BTN-Sustainability-Report-2018.pdf - Bank BTN

Sustainability Report

GROW, TRANSFORM AND SUSTAINBTN is 119 years old this year. The company that started as a postal bank in 1897 has been transformed into the largest housing loan provider in Indonesia. BTN’s long existence, however, has not made us ignorant about the importance of transformation and innovation. BTN has initiated a three-stage transformation agenda in 2013 and aims to reach a global player status by 2025. In 2018, BTN recorded a significant achievement by ranking fifth in the category of banks with the largest assets. This is a step up from its 11th ranking five years ago. BTN’s assets have grown in line with the Company’s effort to provide digitalized banking services across all of the Company’s business activities. This has been done to ensure that all generations of customers are comfortable with our banking services. The Company’s achievements have been built on the principle of inclusiveness, which includes the provision of several cutting-edge financing products for young families, farmers, fishermen, drivers of public transport and low-income communities. BTN will continue to carry out its transformation in order to continue increasing added value for its shareholders and, more importantly, providing Indonesian people with access to cheap and affordable housing.

Overview of Sustainability Performance The Statement of the President Director About this ReportAbout the Company Sustainability GovernanceProviding the Economic Benefits for the NationThe Commitment to the Environmental ConservationHuman Resource ManagementCommitment to Provide Best ServicesInclusive Services and ProductContribution for the Improvement of Life Quality of the CommunitySupporting Information

2 PT Bank Tabungan Negara (Persero) TbkSustainability Report

TABLE OF CONTENTS The Statement of the President Director

About this Report

About the Company

Overview of Sustainability Performance

4

Sustainable Financing to Support the Achievement of Sustainable Development Goals

6

Implementation of the Principles of Sustainable Financing 8

BTN’s Strategic Transformation 10BTN and Sustainable Development Goals 12

Contribution to Sustainable Development Goals 13

Sustainable Performance Overview 2018 15

The Statement of the President Director 16Policy and Strategy of Sustainability 19Implementation of Sustainable Financing 20

Sustainable Financing Implementation Strategy 21

About this Report 22Period, Limitation, and Standards for the Preparation of Reports 24

Report Content and Scope 25

Independent Assurance 27Statement from Board of Commissioners and Board of Directorson Accountability Over Sustainability Report 2018 PT Bank Tabungan Negara (Persero) Tbk.

28

About the Company 30Significant Change to the Company 33

Certification and Awards 2018 34

Bank BTN Brief History 40

Event Highlights 2018 42Company’s Vision, Mission, and Corporate Culture Values 46

Company Organization Structure 48

Operational Area and Market Share 50

Corporate Culture 52

Sustainability Governance 56Operasional yang lebih ramah Lingkungan 58

Governance Strategy 59

Governance Structure 62

General Meeting of Shareholders 63

Board of Commissioners 63

Board of Directors 64

Soft Structure GCG 65

Risk Management 67

Implementation of Prudent Principles 70

Business Ethics and Code of Conducts 71

Corporate Culture 73

Internal Audit System 75

Stakeholders’ Involvement 77

Corporate Governance Appreciation 79

Providing the Economic Benefits for the Nation 80BTN Business Performance 83

Credit Distribution 83

Infrastructure Fiinancing 85

Asset 85

Financial Performance 86

Distribution of Economic Benefit 87

Housing Finance Center 87

Mini MBA in Property 91

Master Developer Indonesia (MDI) 91Penyelenggaraan Pendidikan Pembiayaan Perumahaan Tingkat Dasar & Tingkat Lanjut

92

3PT Bank Tabungan Negara (Persero) TbkSustainability Report


The Commitment to the Environmental Conservation

100

The Company’s Commitment to the Environmental Conservation 102

Head Office Green Building 103

Energy 103

Paper 104Other Waste and Emission Management 104

Human Resource Management 108Human Resource Development Strategy 110

Human Capital Management 112

Employee Rights Protection 114Occupational Health and Safety Management 117

Commitment to Provide Best Services 122Transformation plan and implementation of BTN iGRC 125

Customer Education 127

Digital Application 128

Digital Application 128

Appreciation 128

Inclusive Services and Product 130Providing Sustainable and Inclusive Products 133

Digital Financial Services 136

Inclusive KPR 138

BTN Micro KPR 138

KPR BTN BP2T 139Innovation to Open Access for the Society to Have the House 141

Financial Literacy Program 152

Contribution for the Improvement of Life Quality of the Community

156

CSR Program 158

Realisation of CSR Fund Disbursement 161

CSR Highlight 163Partnership and Community Development Program 164

Structure of PKBL Organisation 2018 166

Partnership Program 167

Highlight Partnership Program 168

Community Development Program 168Highlight Community Development Program 170

Supporting Information 176GRI Standards Index 178

Attachment II POJK 51/2017 Index 181

Independent Assurance Statement 184


OVERVIEW OF SUSTAINABILITY PERFORMANCE

Sustainable Financing to Support the Achievement of Sustainable Development Goals 6

Implementation of the Principles of Sustainable Financing 8BTN’s Strategic Transformation 10BTN and Sustainable Development Goals 12Contribution to Sustainable Development Goals 13Sustainable Performance Overview 2018 15




T he Company actively participates in implementing sustainable financing as a part of the its effort to achieving sustainable

development in Indonesia. In order to achieve its sustainable development goals, the Company has develop the Sustainable Financing Action Plan (RAKB).

The Sustainable Financing Action Plan is expected to encourage long-term value creation in all of the Company’s business activities, which are not limited to creating sustainable competitive advantage for the Company but also aim to benefit the wider community

and the environment of the Company’s operations by strengthening the economic, social and environmental resilience of the community and the surrounding environment. [GRI 102-15]

SUSTAINABLE FINANCING TO SUPPORT THE ACHIEVEMENT OF SUSTAINABLE DEVELOPMENT GOALS




The Company actively participates in implementing sustainable financing as a part of the its effort to achieving sustainable development in Indonesia. In order to achieve its sustainable development goals, the Company has develop the Sustainable Financing Action Plan (RAKB).

Goals of the Sustainable Financing Action Plan Transforming Bank BTN into a market leader in the housing financing sector and becoming a trusted financial partner for

Indonesian families in 2023 by applying the principles of sustainable finance. This is a part of the Company’s contribution to achieving the sustainable development goals in Indonesia.

BTN’s Strategic Steps to Achieving Sustainable Financing

1 2 3 4 5 6

Strengthening the Company’s CSR policy and Practices by applying the 3Ps (People, Planet, Profit) in collaboration with the ABCG (Academy, Business, Community and Government)

Development of digital-based

sustainable financial communication

strategies involving the millennial

generation

Strengthening the Company’s Risk

Management Policy by developing sustainability

policy, strategy and program

Development of the Company’s Banking

Products and Services through housing financing

schemes, and consumption and

SME financing that take into account

environmental and social aspect in

order to strengthen the Company’s sustainability

portfolio

Development of the Company’s

Sustainable Banking Operation Procedures through the implementation

of the Green Office Concept and sustainable

procurement

Strengthening the Company’s

institutional capacity through institutional

arrangement resource capacity

building

BTN has established a Company Secretariat, a work unit responsible for the implementation of RAKB 2019 – 2023. This work unit supervises all sustainable financing and assigns other work units within the Company with tasks to achieve sustainable program implementation.

