a relatively stable political system have allowed Indonesia to enjoy a substantial increase in foreign investment, especially in contrast with China―where direct investment is difficult. Investors have easy, direct access to Indonesian equity and debt markets. Whether you hold a broad emerging markets portfolio, a more specific BRIC portfolio, or are considering your first investment into emerging markets, now may be a good time to consider Indonesia. Over the past several years, a comparison between the BRIC countries and Indonesia shows that Indonesia offers a lower volatility profile with higher potential total returns. A strong infrastructure, stable government, attractive natural resources, and robust exports make this "sleeper" emerging market worth a look.

 

Timothy R. Lee, CFP®, is a managing director and cofounder of Monument Wealth Management in Alexandria, Va., a full-service investment and wealth management firm. Monument Wealth Management is backed by LPL Financial, an independent broker-dealer and Registered Investment Advisor, member FINRA/SIPC.

Manulife Asset Management Indonesia is First Syariah Mutual Fund

Manulife Aset Manajemen Indonesia (MAMI) launches its first Sharia mutual fund, called Manulife Syariah Sektoral Amanah (Manulife Sharia Sectoral Mandate) on January, 2009

This product is one of its kind in Indonesia to apply the Sectoral Rotation investment strategy which aims to maximize the investment return in long run. Sector rotation is an active investment strategy involving the movement of money between sectors in an attempt to beat the market. 

Manulife Syariah Sektoral Amanah aims to deliver superior long-term investment performance by investing in equities of Sharia compliant companies in sectors that are well placed to capitalize on emerging opportunities in the global and Indonesian economy. This product will allocate between 80-100% in Sharia equities, and 0-20% in Sharia fixed income and Sharia money markets instruments. It also aims to invest in those domestic companies which MAMI considers offer the best growth potential in their selected sectors.

 

The fund, which  be Indonesian Rupiah denominated, will be available to both retail and institutional investors. As one of the securities companies that is committed to develop the mutual fund industry and capital market in Indonesia, MAMI applies an affordable minimum investment which gives access to a broad range of investors. With also free subscription fee and no redemption charge for anyone investing for more than one year, anyone can now start investing in mutual funds. Besides selling through Manulife Indonesia’s agency force, MAMI has an exclusive bank distribution partnership with HSBC Amanah Syariah in selling this unique fund to retail investors through all HSBC Amanah Syariah branches in Jakarta, Surabaya, Medan, Semarang, and Bandung.

About Manulife Aset Manajemen Indonesia
Established in 1996, PT. Manulife Aset Manajemen Indonesia (MAMI), a member of Manulife Financial, offers investment management and mutual fund products in Indonesia. Since its establishment, Manulife Aset Manajemen Indonesia has consistently maintained its position as one of the leading investment management companies in the Indonesian mutual fund industry. Currently, MAMI serves more than 30,000 mutual fund investors. The keys to success are: a focus on customers, distribution excellence, innovative products (such as Phinisi Dana Tetap Pemerintah and Manulife Pendapatan Bulanan) and superior risk and investment management. Manulife Financial that has been operating in Indonesia for the last 23 years. This business group serves over 1,000,000 clients across all business units in Indonesia. Manulife Financial enjoys market leadership in life insurance, pension funds, investment management and mutual fund businesses. Manulife Aset Manajemen Indonesia has the largest licensed mutual fund selling agency force in Indonesia. 

The company’s products are sold across the archipelago through more than 1,700 mutual fund selling agents (WAPERDs) from approximately 100 Manulife marketing offices in more than 20 cities in Indonesia from Banda Aceh to Jayapura. In addition to Manulife Indonesia’s exclusive full time agents, MAMI products are also distributed through leading banks such as ABN AMRO Bank, American Express Bank, Bank Bukopin, Bank Commonwealth, Bank Internasional Indonesia, Bank Mandiri, Bank Niaga, Bank Permata, Bank UOB Buana, Deutsche Bank, Development Bank of Singapore, Standard Chartered Bank and The Hongkong Shanghai Banking Corporation.

About Manulife Financial
Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were Cdn$385 billion (US$364 billion) as at September 30, 2008. Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK.

About HSBC Group
The HSBC Group is one of the largest banking and financial services organizations in the world. The Group has about 9,500 offices in 85 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa, serves over 100 million customers and has assets of US$2,547 billion at 30 June 2008.

About HSBC in Indonesia
HSBC has operated in Indonesia since 1884. It now provides personal financial and corporate banking services through 105 outlets, spread through out 10 major cities: Jakarta (World Trade Centre, Pondok Indah, Kebon Jeruk, Sentral Senayan, Pluit, Kelapa Gading, Mangga Dua, Wisma 46, Melawai, Sunter, BSD, Gajah Mada, Plaza Kuningan, and Talavera),Surabaya, Medan, Bandung, Semarang, Solo, Batam, Bogor, Tangerang, and Depok. HSBC is a leading provider of personal financial services, corporate, commercial banking, institutional banking, treasury capital markets and Amanah Syariah services in Indonesia. HSBC in Indonesia delivered profit before tax of US$104 million in the year to 31 December 2007 and US$66 million in the half-year to 30 June 2008.