The Insurance Agreement in the Urgency of Microcredit on Banking
Hilda Yunita Sabrie, Prawitra Thalib, Faizal Kurniawan and Yuniarti
Department of Private Law, Universitas Airlangga, Surabaya, Indonesia
Keywords: Loan Agreement, Insurance Agreement, Banks, Credit, Collateral.
Abstract: In the conduct of its activities, the bank will always apply the principle of prudence, particularly in granting
loans to prospective debtor. Banks are responsible for funnelling the deposits funds to the society. For each
credit given, granting by the bank must be implemented carefully even though the maximum credit given is not
so large or otherwise falls into the category of micro-credit. The application of the precautionary principle by the
bank is implemented via additional agreement in the form of an insurance agreement. So the existence of this
insurance agreement is contingent with the agreement anyway, namely micro-credit agreement. This is often in
practice not be noticed by the bank, because the nominal plafond given relative small, candidate of the debtor
was not asked to surrender collateral as security if later on it turned out that the debtor does not run obligations
in accordance with agreed credit agreement. In granting credit should the bank gives equal treatment i.e. asking
for collateral in accordance with the percentage of plafond liquidated damages or make arrangements for
insurance well against the collateral or credit insurance in private. This research is a normative research using
research methods statute approach (based on laws and regulations), the conceptual approach and case approach.
1 INTRODUCTION
Banking as a community trust financial institutions
play an important role in the economy. The existence
of the banking system in economic development has
a fundamental function and determine a country's
economic resilience. In order to face the dynamics of
development of the regional and global economy, the
banking industry needs to increase national resilience
through improved application of the principle of
reciprocal. The application of the principle can be
observed from the arrangement of the structure of
stock ownership of banks and the inclusion of a
minimum core capital of the bank.
Banking as one of the financial institutions are
intended as a mediator between the parties who have
excess funds with the parties in need of funds. Under
article 3 of law No. 10 Year 1998 about the changes
to the Act No. 7 of the year 1992 about banking
(hereafter referred to as the banking law), that the
main function of collector is as Indonesia's banking
and retailer Community Fund. This functionality is
referred to as bank intermediation, i.e. the bank as
Collector and Contracting Community Fund
(financial intermediary). Banking role in the
development of a nation is very important, this is
because the function of a banking institution is as
intermediaries. Understanding the institution of
intermediaries is bank "intermediaries" that function
as instruments of community funds in the form of
deposits (the surplus) to another community in the
form of credit (the deficit) to be used as in agreement
between banks with the debtor (Algoud, 2004). Thus,
there are two major tasks to be assumed by the bank
in carrying out its functions: first guarantee fund
deposits from the public in order to stay secure
(liquid). The second is to run the mandate of law No.
7 Year 1992 jo law No. 10 Year 1998 About
Banking to consolidated the national economy. This
is because the development of the national economy
is always moving fast with an increasingly complex
challenge.
The existence of the bank to be very important,
but on the other hand because of the large number of
banks in Indonesia, it will become more competitive.
To survive in the business world of banking, the
214
Yunita Sabrie, H., Thalib, P., Kurniawan, F. and Yuniarti, .
The Insurance Agreement in the Urgency of Microcredit on Banking.
DOI: 10.5220/0007540302140219
In Proceedings of the 2nd International Conference Postgraduate School (ICPS 2018), pages 214-219
ISBN: 978-989-758-348-3
Copyright
c
 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

bank will make a variety of banking product
offerings, one of which in the form of savings and
credit. Current banking products that are much
sought after by the public is the credit without
collateral, which in this case fall into the category of
microcredit. Micro-credit is the credit given by the
banks to potential debtor with maximum plafond
IDR 50,000,000.00 (fifty million Rupiah).
In practice, the granting of micro-credit (credit
without collateral) made more simple if compared
with granting credit small, medium and corporate.
This is because it funneled the credit form. One form
of the application of the principle of prudence in the
channeling of credit is making the insurance
agreement as additional agreement. This insurance
agreement that will be used to provide a number of
punitive damages while tort, so that the debtor bank
in this regard can minimize those risks.