The tasks and authority of the work unit include:• Directing the Company’s sustainable financial program implementation to achieve the targeted sustainable

goals. • Determining the Company’s corporate communication strategies and various sustainable financial programs

in order to maintain the Bank’s reputation in the filed of sustainability.• Conducting sustainable financing program implementation, coordination, monitoring and evaluation.


PHASE IConsolidation

PHASE IIStrengthening

PHASE IIIDevelopment

Review, Policy, Sustainable Risk, identification, and measurement of Social and Environmental Risk

Internal Capacity Development, Service Improvement in Underdeveloped Regions (Inclusive) Sustainability Report

Digitalization Process and OperationsGreen Office

The Griya Daya program, Disability-friendly Bank Services, Establishment of Gen HI and Wifi House Campaign, Sustainability Finance Award

Green Lending, Green Bond, Green Index (SRI – Kehati) and Envorinmentally and Socially related Credit Card

2019 2020 2021 2022 2023

Sust

ain

abili

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Pol

icy

& S

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• Set policy tools and sustiamable financial models

• Strengthen institutional and establish sustainable financial structure

Gre

en F

inan

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Pro

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ct &

Ind

exSu

stai

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ility

P

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& In

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s

Road map of the Application of Bank Sustainable Finance of the Company for the 2019 – 2023 Period

RAKB 2019 – 2023 consists of the Company’s long term sustainable financing program, which is based on three main initiative: preparing a set policy framework and sustainable financing model, institutional capacity improvement, establishment and organization of sustainable financing and initiation of sustainability programming.

BTN integrates its development of sustainable financing with its existing transformation strategy and initiative in accordance with the sustainable financing principles, which include digitalization of its mortgage and inclusive financing products, mortgage micro financing for non-fixed income communities, improving access to financial banking services in 17 underdeveloped regions, inclusive financial and banking services for fisherman and disable

communities, and sustainable construction financing schemes. In the financing sector, the Company aims to obtaining green funding such as environmental bond and or green bonds in the future.

IMPLEMENTATION OF THE PRINCIPLES OF SUSTAINABLE FINANCING Sustainable financing is regulated by the Financial Services Authority Regulation Number 51/POJK.03/2017 concerning the Implementation of Sustainable Financing. This regulation contains seven principles that have been applied in the Company’s business activities and will continue to be developed in conjunction with the implementation of the Company’s RAKB.




Principle of Responsible Investment and Social and Environmental Risk Management

The Company has a pro-environment credit policy, which assesses credit risk by taking into consideration the results of the Environmental Impact Assessment (AMDAL) before deciding whether to grant credit for a project. Furthermore, the Company also makes direct field inspections to ensure that the prospective debtors meet all the relevant environmental regulations.

Principle of Running a Sustainable Business

The acceleration of the digital banking transformation is a strategy to support the Company’s business growth and its initiative to minimize the negative impact on the environment by using less paper. This initiative is carried out by synergizing digital banking developments with the Company’s prime products. The iflow application is a correspondence application that can distribute mails directly across divisions and across branches where its distribution system is structured and online. In addition to having advantages in distributing structured correspondence, this application also has other benefits including its swiftness in the distribution of correspondence, monitoring of delivered documents or letters, and can reduce paper use since letters and memos do not need to be printed. This application has been in use at the Company’s Head Office since 2011. In addition, BTN benefits the Company’s application to synergize digital banking with the Company’s superior products such as Home Ownership Loans through the BTN Property Portal service.

Principle of Priority Sector Development

Integrating sustainability aspects into the Company principles of TARIF (Transparency, Accountability, Responsibility, Independence, and Fairness) compliance with regulations relating to employment, customer data confidentiality, waste management, and the implementation of the Partnership and Community Development Program in accordance with the existing regulations.

Principle of Governance Integrating sustainability aspects into the Company principles of TARIF (Transparency, Accountability, Responsibility, Independence, and Fairness) compliance with regulations relating to employment, customer data confidentiality, waste management, and the implementation of the Partnership and Community Development Program in accordance with the existing regulations.

Principle of Inclusiveness Providing inclusive and sustainable banking products through TCASH-BTN Services, providing Mortgage facilities for informal workers (BTN KPR for Gojek Partners and BTN Micro KPR for associations and communities), developing Micro, Small and Medium Enterprises (MSMEs) through the KUMK scheme and KUR (People’s Business Credit), development of digital banking services, and implementation of various financial literacy programs.

Principle of Coordination and Collaboration

Utilizing existing Government regulators to facilitate housing and building permits, collaborating with the National Land Agency (BPN), and collaborating with students from 25 universities in Indonesia who are involved in the Entrepreneurship Property Literacy training program, which aims to improve their skills in the property business.

Principle of Clear Communication

All the information in the Company’s Sustainability Report related to economic, social and environmental issues is clear and accurate. The report can be accessed by all stakeholders.

In developing its Sustainable Financing Action Plan, the Company has used several international guides, which are used globally as reference point. They include the following:

Sustainable Financial Roadmap 2015-2019 and Financial Services Authority Regulation Number 51/POJK.03/2017 concerning the implementation of Sustainable finance

IFC’s (Internasional Finance Corporation) Sustainability Framework

Standar ISO 26000

UNEP-FI ( United Nations Environment Programme - Finance Initiative

GRI (GLobal Reporting Initiative)

SDGs (Sustainable Development Goals)

Law No 40/2007 on Limitid Liability Company that makes it mandatory to Companies to do TJSL and Law No 32 of 2009 on Environmental Preservation and Management


BTN’S STRATEGIC TRANSFORMATION

Transformational Entreprise-Globe mindset

One Million Homes Program

Products and services have

been in operations internationally

PHASE 1 TRANSFORMATIONSurvival Period

PHASE 2 TRANSFORMATIONDigital Banking Period

PHASE 3 TRANSFORMATIONGlobal-Playership Period

TRANSFORMATION LEAPTriggered by one million

houses

ASPIRATIONThe leading housing bank in

Indonesia with world class

standard

ASPIRATIONTransformational Enterprise-Globe Mindset

2015 2016 2019 20252013

Stronger Business

Infrastructure HR


In 2013, the Company initiate a three-stage transformation agenda to become a market leader in the housing loan banking industry and a world class banking entity. With the three-stage transformation process, the Company aims to transform itself into a market leader with a global service quality in the housing financing sector.

The Company’s three-stage transformation agenda has three specific themes, including: business transformation, infrastructure transformation, and human resources transformation. All of these are carried out simultaneously. The transformation in the banking business sector is being carried out in three stage. The first stage is the survival transformation stage that took place from 2013 until 2015. The second phase is the digital banking period that has been implemented since 2015. The third stage is the global partnership transformation stage that sees the Company prepare to compete in the global market.

The development activities carried out by the Company include: 1. Strengthening the business sector; Strengthening

the Company’s Customer Banking and Commercial Banking Strategy in line with the Bank’s customer segmentation. In relation to consumer segmentation, the Company’s strategy

is to improve its Mortgage positioning in the mass segment and expand the Company’s digital banking services. Meanwhile, in the commercial segment, the Company’s business direction is focused on expanding housing supply and customer value chain mapping. The expansion of the Company’s mortgage based financing scheme and strengthening cooperation with various agencies are initiatives carried out to increase CASA in the commercial segment.

2. Infrastructure development in line with the Company’s policy; development of the Company’s infrastructure pillars to support the Company’s three-stage transformation and achieve sustainable business growth. The infrastructure development pillar focuses on the following activities:a. Infrastructure transformation focused on

increasing IT capabilities in the implementation of digital banking, digitalization process and big data analytics.

b. Improving the Company’s GCG by implementing governance, and risk and compliance analysis in an integrated manner.

