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Driven more by financial necessity rather than by personal
choice, almost two out of three Indonesians live in homes with more
than 5 residents in the house.
Only one in three people live in the more universally accepted 3 or
4-member household. And there are only about 4 million couples who are
privileged to live in their own homes, a tiny fraction of the
population.
No wonder that over 80 percent of the population say they live in a
house they or their family owns, with only 7 percent currently renting.
Less than 1 per cent has a home loan today and demand for mortgages is,
in fact, declining, not growing.
The mortgage business is almost a mirror image of the doldrums faced by
the car industry as the focus has traditionally been the affluent
echelons of society, many of whom don't need to borrow to buy a house
in the first place.
Unbelievable as it may sound, there are only 310,000 people in the
entire country planning to get a home loan in the next 12 months. They
are the "low-hanging fruit" for the banks. Too many marketers refuse to
accept the simple reality that Singapore is a bigger market for most
big-ticket items, not just homes and cars.
The nascent condition of the property sector has got to be a major
opportunity for the government to focus on, and for the public and
private sector to exploit. Imagine the power of the property
developers, working hand in hand with the banks for mutual gain, thus
contributing to a surge in employment and national prosperity.
With asset-based loans, everybody wins. The early signs of such
development are visible only at the top end, but unless the broader
mass market is embraced, the true potential will remain untapped. These
observations are based on trends continuously measured by Roy Morgan
Single Source, Indonesia's largest syndicated survey. That study is now
expanding to include over 27,000 respondents this year, projected to
reflect the behavior of 90 percent of the population over the age of 14.
It's not as if people do not borrow to build or buy a home, it's just
that very few do so. The not-so-surprising reality is that there are
"more friends and relatives" lending money than any single bank, with
the exception of Bank Rakyat Indonesia. That's because the amounts
borrowed under the current circumstances are relatively small, (see
chart). Nudging those borrowings upwards, against real assets, is the
only way forward for all concerned. That calls for a partnership
between the developers, the banks and the government.
In the absence of adequate laws to protect lenders, one way to
encourage the tax-paying public to build assets is to provide tax-free
incentives to all who qualify. That would act as an added bonus to draw
evaders into the tax net. But with one in five adults already having at
least one transaction account, the opportunity already exists. There
are some 30 million account holders, a tiny fraction of whom own their
own homes. While a large proportion of these prospects are within the
BRI fold, the same is true of some 18 million other customers today. If
each bank invested in real, not superficial, CRM (Customer Relationship
Management) programs, they would generate business from within to start
with.
Mobile bankers visiting prospective customers at home to promote their
offerings is a concept far removed from the culture of financial
services marketing prevailing in Indonesia today.
The easiest thing to do is to run glossy ads on television, or
billboards shamelessly displaying cars as "prizes" to bribe the
untargeted public at large to call the bank. That, unfortunately,
symbolizes the extent of "marketing" acumen in most Indonesian consumer
banks, even today. Not many want to know the truth, develop a realistic
plan, monitor its execution or in any way be accountable. Yet the tools
exist and the expertise is within easy reach.
The number of people actively considering a home loan today is a paltry
310,000. What is even more irksome to armchair marketers is that less
than half of these prospects hail from the "Top 20 Cities". In fact,
almost a third are rural residents and the rest live in the smaller
cities and towns.
These are the easy pickings I referred to earlier. The broader goal
would be to gradually convert Indonesia's middle class, already 33
percent of the population. In a country that boasts the island of Java
as the most-densely populated piece of real estate in the world, the
lines between urban and rural are blurred and therefore pose less of a
challenge. But I'm not so sure that the financial services community
here is actually looking for challenges.
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