Granting
credit committed by the bank should still be done on
the basis of the principle of prudence which has been
regulated in the legislation. But in fact specifically
for micro-credit, the bank does not implement the
principle by not applying any warranty on the credit
given. The issue is that being a legal issue in this
study i.e. whether the granting of microcredit can be
categorized has violated the principle of prudence
and whether insurance is required in channeling
microcredit.
2 RESULT AND DISCUSSION
The principle of bank prudence is something urgent
to implement since the onset of the financial crisis in
1998. The ASIAN crisis was the point that G7 were
pressed to restructure the international financial
architecture. It was led to awareness to provide an
integral role of bankruptcy systems in national and
global area, which then raises international
institutions to consider insolvency law to be a
particular hard case for harmonization. The
awareness was raised because of the unsuccessful
process in separately in every single jurisdiction.
Moreover, the recent financial crisis 2007-2009, has
renewed the urgent attention to the importance of
resolution systems for financial institutions, which is
safeguard financial stability and moral hazard. And
this resolution would only be effective if there is a
development made in a framework that applies on a
cross border basis. As a response to this matter, the
G-20 leaders, International monetary fund, the
financial stability board, World Bank and The Basel
committee of Banking Supervision (BCBS) cross
border bank resolution group held a meeting at the
London Summit 2009. The principle of prudence in
banking is the principle which States that the bank in
carrying out the functions and operational activities
is mandatory be careful. The prudence is meant to be
applied in all bank products i.e. savings and
channeling of credit. The provisions governing the
principle of prudence is regulated in article 29 of law
No. 7 Year 1992 jo law No. 10 Year 1998 On
banking (Banking ACT):
(1) The Bank is obliged to keep the level of health in
accordance with the provisions of the bank capital
adequacy, asset quality, management quality,
liquidity, solvency, earning ratios of other funds
related business of the bank and must do business
activities in accordance with the principle of
prudence,
(2) In giving credit or financing based on sharia
principles and conduct other business activities,
the bank is obligated to tackle the ways that do
not harm the interests of the bank and the
customer who entrusted their funds to the bank,
(3) For the benefit of the customer, the bank is
obligated to provide information on the likely
incidence of risk of loss with respect to any
transaction conducted through banks.
According to Munir Fuady that business bank
has conservative tendency as business becomes
known as prudent banking. It is caused by:
a. The role of the bank is quite decisive in the
development of the monetary and macro-
economic;
b. Dealing with people's money (deposit, current,
savings, and others) is at stake in a bank; and
c. Due to the characteristics of the business bank
should always do match between funds
received and funds disbursed, so repressed
speculative elements may be minimal.
As a financial intermediary institutions of society
(financial intermediary), the bank became an
intermediary media parties who have excess funds
(surplus of funds). In line with this, the banking
positions as financial institutions that each
akitivasnya implies economic growth of a country
require the existence of a special surveillance. The
bank must be in a healthy state in order not to cause
The Insurance Agreement in the Urgency of Microcredit on Banking
215

big losses, so the necessary existence of the principle
of prudence in any banking activities. According to
Thomad Hellman, Kevin Murdock and Joseph
Stiglizt:
“ Prudential regulation is menat to
protect the baking system form these
problems. Traditionally, it consisted of a
mixture of monitoring individual
transactions (ensuring, for instatce, that
adequate collateral wa put up), regulations
concerning self-ealing, capital requirements
and entry restrictions. In some countries,
restrictions were placed on lending in
particular areas-many East Asian
Countreis, for example, used to have
restrictions on real estate lending. Finally,
many countries imposed intreset rate
transactions, concern about bank runs also
led may countries to provide deposit
insurance and to establish central banks to
serve as lenders of last resort”.
The purpose of the enforceability of the principle
of prudence is in order for the banks is always in
good health, so that among other things is always in
a state of liquid, solvent and profitable so that the
expected levels of public confidence towards
banking is always high and do not hesitate to keep
their funds in the bank.
2.1 The Prudential principle in
Channelling Bank Funds
As a contracting agency funds, the bank is funneling
funds to the community through the granting of
credit. The event will certainly always be faced with
the risk of a commonly known as credit risk. This is
due to every possible activity occurring in the
channelling of funds can lead to losses if a bank is
not ready to face the things that can happen.