3. Strengthening the Human Resources Pillar by strengthening the ten building blocks

and increasing HR capacity as agents of the implementation of the Company’s transformation.



The Company has successfully passed the first phase of its three-staged transformation plan and is enthusiastically implementing the second phase with the main theme of Digital Banking. As a part of this second stage of the transformation process, the Company has begun the implementation of its strategic transformation plan blueprint for the period 2017-2018. Based on this blueprint, the Company has launched 32 (thirty-two) strategic initiatives, which aim to maintain the Company’s market share in the mass segment while expanding its market in emerging affluent and affluent segments of the society.

The Company has also developed high capability and reliable technology infrastructure, initiated branch productivity and sales productivity optimization, as well as strengthened the implementation of comprehensive and integrated Governance, Compliance and Risk (GRC) implementation. [GRI 102-15]

BTN AND SUSTAINABLE DEVELOPMENT GOALS

“Creating inclusive, safe, resilient and sustainable township and residential”

The Company realizes that to achieve the 17 goals of the 169 Sustainable Development Goals requires wider public participation, where the private sector could play a significant role in collaborating with the government and the communities. BTN actively participates in the government’s effort to achieve the Sustainable Development Goals (SDGs), especially SDG 11.1, namely in 2030 cities development, providing access to feasible, safe and affordable settlements for all people through home ownership financing products.

The Indonesian government targets the achievement of the SDGs as stipulated in the Presidential Regulation Number 59 of 2017 concerning the Achievement of the Implementation of the Sustainable Development Goals. This is in accordance with the mandate of Law Number 1 of 2011 concerning Housing and Settlement Areas, and Government Regulation Number 14 of 2016 concerning Housing and Settlement Areas.

To help the Government to achieve these targets, the Company has initiated housing ownership loan (KPR) products that are feasible and affordable for everyone, including: • BTN Micro KPR aimed at those who have a low income and work in the informal sector, including street

vendors, traders at traditional markets, fishermen, and farmers.• KPR Micro Academy Business Community Government or ABCG targeting Low-Income Communities (MBR).• Subsidized Mortgages from the Ministry of Public Works and Public Housing of the Republic of Indonesia

intended for MBR with low interest rates and light installments for the purchase of landed housing and flat housing.

In addition to the Company’s mortgage products, the Company also supports the achievement of SDGs, directly and indirectly, through the implementation of social and environmental responsibility activities (CSR) and corporate social responsibility (CSR) programs.



CONTRIBUTION TO SUSTAINABLE DEVELOPMENT GOALS



SDGs Description BTN Contribution

2. Zero Hunger Hunger eradication, achieving food security and adequate nutrition, and increasing sustainable agriculture

The Company donated food and organized low-cost markets in several regions in Indonesia to provide access to food supply for people in need.

3. Good health and well-being

Ensuring a healthy life and improving the welfare of all residents of all ages

The Company initiate a Community Development Program, under that program the Company contributes to providing access to clean water and sanitation infrastructure in order to improve the community health. quality

4. Quality Education Ensure quality of education that is inclusive and equitable and increases lifelong learning opportunities for all

Through the Community Development program, the Company assists Education activities in various fields, including:• Program Siswa Mengenal Nusantara• Providing Educational Scholarships• Provision of facilities and infrastructure to support school

activities

5. Gender Equality Achieve gender equality and empower women

The Company opens wide opportunities for women to work and have a career within the Company:• Providing a Sustainable and without Discrimination employment

environment • Eliminating of Forced Labor Practices, Child Labor and

Discrimination• Equality in Granting Employee Remuneration and Welfare

7. Affordable and clean energy

Ensure affordable, reliable, sustainable and modern energy access for all

Through the Community Development program, the Company assists in electrification activities in areas that have not been electrified.

8. Decent Works and Economic Growth

Increase inclusive and sustainable economy growth, provide productive and comprehensive employment opportunities, and decent work for all

Through the Partnership Program, the Company facilitates revolving funds for the development of MSMEs in Indonesia, including cooperation with BUMN Present for the Country, including:• Community Economic Development Through the Village

Economic Center (Balkondes)• BUMDes and Agricultural Entrepreneurship Program• Tabungan BTN SimPel (Student Savings)• Entrepreneurship Property Literacy Training

11. Sustainable Cities and Communities

Making inclusive, safe, resilient and sustainable cities and settlements

Providing Housing Ownership Credit (KPR) products and supporting the One Million Houses Government Program including for communities including low-income communities to have safe and affordable housing, and Community Development activities:• Road Improvement and Arrangement• Construction of Worship Spaces in Various Areas of Indonesia

12. Responsible Consumption and Production

Ensure sustainable production and consumption patterns

The Company utilize banking services digitization on its operation and internal business processes in order to reduce the use of natural resources and to reduce waste from administrative activities, including:• TCASH-BTN services are meticulous• Electronic Channel Development

13. Climate Action Take comprehensive and adjust action in addressing climate change and minimizing its impacts

The company conducts energy efficiency initiative at the head office building and participates in the annual Earth Hour event to increase awareness of energy efficiency.


SUSTAINABLE PERFORMANCE OVERVIEW 2018 [GRI 102-7, 102-15]

Economic Overview

Rp2,467 Million Rp605,493 Million 757,159 Unit

Direct Economic Value Increased by 2.49% Distributed Direct Economic Value Increased by 15.60%

Mortgage Loan Disbursement Reached 18.89% compared to 2017

Environmental Overview

1,188.98 MWh Rp78.94 Million RAKB 9,600 Kilogram

Electricity saving compared to 2017

Environmental Management and Conservation fund realization by 49.78%

The Sustainable Financial Action Plan Has Been Compiled and Submitted To the OJK

Office waste Reduction compared to 2017

Social Overview

11,810 People 297 People 1.45 Times Rp21,782.2 Million Rp5.180,09 Million Rp2.157,92 Million

45.26% of the Company’s employees are women

24% of management positions are hold by Women

Salary of Entry Level Employees Compared to the Minimum Wage

Community Development Program fund Distribution increased by 8.78%

CSR Fund Distribution

UMKM Credit Distribution

SOE Synergy Program to Improve Community Standard of Living:1. Program Keluarga Harapan (PKH)2. Badan Umum Milik Desa (BumDes)3. Farmer entrepreneurship program 4. Social Forest Program5. Community Economic Improvement

Program Through Balai Ekonomi Desa (Balkondes)

Contribution to the government social assistance program (bansos) with the target of channeling assistance to 792,452 beneficiary families with the total value of Rp1.046 trillion

FacilitatingMortgages for Low Income Communities (MBR):1. Micro KPR2. Subsidized Mortgages3. KPR Micro Academy Business Community

Government





THE STATEMENT OF THE PRESIDENT DIRECTOR

The Statement of the President Director 18Policy and Strategy of Sustainability 19Implementation of Sustainable Financing 20Sustainable Financing Implementation Strategy 21




THE STATEMENT OF THE PRESIDENT DIRECTOR [GRI 102-14]

MaryonoPresident Director



The Company engages

actively in programs of

sustainable finance while

supporting sustainable

development in Indonesia.

To achieve this objective,

the Company has

formulated its own

Sustainable Financial

Action Plan (RAKB).

