Consumer finance with Ajay BandhuAjay Bandhu has been the country manager of consumer finance company Home Credit Indonesia since 2012, following the same position he held previously in Vietnam.

We met with Ajay to discuss how the Czech Republic based consumer finance company came to Indonesia and what their plans are for the future.

Having spent most of his professional career in the consumer finance sector, he is also an excellent person to talk about the booming consumer market in Indonesia and how to benefit from it.

Setting up consumer finance company

Ajay Bandhu, how did Home Credit started in Indonesia?

It is the first time for PPF (parent company of Home Credit) to be in Indonesia. We just received the license to operate in November 2012 and launched a pilot in Jakarta in February 2013.

In Indonesia we are a joint venture between us and a local partner. This is both to comply with the law but also in markets like Indonesia it makes sense not to come alone.

Setting up a finance company is more regulated than many other industries. This is of course reasonable as there needs to be a strong control over the financial services.

Which markets in the region had Home Credit been to already prior to expanding here?

This is our 9th market globally, in Asia we are also in China, India, Vietnam and soon in the Philippines.

Joint venture with local company

Are you having joint ventures in other countries as well?

Indonesia was the first joint venture and the Philippines will be second. It depends on the regulations of the country, for example in Vietnam there is no law that requires you to have a local partner. But we still use the support of local companies to understand the market.

Is the local partner actively involved in running the company?

The objective is to be self-sufficient. I am managing the daily activities. Local partners are providing experience in the areas where it’s needed.

Indonesian consumer finance market

How competitive is the consumer finance industry in Indonesia?

There are about 200 consumer finance companies in Indonesia. Even though it’s a very big market, it is still a huge number. Not all of them are active though, perhaps 40-50 companies are actively competing in the market, including all the banks and some large non-banking finance companies like Adira.

Automotive financing is especially competitive, particularly for the motorcycles.

How would you compare your experiences in Indonesia and Vietnam?

I enjoyed my time in Vietnam tremendously. It was my first time back in Asia after 15-16 years.

The business was very successful, even though doing business in Vietnam was more difficult than in Indonesia due to the size of the market and lower GDP per capital.

One of the challenges was the inflation that went up and down in cycles. When I was there, the inflation hit 28% and naturally the government restricted the lending. It was tough but we are there for long term and understand that government needs to take action.

It is not fair to compare of course Vietnam to Indonesia. Indonesia should be compared to China but not to countries like Vietnam or Malaysia. Clearly Indonesia is a much bigger job.

Understanding the Indonesian consumer

When a young consumer in Indonesia wants to buy a new TV, they find it exciting to get a new LCD TV. The fact of getting a TV is more important than thinking whether the programs in the TV channels are good or not.

Indonesian consumer confidence index is among highest in the world. That must clearly be good news for Home Credit?

It is of course good news for us. When we talk about consumer confidence, it is important to understand how it is being defined.

In most of the emerging markets the consumer confidence is high because the young generation realizes their quality of life is better than the previous generations’. This creates aspirations for the consumers.

When a young consumer in Indonesia wants to buy a new TV, they find it exciting to get a new LCD TV. The fact of getting a TV is more important than thinking whether the programs in the TV channels are good or not. Getting a new mobile phone is also exciting. Motorbike is a necessity.

There is a huge volume of people who need and deserve to buy all of those things and they are very positively minded.

What are some other opportunities you see in Indonesia?

Retail is a huge opportunity. Electronics retail has been growing 45% per year which is fantastic. There are many opportunities also in infrastructure, commodities, banking.

Other cities besides Jakarta are also growing rapidly. Some weeks ago I was in Balikpapan and I was surprised to see how many big malls they have over there.

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