In addition to traditional banks, Indonesia has BPR Banks. Sometimes translated into English as “Rural Banks”, even though they are available in cities as well. These banks provide many of the same services as traditional banks. While they are limited in some areas, they still provide significant advantages in others. We go in-depth into these, to help you decide whether or not BPR Banking is for you.
BPR Banks: What are they?
A BPR, short for Bank Perkreditan Rakyat (People’s Credit Bank), is a type of bank in Indonesia. Like regular banks, BPR Banks take savings and deposits and give out loans. Even though they are sometimes referred to as “Rural Banks” in English, they are available in cities as well as rural areas. Typically, they are rather small. In fact, most of them will only have one branch. Their main purpose is to serve their local community’s savings and loan needs.
Are they safe?
Similar to regular banks, BPR Banks are members of the Indonesian Deposit Insurance Company (LPS – Lembaga Penjamin Simpanan). As such, LPS insures deposits in amounts of up to Rp 2 billion per person. If you need to deposit more, you can split it with other family members.
To see if your bank is a member of LPS, you should go to their website. On this website, LPS also published the maximum allowed interest rate. The interest rate given to you should not be above this, as this will void the insurance.
Advantages of using BPR Banks
The main advantage of BPR Banks is that they can pay significantly higher interest rates on deposits.
- Better interest rates on deposits. BPR Banks are authorized by LPS to give higher interest rates than regular banks. At the time of this article, LPS allows up to a 7% interest for deposits at a regular bank. Meanwhile, LPS allows BPR Banks to pay up to 9.5%. Further, most regular banks will not pay the highest LPS interest rate, while many BPR Banks will.
- Additional incentives. In addition to the better interest rate, many BPR Banks will offer an additional incentive for depositing large amounts of cash. These are usually negotiable as well. Common incentives include gold or electronic gadgets.
- More personal service. As these banks are typically tiny, their service is significantly more personal. For their top customers, they can usually send employees to your house to deal with paperwork. Or even to make withdrawals. In an interesting story we heard, a BPR even kept their branch open long after hours so a customer could still make a withdrawal in time. Try getting this kind of service at a regular bank!
Limitations of BPR Banks
According to Indonesian banking law (UU no. 10, 1998), BPR Banks can not engage in any money transfer activities. This means no inter-bank transfers, no bill payment, and so forth. They can not engage in foreign currency exchange. Furthermore, being rather small operations, most of them do not have any online presence or even ATM cards. There won’t be a customer service center. In fact, customer service is often just a direct Whatsapp chat with the manager. Although this is probably more an advantage, rather than a limitation.
Keep in mind, that if you are depositing the maximum insured amount (Rp 2 billion), you will likely be one of the largest customers for the bank. If you judge this to be the case, it would probably be prudent to give them a little heads-up before doing a large withdrawal.
Are they for me?
In summary, BPR Banking is probably ideal for you if you have a significant sum that you want to park for a period of time. Most people will obviously still need a regular bank for their daily banking needs.
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