Dear distinguished shareholders and stakeholder,

Praise Allah SWT, the God Almighty, for the abundance of His mercy and grace, which let the Company achieve a remarkable performance in

2018, satisfying the expectations of its shareholders. The Company’s transformation since 2013 has resulted in an extraordinary business performance. Not only an anchor of the one million housing program, the Company’s transformation strategy has also strengthened its assets, catapulting it to the position of the fifth largest asset Bank in Indonesia.

As a Bank that has been focused on housing finance since 1974, the Bank credit growth that is consistently above the industry and the company dominant activities in the housing sector is the Company’s real support to strengthen its role in the development of the national housing sector. By 2018, Bank BTN Loans grew by Rp38.8 Trillion (19.5% YoY) to Rp237.8 Trillion, higher than the national credit growth of 11% YoY. This was a positive achievement, which indicates that the Company’s transformation program has been an appropriate strategy for achieving sustainable growth.

POLICY AND STRATEGY OF SUSTAINABILITY Since 2014, The Financial Services Authority (OJK), the Financial Services Industry (IJK) and the Company’s stakeholders have collaborated to initiate a sustainable financing program in the Indonesian banking industry. By 2017, the OJK issued implementing regulation Number 51/POJK.03/2017 regarding the Implementation of Sustainable Finance for Financial Service Institutions, Issuers and Public Companies. This regulation has formed the basis for all IJK to initiate sustainable financial programs in their respective companies. The objective of sustainable finance is to provide the necessary funding sources for sustainable development and funding related to climate change and the integration of environmental, social and governance (LST) risk management in financial systems.

The Company recognizes sustainability as important in the provision of financial products and services for housing, including subsidized housing for the lower middle-class community segment and carrying out concerns for the interests of the social and environmental communities in a sustainable manner. Sustainability is now a part of the Company’s overall mission, and it will continue to play a large role in the Company’s future.

As a responsible corporation, the Company will continue to carry out its mandate to build sustainable finance programs and implement sustainable financing principles in the Company’s business processes, and its financial product and services portfolio. To a certain extent, the Company’s existing sustainable financing products include providing subsidized mortgages and micro mortgages to enable low-income communities to have decent housing.

We are committed to developing sustainable financing programs, as sustainability principles are an important part of the Company’s vision and mission. The Company is committed to developing cooperation and partnerships with relevant stakeholders to instigate portfolios and integrate LST in accordance with the nature of the Company’s business activities.


In 2018, the Company completed the preparation of its Sustainable Financial Action Plan (RAKB) and submitted it to the OJK. The purpose of the Bank’s Sustainable Financial Action Plan is to achieve the company’s vision of becoming an Indonesian housing sector market leader and a trusted financial partner that applies the principles of sustainable financing to jointly achieve sustainable development goals in Indonesia by 2023. The RAKB consists of the Sustainability Policy & Strategy (policies and structural changes and the role of the organization), the amendment and implementation of the Green Finance Product & Index, as well as the implementation of various Sustainability Programs and Initiatives.

The challenge facing the Company at the early stage of implementing sustainable financing was developing comprehensive understanding about sustainability, as well as developing the Company’s sustainable financial products portfolio. The other challenge was developing a level of understanding about the implementation of sustainable financing and the financial services sector among the Company’s stakeholders that is appropriate for social and economic conditions in Indonesia. For this reason, in the early stages of implementation, the Company focused on developing internal capacity through consolidating policy tools and adjusting structures to support the implementation of RAKB in the coming years.

IMPLEMENTATION OF SUSTAINABLE FINANCING The Company recorded excellent economic performance in 2018, with the business transformation entering its second phase. At this stage, the Company started implementing digital banking services by opening smart branch outlets and the portal www.btnproperti.co.id for people who want to find information regarding new housing loans and the mortgage application process.

Amid challenging conditions, the Company remains committed to continue growing and strengthening aspects of its business. This is demonstrated by the Company’s successful achievements in 2018, based on the 2018 financial statements. In 2018, the Company’s assets grew by Rp47.1 Trillion (17.24% YoY) to Rp306,436 Trillion, making it the 5th largest bank in Indonesia.

The Company’s consistent credit growth in the industry and its dominant activities in the housing finance sector constitute the Company’s real support to strengthen role in the development of the national housing sector. In 2018, the Company’s loans grew by Rp38.8 Trillion (19.5% YoY) to Rp237.8 Trillion, higher than the national credit growth of 11% YoY.

As the banking industry faced the challenge of tight liquidity, the Third-Party Funds grew equally to credit growth, with a growth of Rp37.3 Trillion (19.3% YoY) to Rp230.3 Trillion. The Company managed to maintain its profitability as indicated by its NIM ratio of 4.32% in 2018, when the benchmark interest rate increased. On the other hand, the Company continued to focus on increasing fee-based income growth as an initiative to increase profitability. In 2018, the Company’s fee-based income grew by 29.40% YoY to Rp2.1 trillion.

The Company’s Human Resources Department promotes Good Corporate Governance (GCG), so that the company can implement its transformation agenda in a structured manner. The Company has transformed its governance implementation paradigm from a compliance driven approach to a value driven approach across all its business processes.

The Company’s GCG achievements are assessed using the ASEAN Corporate Governance Scorecard standards conducted by the OJK and the Indonesian Institute for Corporate Directorship (IICD). In 2018, the Company achieved a total score of 106.19 points, taking the title of “leadership in corporate governance”. For three consecutive years since 2016, the Company achieved a score above 100, which is classified as level 5. In environmental management, in 2018, the Company reduced its electricity consumption at the head office by 14.80% and water use by 7.90%.

The Company has implemented ESG risk management as a step to carry out responsibility for lending through the preparation of a Sustainability Risk Policy. This policy includes environmental permit requirements, land monitoring, incorporating environmentally friendly requirements in middle class construction financing including green space provisions and the application of green building criteria to the construction and preparation of Exclusion Lists in activities that have negative environmental and social impacts.

THE STATEMENT OF THE PRESIDENT DIRECTOR [GRI 102-14]



The Company’s social and environmental responsibility programs have been managed through the Company’s Corporate Social Responsibility program and the Company’s Partnership and Community Development Program. The Company facilitates Micro, Small and Medium-Sized Enterprises (MSMEs) through the Partnership Program and provides capacity building to ensure that MSMEs are more competitive. In line with its core business, the Company takes part in the BUMN Present Program for countries in the Larantuka and Kupang regions in the PLN electrification program. Direct assistance to the community has taken the form of electrification of 305 houses, construction of 10 houses for integration fighters of the former East Timor and a number of other developments.

SUSTAINABLE FINANCING IMPLEMENTATION STRATEGY In order to increase the Company sustainable financing portfolio, the Company focuses on the provision of inclusive and sustainable products that reach various levels of society, including low-income communities (MBR). The Company provides a subsidy for BTN KPR products and Micro BTN KPR. The company also launched a new product called ABCG Micro KPR, which involves the Academy-Business-Community-Government (ABCG) in the support of the development of community-based self-help housing for low-income communities. There are 6 million unbankable MBRs that do not yet have a home throughout Indonesia. This challenge is a responsibility not only of the central and regional governments, but also of all stakeholders, including the Company by involving academics and the community.

The ABCG program was initiated in Curug Sewu Village, Patehan District, Kendal Regency. 58 debtors made credit agreements with a total nominal value of Rp2.06 billion. In 2019, the program will be expanded to other location, such as Kendal, Kudus, and more focus on the development in six provinces (West Java, Central Java, East Java, Lampung, Gorontalo and West Kalimantan).

