Spektra is currently a new division on Federal International Finance (known as FIF) that focus on electronics and home appliances financing (E&HA). Having studied Spektra's business and strategy in 2007, this business proposal is zooming in 3 key territories to drive its core in financial services: Marketing, Operational, and Financial with the ini~ial hypothesis: "Spektra doesn't have clear and consistency in its segmentation. By the improvement, it will create significant result to Spektra performance as part of the effort to achieve its vision. "

Spektra current segmentation is using demography which base on occupation and income on current FIF data base. Based on income, current addressed to the consumers with income between Rp 1.1 - 2.0 mio (50%). Most of the company's consumers are occupied as employee (64.56%).

Currently Spektra just maintain the operational flow of FIF operational system consists of: credit approval and disbursement process, collection system, remedial system. However it is also to be questioned whether this operational flow that dedicated especially for motorcycle will fit for Spektra which more focus on elect~onics and home appliances financing (E&HA).

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Spektra's key indicators in 2007 were: financial amount (Rp 750 bio); average amount principal (Rp 2.1 mio); weighted AVG rate/WAR (55.5%); employee application portion (30%); SPA (5%); Spektra on Store 3 (Rp 600 mio/month -target); Spektra Outlet 70 (Rp 385 mio/month -target); segment (Low); delinquency (2.85%); credit cost/WO (3.84%); profitability (7.89%).

Tap into consumer market in a diverse population amounting 220 million people, we recommend a thorough market targeting, based on the following criteria: demographic, psychographic, usage & behaviour towards electronic products, and needs. Demographic: female/male living in urban/sub- urban/secondary cities; ABC section; commuters, who work in the cities at their utmost productive age (25 -40 y.o). Psychographic: they are pursuing for a better economic status and social recognition. Usage & behaviour: most the consumers are credit card holders and having phone, who are willing to pay certain interest for longer payment due to limited cash. They fall into early and late majority at the lifespan of adoption, though they keen to follow trend in consumer buying behaviour. Frequency of purchase: 1 -2 years. Needs: instant/fast approval, minimum requirements, reasonable amount of instalment, brand products and Spektra widely available, instant gratification/ fast delivery of the products.

Based on previous targeting and positioning, we propose Spektra to be more focused on Employees (75%). The segmentation will be based on occupation and income on current FIF data base. 75% of target customer consists of income range from Rp 600k -1.7 5k monthly. Leverage on the existing campaign, using the Green Bee as the point of attraction, yet an integrated campaign will help Spektra to reach its optimum points: prominent POP (point-of-purchase) using hanging mobile, posters, special display, banners, billboard, etc; flyers distribution system; print media to drive awareness and trials; using local radio to drive awareness amongst target users; using direct mail to revisited the existing good consumers for next instalment (build loyalty); electronic bazaars.

Proposed collection policies: early handling monitoring; FPD (first payment default) monitoring; booking quality 3 and 6 months on book; bucket 1 -7 days: desk collector; bucket 8- 30 days: desk collector; bucket 31 -60 days: field collector; write-off> 60 days: no repossession effort (sold out to outsourcing company).

Regarding to the risk management related to funding strategy, we identify 3 risks facing by the company: liquidity risk, gapping risk, and interest rate and derivative risk. In order to have good control on the above matters, we recommend the company to make daily liquidity plan until at least the next one week by obtaining the estnna:tlon target from business side. The examples for daily liquidity plan are: daily liquidity format, daily liquidity report to be acknowledged bye Finance Director.

~ To manage the issue of Gapping risk, Spektra must establish ALCO or Assets Liability Committee. It should conduct at least once a month meeting to determine the proper maintaining of assets and liability maturity level. The Company should determine the maximum gapping level between assets and liabilities. Actually the gapping can be covered some part by internal equity. Afterwards, if there is still gapping level as the overall, then the ALCO meeting 'should decide to cover the

..gapping by taking certain period of direct bank loan or doing other actions.

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r To overcome the issue of interest rate and derivative risk, company can take foreign currency loan with floating interest rate and exchange rate, but it needs to enter into derivative contracts such as cross currency rate swap. By doing this matter, it will have a fixed interest rate as well as fixed exchange rate until the maturity of bank loan. Beside that, the company may have to enter into Rupiah straight loan for more than one year period, while in reality there is no fixed interest rate for such period of loan. It endang~ the fluctuation of cost of fund during the bank loan period. Therefore the Company can take the floating Rupiah straight loan with quarterly or semi annual rupiah loan and enter into interest rate swap. By executing this swap, the Company can have fix interest rate until maturity of the bank loan.

J As a big mainframe, there are three basic operational risks: credit risk, daily operational risk, and , funding risk in relating to disbursement process. In order to ensure the compliance of lending

criteria, we recommend Spektra to socialize well the lending criteria to operational front liners and dealers for strengthening the implementation and strong monitoring by credit order or credit committee before approval, and there should be a periodically credit audit to ensure the implementation of lending criteria at branches. Daily operational risk is the risk arose from daily operational activities which might due to irregularity, which is mostly due to misconduct of employee's behavior. There should be a clear reward and punishment from Spektra management; disoperation due to human error, which can be overcome by applying KPI on each organization member to show fairness for every showing capability, also negligence.

To avoid the credit risk, we recommend the following determination of credit program and credit structure for proper credit risk management: 10% (assumption) for cost of fund; 31 % effective p.a. for selling rate and 50% effective p.a. for province capital city; district city (24 month): -2% = 12 months, +2% = 36 months; administration: Rp 20,000 (12 months), Rp 25,000 (24 months), Rp 50,000 (36 months); tenor 36 is accepted at 5%.

Keywords: Spektra, FIF, Electronic & Home Applicance (E&HA), market segmentation, credit collection policy, credit risk.



Research Location : PT Federal International Finance (PT FIF)

Supervisor by : Alex Iskandar Munaf

Date Received : November 1, 2008





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