In order to avoid those risks, the bank must do
ability against analysis of doing a credit payment for
dierikan. This is in line with article 8 of the Banking
Act which states that the bank is obliged to have the
conviction based on a profound analysis over faith
and the ability and willingness of the customer to pay
off debts or restore financing referred to as
exchanged. Analysis conducted by the bank subject
to the instrument can be 5C and 7P. As for the
instrument of 5C in analysis granting credit includes:
a. Character
The bank will analyze the character of the
customer which can be seen from the client's
background, whether that is private or work.
Judgment on the character aims to find out the
honesty and good faith of prospective borrowers
and become material for knowing his little big
the credit risk.
b. Capital
Prospective borrowers who will ask a credit
bank must have sufficient capital. The greater
the capital owned, then the greater the
customer's ability to perform its obligations. In
addition, to see the use of the capital he replied:
effective or not, can be seen through the
financial statements are presented with such a
measurement in terms of liquidity, solvency, and
other sizes. This analysis should also refer to the
source where the present capital, including
presentations of capital used.
c. Capacity
Banks should analyze the customer's ability to
repay. This analysis is usually linked with the
educational background and pengalamanya so
far in managing credit is channelled. Capacity is
often also referred to as capability.
d. Collateral
A guarantee can be given for the customer either
physical or non-physical. Based on the
explanation of article 8 of the Banking Act, can
be summed up the two kinds of collateral that is:
1. Collateral is a staple item, project, or a dibiaai
charged with the corresponding credit;
2. Additional collateral is the object that is not
directly related to the object financed credit.
Guarantees provided should exceed the
amount of credit given and has already
examined the validity and kesempurnaanya. So
the guarantee that is used can be used as soon as
possible in case of bad credit.
e. Condition
The analysis of the client's condition is aimed
at knowing the prospects in the future. For
example, the assessment of business conditions
that are financed should really have a good
prospect until the possibility of bad debt is
relatively small.
Furthermore, the instruments include 7P:
a. Personality
i.e. rate borrowers of the personality and the
vagaries of everyday Act. This assessment also
ICPS 2018 - 2nd International Conference Postgraduate School
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includes attitudes, emotions, and actions of the
customer in facing a problem and solve it.
b. Party
Classify clients into a certain classification
based on capital, loyalty, as well as characters.
Clients are classified into a particular class
would get a different facility from bank.
c. Purpose
Knowing the purpose of clients in taking credit,
including the type of the desired credit
customer.
d. Prospect
I.e. assessing the customer's business prospects
in the future. This is important considering if a
credit facility financed without having the
prospect, then there is a risk of losses banks
will appear.
e. Payment
is a measure of how the customer in the process
of repayment that superbly rendered. The more
the income the customer seumber, it will
suppress the possibility of bad credit.
f. Profitability
To analyze how the capabilities of clients in
search of profit. This instrument is measured
periodically.
g. Protection
The goal is how to keep the credit given
assurance of protection, so that the credit given
is completely safe. Protection meant here can
be a guarantee of.
After performing the above analysis, the bank can
assess whether the proposed credit is safe enough
with a sense that the credit will be paid off in
accordance with the agreement. In line with this, the
bank still needs to do monitoring whether the use of
credit has been in accordance with the purpose of
early post-war proposed credit disbursement of credit
to borrowers. By doing this there are at least two
things you can do. First, help what has disampikan in
the application for credit. Second, when found
deviations from credit funds credit application
submitted in advance, then the bank can be discussed
with the customer that such action can be difficult for
the customer to make a payment by credit.
In the framework of good credit management,
Widjanarto Sembiring was quoted by as saying that
the bank should at least orderly do things as follows:
a. monitoring compliance by the customer with a
good over all requirements between the debtor
properly;
b. monitor compliance with either by the customer
or debtor especially interest payments and
installments with an orderly and timely manner in
accordance with the exchanged;
c. monitor the development of the business and
financial clients including the ability of liquidity
and fulfillment of obligations to the other party
other than the debtor bank.
Furthermore, in terms of the distribution of
credit, the bank is obligated to have confidence over
the ability of the debtor to be able to capable and pay
off all obligations, namely in the form of debt
principal and interest as provided for in article 8 of
the banking ACT 10 jo. On article 11 of the banking
ACT also stated that Bank Indonesia sets out
provisions on the maximum limit of granting of
credit or financing based on sharia principles i.e.
30% of the capital stock of the bank, the granting of
guarantees, investment securities, placement or other
similar things, which can be done by the bank to the
borrower or a group of related borrowers. Included in
these matters to companies in the same group with
the bank in question.
So many rules which represents the principle of
prudence in the banking ACT shows that this
principle is one of the very fundamental principles to
run any operational activities of the bank. If
connected with the distribution of micro-credit
(credit without collateral), in practice are very
different. Discrimination occurs in the process of
channeling microcredit credit compared to small,
medium and corporate. In channeling microcredit,
seem more simple in its credit worthiness
assessment, short time period (1-3 years) and are not
required to submit collateral by scheme products
because it is becoming more attractive to many
people. However, the bank has also provided
"protection" in channeling microcredit, applying high
interest to the debtor.
In addition to high interest,
banks also provide related terms of payment of the
fine if the debtor fails to pay the installments or
having bad credit. The bank will send the collector to
the address in question and if this effort does not
bring results then the bank will file a lawsuit to court.
A lawsuit to the court made by the bank, if the
debtor fails to pay credit to the rarely performed
small, medium and corporate. This is because to
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217

skim the credit, the bank typically serves as a
creditor preference, where the bank holds collateral
property of the debtor used as collateral material.
The collateral can be a moving objects and/or objects
do not move whose value is an average of 110%-
130% of the disbursed credit to the debtor. So when
the debtor defaulted or tort, a last resort that the bank
can do is to sell the collateral that has been bound by
fiduciary rights or rights of dependents in accordance
with the legislation in force. This is what makes the
position more secure bank to channel credit to the
debtor.
In addition to asking for collateral to secure bank
loans, disbursed when the bank also insure the object
of collateral or credit to insurance companies. In this
case the insurance company as an insurer and the
insured is the debtor. While the bank is as a third
party with an interest in the insurance agreement.
The obligation of the debtor is to pay a premium
which has been determined at the time of the
beginning of the credit agreement, in accordance
with the object of collateral or channeled credit.
While the liability insurer (insurance companies) are
paying compensation in the event of an uncertain
event in this one is because the debtor defaulted. So
the existence of this insurance agreement will
become more perfect and strengthen banks as
instruments of credit. This is done in a bank as a
form of liability of the bank to the customer the
depository of funds as well as the form of the
application of the prudential principle.
For channeling microcredit, guarantee and
collateral agreement insurance is not made a
requirement by the bank because this type of credit
allocated by the celebrated medium circles down.
Target micro-credit is usually for the purpose of
consumption, not for business. Nevertheless, in
channeling microcredit must still implement the
principle of prudence. It means not just funneling
credit alone but should remain cautious and keep
applying the principle 5 C (character, capacity,
capital, collateral and condition of economic).
Even so, if applying the principle 5 C, which
often happens is a prospective debtor does not have
the "collateral" that lends itself to warranted. So it
should be possible when the bank is working with
insurance companies to share the risk of default by
the debtor. The existence of the insurance agreement,
in case of default by the debtor the insurer will
assume some or all of the losses suffered by the
bank. This way will be more effective and efficient
than the bank filed a lawsuit to court. The lawsuit to
trial surely cost money and time briefly when
compared to what is required by the bank.
3 CONCLUSION
On the granting of microcredit by the bank, it is not
required the existence of a collateral warranty
agreements and the awarding of insurance upon the
object of collateral and credit. The form of the
application of the principle of prudence exercised by
giving high interest credit at the top of the channel
by the bank. It is considered ineffective because it is
still a level of "security" over the bank of the
disbursed microcredit is significantly lower. This
means that the application of the principle of the
prudence is not so vulnerable and this is detrimental
to the bank.
To minimize the risk of micro-credit bank
transmitted then the bank needs to give these terms
to the debtor to insure credit. It is also as conducted
by bank credit to small, medium and corporate. So
there is no discrimination between the credit granting
process of micro, small, medium and corporate.
Credit insurance agreement will be more beneficial
both for the bank and the debtor because its function
is to protect the credit given. Although the later costs
that will be borne by the debtor will become larger
because they have to pay a premium.
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