In addition to mortgage products, the Company also contributes to the implementation of the Inclusive Finance Program initiated by OJK, namely “LAKU PANDAI,” with the brand “Griya BTN,” that utilizes agents with information technology support. In addition to payment, Griya BTN also provides savings and withdrawal facilities that utilize the Company’s

Savings products. In addition, the Company also provides Student Savings products (SimPel) to encourage saving since school age.

Going forward, housing is still the main need of the Indonesian community, especially considering the growing number of millennials in Indonesia. With various innovations and transformations, the Company aims to become a bank with global standard of service without losing its local flavor. Market changes and globalization are two challenges for the Company. However, they also present an opportunity for the Company to continue its transformation.

The Company will continue to carry out the final stages of its transformation, namely the Global Playership Period from 2019-2025 with the aim of being able to provide international banking products and services.

We would like to take this opportunity to express our gratitude to all the stakeholders who supported the Company in recording a remarkable achievements amid dynamic economic conditions. We remain committed to providing the best services in order to achieve a sustainable performance, not only for the Company but also for the development of the national economy.

On behalf of the DirectorsJakarta, Februari 2019



ABOUT THIS REPORT

Period, Limitation, and Standards for the Preparation of Reports 24Report Content and Scope 25Independent Assurance 27Statement from Board of Commissioners and Board of Directors on Accountability Over Sustainability Report 2018 PT Bank Tabungan Negara (Persero) Tbk.

28


Overview of Sustainability PerformanceThe Statement of the President Director About this ReportAbout the CompanySustainability GovernanceProviding the Economic Benefits for the NationThe Commitment to the Environmental ConservationHuman Resource ManagementCommitment to Provide Best ServicesInclusive Services and ProductContribution for the Improvement of Life Quality of the CommunitySupporting Information


ABOUT THIS REPORT

Welcome to PT Bank Tabungan Negara (Persero) (hereinafter referred to as the Company) Tbk 2018 sustainability report.

This report provides information about the Company’s performance, policies, strategies, sustainable products and services (economic, environmental and social) as well as the Company’s contributions to supporting the achievement of the Sustainable Development Goals.

PERIOD, LIMITATION, AND STANDARDS FOR THE PREPARATION OF REPORTS This report is the eighth report that the Company has published since 2009. The previous report was published in February 2018.

In line with the previous reports, this report outlines the performance and impact of the Company’s sustainability programs during the period from 1 January to 31 December 2018 and is a part of the BTN Annual Report of 2018. [GRI 102-50, 102-51, 102-52]



The Company has published Sustainability Report since 2009 containing policies, programs, initiatives, achievements and challenges faced by the Company in carrying out sustainable development.

“ “

The scope of this report covers the Company’s operational activities both at the head office and throughout the Company’s branch offices across Indonesia. It does not cover the operational activities of the business partners and suppliers that are beyond the Company’s control.

In principle, there has been no significant change in the scope of this report from the previous year’s Sustainability Report. Therefore, this report does not restate the information already covered in the previous years. [GRI 102-45, 102-48, 102-49]

This report has been prepared in accordance with the GRI Standard option “Core,” which is the latest version of the international sustainability reporting standards issued by the Global Reporting Initiative (GRI). In addition, this report also uses the Financial Services Sector Disclosures. To make it easier for readers to find the applicable GRI Standards, in this report the disclosure of the relevant GRI Standards in each of the related pages is in parentheses. The report has also implemented POJK 51/2017. [GRI 102-54, 102-55]

REPORT CONTENT AND SCOPEThe scope of this this report is in line with the principles of sustainability reporting compiled by GRI, which include:[GRI 102-46]1. Stakeholder Inclusiveness: The Company has identified its stakeholder groups

and included information about its business activities that may be of interests to each group.

2. Sustainability Context: This report outlines the performance and impact

of the Company in the context of sustainability that includes economic, social and environmental aspects.

3. Materiality: This report discloses the economic, social and

environmental impacts of the Company’s business activities, as well as any significant decisions made by its stakeholders.

4. Completeness: This report reveals all material sustainability

aspects relevant to the Company’s operations so that its stakeholders can evaluate the Company’s sustainability performance during the reporting period.


To determine the material topics to include in this report, the Company conduct a materiality analysis. This process determined the material topics that are relevant to the Company’s business activities and and have a significant impact on its stakeholders. The Company has mapped the material topics in the materiality tables and graphs as follows.

Marketing and Labelling

EnvironmentCompliance

ProcurementPractice

Freedom of Association

Material

Water

OccupationalHealth and Safety

Waste

Energy

Economic SocialCompliance

Indirect EconomicImpact

Med

ium

Hig

h

Low Medium High

Low

Diversity and Equal Opportunities

Local Community

Educationand Training

Customer’sPrivacy

EconomicPerformance

ProductsPortfolio

MarketExistence

Employment

Anti-Corruption

Non Discrimination

Forced or CompulsoryLabor Work

Child Labor

Signifikansi Dampak terhadap Ekonomi, Sosial, dan Lingkungan

Sig

nifi

kan

si t

erh

adap

per

sep

si p

eman

gku

kep

enti

ng

an

Based on priority, relevant sustainability topics have been mapped into three levels; High, Medium and Low. Material topics presented in this report fall under he High-Medium categories while the limits in terms of supply chain are elaborated in the following list. [GRI 102-47]

ABOUT THIS REPORT



Material Topics GRI Standard DisclosureTopics Boundary

Pemasok Company Nasabah Masyarakat

ECONOMY

Economic Performance GRI 201-1, GRI 201-3, GRI 201-4

✔ ✔

Market Existence GRI 202-1 ✔

Indirect Economic Impact GRI 203-1, GRI 203-2 ✔ ✔ ✔

Procurement Practice GRI 204-1 ✔ ✔

ENVIRONMENT

Material GRI 301-1 ✔

Energy GRI 302-1, GRI 302-4 ✔

Water GRI 303-1 ✔

Waste GRI 306-2 ✔ ✔

Environment Compliance GRI 307-1 ✔ ✔

SOCIAL

Employment GRI 401-1, GRI 401-2, GRI 401-3

Occupational Health and Safety GRI 403-2, GRI 403-3 ✔

Education and Training GRI 404-1, GRI 404-3 ✔

Diversity and Equal Opportunities GRI 405-1, GRI 405-2 ✔

Non - Discrimination GRI 406-1 ✔

Freedom of Association GRI 407-1 ✔

Child Labor GRI A08-1 ✔

Forced or Compulsory Labor Work GRI A09-1

Local Community GRI 413-1, FS13 ✔ ✔

Marketing and Labelling GRI 417-3, FS16

Customer’s Privacy GRI 418-1 ✔ ✔

Economic Social Compliance GRI A19-1 ✔ ✔

Products Portfolio FS2, FS3, FS6, FS7 ✔

INDEPENDENT ASSURANCE In the Sustainability Report published this year, the Company once again assigned an independent assurer, Moores Rowland, to carry out an assurance assignment for the 2017 BTN Bank Sustainability Repor. In order to increasing its credibility, and ensuring that it is free from material errors and has been prepared in accordance with the GRI Standards. The Company has no other relationship with Moores Rowland except as the Company Sustainability Report assurance in 2017. The process of appointing Moores Rowland as an independent assurer was approved by the Company’s Board of Directors, which is represented by the Corporate Secretary. The independent assurer’s report on Bank BTN Sustainability Report 2018 can be found on page 184. [GRI 102-56]

Further information about this Sustainability Report can be obtained from theCorporate Secretary Division of Bank BTN [GRI 102-53]Menara BTN 20th FloorJln. Gajah Mada No. 1Jakarta Pusat, 10130Telp : (021) 6336789 ext. 2003Fax : (021) 6336719Email : [email protected]


STATEMENT FROM BOARD OF COMMISSIONERS ON ACCOUNTABILITY OVER SUSTAINABILITY REPORT 2018 PT BANK TABUNGAN NEGARA (PERSERO) TBK.

We, the Board of Commisioners of PT Bank Tabungan Negara (Persero) Tbk. have evaluated the content of this Sustainability Report and declare that the report has contained all sustainability topics that are material for the Company and Company’s stakeholders. We are accountable for the truth of the contents of this Sustainability Report.

Jakarta, April 2019

SumiyatiCommissioner

Iman SugemaCommissioner

I Wayan Agus MertayasaPresident/Independent Commissioner

BOARD OF COMMISSIONERS

Lucky Fathul Aziz HIndependent Commissioner

Arie CoerniadiIndependent Commissioner

Kamaruddin SjamIndependent Commissioner

Garuda WikoIndependent Commissioner

Maurin SitorusCommissioner



STATEMENT FROM BOARD OF DIRECTORS ON ACCOUNTABILITY OVER SUSTAINABILITY REPORT 2018 PT BANK TABUNGAN NEGARA (PERSERO) TBK.

We, the Board of Directors of PT Bank Tabungan Negara (Persero) Tbk. have evaluated the content of this Sustainability Report and declare that the report has contained all sustainability topics that are material for the Company and Company’s stakeholders. We are accountable for the truth of the contents of this Sustainability Report.

Jakarta, April 2019

BOARD OF DIRECTORS


R. Mahelan Prabantarikso

Director

Yossi IstantoDirector

Nixon L.P. NapitupuluDirector

Andi NirwotoDirector

Oni Febriarto Rahardjo

Director

Dasuki AmsirDirector

Iman Nugroho SoekoDirector

Budi SatriaDirector


ABOUT THE COMPANY

Significant Change to the Company 33Certification and Awards 2018 34Bank BTN Brief History 40Event Highlights 2018 42Company’s Vision, Mission, and Corporate Culture Values 46Company Organization Structure 48Operational Area and Market Share 50Corporate Culture 52




ABOUT THE COMPANY

PT Bank Tabungan Negara (Persero) Tbk. is a State Owned Enterprise (SOE) who conduct businesses in the field of banking services

provider. The Company was established under the name of Postpaarbank in 1897, which leter in 1950 changed its name to “Bank Tabungan Pos” Furthermore, The Government on Republic Indonesia changed the Company name into Bank Tabungan Negara in 1963. Letter on in 1974, the Company selected by Government of Indonesia to be the only institutions to disburse Housing Loan (KPR) for lower middle-class community (GRI 102-1)

To provide better service for the customers and to accelerate their business performance, the Company has 6,090 Conventional Offices, 6 Region Offices, 76 Branch Offices, 304 Sub-Branch Offices, 468 Cash Offices, Priority Offices, 80 Sharia Offices, 2,126 ATM, and is connected to 2,951 Post Offices throughout Indonesia.



SIGNIFICANT CHANGE TO THE COMPANY [GRI 102-10]In 2018 there were a significant addition of Company Bank office as much as 145 access point made the Company to had 5.895 access point compared to 5.750 access point in 2017. There was also 12 new additional Sharia access point made the company had 80 Sharia access point in 2018 compared to 68 access point in 2017. There were no significant changes to the size, structure, ownership or supply chain of the organization that occurred in the 2018 reporting period, the composition of share ownership can be seen in the 2018 BTN Year Report section of the Company Profile - Composition of Shareholders.

the Company has 6,090 Conventional Offices, 6 Region Offices, 76 Branch Offices, 304 Sub-Branch Offices, 468 Cash Offices, Priority Offices, 80 Sharia Offices, 2,126 ATM, and is connected to 2,951 Post Office throughout Indonesia.


CERTIFICATION AND AWARDS 2018 [GRI 102-12]

Gold Awardprovide by League of American Communication Professionals2017 Vision Awards16 July 2018

1Top 10 Indonesian Reports of 2017Provide by League of American Communication Professionals2017 Vision Awards16 July 2018

2Best Report Financials: SilverProvide by League of American Communication Professionals2017 Vision Awards16 July 2018

3

Top 80 Reports Asia - Pasific RegionProvide by League of American Communication Professionals2017 Vision Awards16 July 2018

4Top 100 Reports WorldwideProvide by League of American Communication Professionals2017 Vision Awards16 July 2018

5The 11th Ranking of Indonesia The Best Public Companies Based On Wai™ (Overall) 2018Provide by Swa MegazineAsean Best Public Companies26 July 2018

6

The 5th Ranking Of Indonesia The Best Public Companies Based On Wai™ 2018 Industry Category: Banks Provide by Swa MegazineAsean Best Public Companies26 July 2018

7TOP 50 ASEAN PLCs (TOP 31-50)Provide by ASEAN Capital Markets Forum ASEAN Corporate Governance Awards21 November 2018

8TOP 3 PLCs (Indonesia)Provide by ASEAN Capital Markets Forum ASEAN Corporate Governance Awards21 November 2018

9

Best CEO category SOE’S Bank Public Company in Asia & TurkeyProvide by Perbanas, Economic Review, International Business School, Indonesia-Asia Institute Human Development for Corporate Transformation Indonesia - Turkey Global Leaders Award 201824 November 2018

10The Best Company in Asia & Turkey 2018 category SOE’S Public Company - BankProvide by Perbanas, Economic Review, International Business School, Indonesia-Asia Institute Human Development for Corporate Transformation Indonesia -Turkey Global Leaders Award 201824 November 2018

11Gold Awards in Corporate Governance and Investor RelationsProvide by The Asset The Asset Corporate Award 201810 December 2018

12

INTERNATIONAL CERTIFICATION AND AWARDS

9

12

1

5

2 4

3

6

11

8

11



The Company obtain Education Field Award provide by Koran SindoCSR Appreciation 201725 January 2018

1Best Achiever in CEO State Owned Enterprises (SOE) Provide by Mens Obsession Obsession Award22 March 2018

2Top Used Bank in Commercial Bank Based on Business Activities/Buku 3Provide by Warta EkonomiJawara Financial Indonesia 201829 March 2018

3

Top Home Ownership Loan ProductProvide by Warta EkonomiJawara Financial Indonesia 201829 March 2018

4Top Apartment Ownership Loan ProductProvide by Warta EkonomiJawara Financial Indonesia 201829 March 2018

5Category Indonesia Mandiri Terbaik - Gold WinnerProvide by Bumntrack Revolusi Mental Award25 April 2018

6

Category Indonesia Melayani Terbaik - Silver WinnerProcvide by BUMN Track Revolusi Mental Award25 April 2018

7Excellent Growth – SOE Bank CategoryProvide by Bisnis IndonesiaBisnis Indonesia Award 20187 May 2018

8Top Performing Listed Companies 2018, Kapitalisasi Pasar ≥ Rp10 TrillionProvide by Investor MegazineInvestor Award 2018 - 100 Best Listed Companies 201814 May 2018

9

3rd the Best of the Best Indonesia Human Capital 2018Provide by Economic Review & Indonesia-Asia Institute Human Development for Corporate Transformation Indonesia Human Capital Award - IV - 201830 May 2018

103rd Best Overall Performance Sharia Business Unit (UUS)Provide by Infobank & MRI15th Banking Service Excellence Awards 20185 June 2018

113rd Best Opening Account Mobile Application Commercial Bankdari Infobank & MRIProvide by Infobank & MRI15th Banking Service Excellence Awards 20185 June 2018

12

NATIONAL CERTIFICATION AND AWARDS

1

2

3

6

7

8

9

10

11

12



1st Best ATM Center Commercial BankProvide by Infobank & MRI 15th Banking Service Excellence Awards 20185 June 2018

132nd Best Telephone Sharia Business Unit (UUS)Provide by Infobank & MRI15th Banking Service Excellence Awards 20185 June 2018

143rd Best Telephone Commercial BankProvide by Infobank & MRI15th Banking Service Excellence Awards 20185 June 2018

15

4th Best Walk-In Channel Commercial BankProvide by Infobank & MRI15th Banking Service Excellence Awards 20185 June 2018

166th Best Overall Performance Commercial BankProvide Infobank & MRI15th Banking Service Excellence Awards 20185 June 2018

17Best Bank 2018 – Category General Bank with core capital Rp5 Trillion - Rp30 trillionProvide by Investor MagazineInvestor Awards Best Bank 201829 June 2018

18

BTN SYARIAH KATEGORI Sharia Banking for Achieving Exceptional Total Service Quality Satisfaction Based on Customer Perception survey SQIndex 2018Provide by Carre Service Quality Monitoring Indonesia Service Quality Award, SQ Diamond Award 20182 August 2018

19Gold Winner BUMN Tbk Category Best Good Corporate Governance (GCG) Provide by BUMN Track7th Anugerah BUMN 20189 August 2018

20Best Ceo Driving ExecutionProvide by BUMN Track7th Anugerah BUMN 20189 August 2018

21

First Place Category Best Talent DevelopmentProvide by BUMN Track7th Anugerah BUMN 20189 August 2018

22Bank with Excellence predicate on financial performance throughout 2017Provide by Infobank23th Iinfobank Awards 201814 August 2018

23Bank with Excellence predicate on financial performance throughout 2008 – 2017Provide by Infobank23th Iinfobank Awards 201814 August 2018

24


13

14

15

16

1718 19

20

2122

23 24



Top 8 Popular Company in Banking SectorProvide by Warta EkonomiIndonesia Corporate PR Award 201824 August 2018

25Top 5 Popular CEOProvide by Warta EkonomiIndonesia Corporate PR Award 201824 August 2018

26SEO with excellence predicate on Financial Performance 2017Provide by Infobank9th BUMN Awards 201826 September 2018

27

SEO with excellence predicate on Financial Performance 2008 - 2017Provide by Infobank9th BUMN Awards 201826 September 2018

28Bank Sharia with excellence predicate on Financial Performace throughout 2017 (Golden Awards)Provide by Infobank7th Sharia Awards 201826 September 2018

29Sharia Business Unit (UUS) with Excellence Predicate on Financial Performance 2013-2017Provide by Infobank7th Sharia Awards 201826 September 2018

30

The Best Assets Quality Sharia Business Unit of Commercial Banks 2015-2017Provide by Infobank7th Sharia Awards 201826 September 2018

31The Best Sharia Business Unit; Category Sharia Bank Asset 20T and above 20TProvide by Tempo Media Group & Indonesia Banking SchoolIndonesia Banking Award 201826 September 2018

32Living Legends Companies 2018Provide by SWA Living Legends Companies 201811 October 2018

33

Best BHUN 2017 IIIProvide by SOE Ministry BUMN Hadir Untuk Negeri Award 201729 October 2018

34Best BHUN Documentation 2017Provide by SOE Ministry BUMN Hadir Untuk Negeri Award 201729 October 2018

35The 2nd Rank Financial Services Companies Provide by SWA & NBO GroupIndonesian Best Company in Creating Leaders from Within 201831 October 2018

36


2728

29 30

31

32

34 3536



The Best in Housing FinancingAwarded by Republika Newspaper,Republika Sharia Award 20188 November 2018

37Winner SOE Bank Tbk – Best in Indonesia - 2018 (Book 3) Asset > Rp100 TAwarded by Economic ReviewIndonesia Perbankan Award - VII 201819 November 2018

38KPR BTN, Largest Housing Financing Products 2018 Category Property BankingAwarded by Property & Bank, Alliance of Journalist of Property & Finance, MyHomes TV. Indonesia Property & Bank Award 201821 November 2018

39

SOE with Best Supporting in One Million Housing ProgramAwarded by Warta EkonomiIndonesia, Appreciation for SOE23 November 2018

40Popular SOE in Financing SectorAwarded by Warta EkonomiIndonesia Appreciation for SOE23 November 2018

41TOP 5 Popular SOE on Financing SectorAwarded by Warta EkonomiIndonesia Appreciation for the SOE23 November 2018

42

TOP 5 SOE on Bussiness PerformanceAwarded by Warta EkonomiIndonesia Appreciation for SOE23 November 2018

43Top Most Caring SOE in Providing Employee BenefitAwarded by Warta EkonomiIndonesia Appreciation for SOE23 November 2018

44The TOP 50 Companies for 2018 (Top 8 Best Company)Awarded by Forbes IndonesiaThe 8th Annual Best of The Best Awards 201829 November 2018

45

The 3rd Rank of The Best CEO 2018 Employee’s ChoiceAwarded by SWAThe Best CEO 201829 November 2018

46Healthy Bank Pradicate Category Book with assets above Rp100 trillionAwarded by Warta EkonomiIndonesia Best Banking Award 201830 November 2018

47BUMN/ BUMD with Best Gratification Management System 2018Awarded by KPKGratification Award, World Anti-Corruption Day Award (HAKORDIA) 20185 December 2018

48


42

37

38 39

40

41

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45 46 48



Top Leader on IT Leadership 2018Awarded by IT Works TOP IT 20186 December 2018

49TOP IT on Property Web & Application 2018Awarded by IT Works TOP IT 20186 December 2018

50

Runner Up in the category Risk Educator AwardAwarded by ERMA (Enterprise Risk Management Academy)ASEAN Risk Award 20186 December 2018

52

Best OverallAwarded by Indonesian Institute of Corporate DirectorshipThe 10th IICD Corporate Governance Conference & Award10 December 2018

54


49 50

55

54

Winner in the category Public Risk AwardAwarded by ERMA (Enterprise Risk Management Academy)ASEAN Risk Award 20186 December 2018

51

Runner Up in the category GRC AwardAwarded by ERMA (Enterprise Risk Management Academy)ASEAN Risk Award 20186 December 2018

53

TOP 50 Big Capitalization Public Listed CompanyAwarded by Indonesian Institute of Corporate DirectorshipThe 10th IICD Corporate Governance Conference & Award10 December 2018

55 Most Trusted Company Based on Corporate Governance Perception Index (CGPI)Awarded by IICG & SWA Good Corporate Governance Award 201819 December 2018

56

ISO 9001:2015Compliance Assurance from SGSReceived by the Compliance & Governance Division, valid until 19 October 2021

1

ISO 9001:2015Internal Audit Services (General, Sharia & IT Audits) from SGSReceived by Internal Audit Division, valid until 11 August 2020

2

ISO 9001:2015Non Subsidized Mortgage Processing (KPR & KPA Ready Stock) wich include the process of loan application initial data entry, loan document checking, loan approval & disbursement Dari SGS Received by Non-Subsidized Mortgage & Consumer Lending Division, valid until 6 January 2021

3

ISO 9001:2015Risk Management Services from SGSReceived by Risk Management Division, valid until 6 August 2021

4

CERTIFICATION


BANK BTN BRIEF HISTORY

1897The Company was established under the name “Postspaarbank” during the Dutch era.

1950The Government of Republic of Indonesia change The Company name into “Bank Tabungan Pos”.

1942The Company was take over by Japan Government whose changed its name into Tyokin Kyoku or Saving Office .

1946All office of Taboengan Post was occupied by the Dutch that made the Company operation stop.

1953Inaugurated as a legal entity under the Ministry of Transportation and allowed to open a Branch Office.

1963Government of Republic of Indonesia renamed the Company into the National Savings Bank and its management moved to the Minister of Central Bank Affairs.

1974 19891968Appointed by Ministry of Finance to finance public

housing project.

The Company issuing bonds for the first time and its marking

the beginning of the Company to conduct commercial bank

activities.

Government of Republic of Indonesia decide to separate

the Bank Negara Indonesia and re-opened Bank Tabungan Negara

abbreviated BTN.

1945Government of Republic Indonesia taking over the Tyokin Kyoku and established Taboengan Pos.

1971

1949Government of Republic Indonesia re-opening Taboengan Pos Office.

BTN collaborates with Perum Pos and Giro to implement

the National Savings Program (Tabanas) and Term Insurance

Savings (Taska).

1976Realization of BTN KPR

for the first time in Tanah Mas Housing Project at

Semarang City.

1965The Government of Republic Indonesia integrate the State

Public Banks and State Savings Banks into a single Central Bank.

The Central Bank named Bank Negara Indonesia which consists

of Bank Tabungan Negara, Bank Indonesia, Bank Koperasi Tani dan Nelayan, Bank Umum

Negara, BNI 1946 dan Bank Dagang Negara.

1986Obtain USD 266,550,000 credit

from the memorandum of understanding between IBRD/

World Bank with Government of Republic of Indonesia.



2008Obtaining ISO 9001-2000 Certification for medium-term credit services with 151 service patterns.

2002The Company successfully installing a real online system in all of the Company branch offices, based on IBM-AS400.1994

Obtain permission to operate as a Foreign Exchange Bank.

2009

2001 2005

Mortgage Securitization through the first Asset Backed Securities (KIK EBA) Collective Investment Contract in Indonesia.

The Company conducts an Initial Public Offering (IPO) and listing on the Indonesia Stock Exchange (Go Public).

Recapitulated by the Indonesian Government with a value of Rp13.6 Trillion.

The Company establishment its Sharia Business Unit and operating first Sharia Branch Office in Jakarta Harmoni.

2017

2015The Company is still

continuing its transformation phase to digital banking

periods by developing various digital-based

products and services, one of which is the opening of the Smart Branch Jakarta

Harmony.

Mengembangkan Ekosistem Digital untuk Mendukung Bisnis yang Berkelanjutan

Tahun 2018 merupakan tahun yang penuh tantangan. Perseroan dihadapkan pada pertumbuhan pasar properti perumahan yang cenderung melambat, yang disertai dengan perkembangan teknologi, membuat industri perbankan harus melakukan transformasi. Pada tahun 2018, untuk mencapai sasaran yang telah ditetapkan, Perseroan membangun ekosistem digital untuk mendukung bisnis yang berkelanjutan sekaligus memperkuat posisi sebagai bank pembiayaan perumahan terdepan di Indonesia.

The company participated in the Million

Houses for the People Program.

1992Effective to become a PT Persero

2016The Company continues

its transformation agenda, namely “Digital

Banking Periods”.

2013The company is

transforming into leading housing banks and world

class banking.

2012The Company Conducts

Rights Issues .

2014The company and

SMF signed the largest securitization.

2018


EVENT HIGHLIGHTS 2018

April Mei

Dukung Pendidikan, Perseroan Tawarkan Kredit Pendidikan Single DigitPerseroan meluncurkan kredit untuk memenuhi kebutuhan pendidikan dengan plafon hingga Rp200 juta dan bunga hanya sebesar 6,5% flat selama 5 tahun. Pinjaman tersebut diluncurkan untuk mendukung kebijakan Pemerintah dalam meningkatkan kualitas sumber daya manusia (SDM) Indonesia.

06

Perseroan Gelar Roadshow Tabungan e’bataraposPerseroan menggandeng PT Pos Indonesia (Persero) untuk memperluas inklusi keuangan ke seluruh lapisan masyarakat lewat produk Tabungan e’Batarapos. Produk tabungan tersebut ditargetkan bisa menarik nasabah dan meningkatkan Dana Pihak Ketiga (DPK) Perseroan dengan menggelar roadshow ke sejumlah provinsi di tanah air.

05

Manjakan Nasabah, Perseroan Luncurkan Kartu Debit Berlambang GarudaSetelah Bank Indonesia meluncurkan Gerbang Penbayaran Nasional (GPN) pada akhir tahun 2017 lalu, Perseroan mendukung penuh implementasi GPN di perbankan nasional. Perseroan berharap dengan hadirnya kartu debit berlogo GPN tidak hanya membuat transaksi perbankan menjadi lebih baik bagi nasabah, tapi juga mendukung kelancaran program berbagai pemerintah.

17

TCASH dan Perseroan Jangkau Nasabah Lewat PonselTCASH, sebagai uang elektronik milik Telkomsel, mengembangkan kerja sama strategis dengan Perseroan untuk menjangkau lebih banyak masyarakat Indonesia mengakses layanan keuangan lewat telepon selular (ponsel). Perseroan terus berupaya memudahkan nasabah mengakses berbagai produk perbankan sehingga semakin banyak masyarakat Indonesia menjadi bankable.

08

Januari

Gandeng Pengadilan, Perseroan Luncurkan Aplikasi E-PanjarDalam rangka mendukung kelancaran proses peradilan di Indonesia, Perseroan menggandeng Pengadilan Negeri (PN) Cibinong meluncurkan aplikasi e-Panjar. Melalui e-Panjar, masyarakat bisa membayar biaya panjar perkara dengan mudah & praktis. Pengadilan pun dapat menghitung serta mengelola biaya panjar dengan lebih cepat, tepat, akurat, & praktis.

10

Februari

Perseroan Gelar Kompetisi Perseroan Mortgtech HackathonPerseroan terus berupaya memacu lini bisnis digital banking sesuai dengan strategi transformasi digital perseroan guna mendukung Program Satu Juta Rumah. Kali ini, Perseroan dengan didukung DailySocial menggelar Perseroan Mortgtech (mortgage technology) Hackathon.

19



Agustus

Raup Pendanaan Murah FLPP, Perseroan Bidik Penyaluran KPR SejahteraPerseroan menandatangani Perjanjian Kerjasama Tripartit antara Pusat Pengelolaan Dana Pembiayaan Perumahan Kementerian Pekerjaan Umum dan Perumahan Rakyat Republik Indonesia (PPDPP) dan PT Sarana Multigriya Finansial (SMF) tentang penyaluran KPR Sejahtera atau biasa disebut KPR Subsidi dengan skema Fasilitas Likuiditas Pembiayaan Perumahan (FLPP).

14

Juli

Dukung Pengembangan Wilayah Maja, