Danamon unit doing well with asset-based financing program

The Jakarta Post, Jakarta

Bank Danamon Syariah, the sharia unit of the country's fourth largest lender -- Bank Danamon -- reported Monday it disbursed Rp 35 billion (around US$3.86 million) in asset-based financing as of the end of September, only months after it introduced the scheme in July.

"We have channeled Rp 35 billion out of the end-of-year target of Rp 50 billion," said deputy president for business development Dodong Cahyono.

Asset-based financing is a type of lending that treats assets purchased by the loan as collateral; "it's like when a fisherman buys a fishing boat, the boat (he purchases) becomes the asset that we deem as collateral," Dodong said.

The asset-based financing figure makes up 10 percent the bank's total loans, which according to Dodong, amounted to Rp 350 billion as of the end of September, with more than 80 percent going to micro, small and medium businesses.

The availability of collateral for a loan is a must in the sharia industry, which forbids interest.

Dodong said the bank's asset-based financing scheme generated plenty of interest in Kalimantan, Jakarta and Makassar.

"In Kalimantan, the scheme is often used to finance heavy machinery and equipment in the manufacturing sector," he said, adding the bank had been cooperating with heavy equipment suppliers like PT Trakindo to minimize investment risks.

He said other heavy-duty assets, such as sea-barges, were commonly financed.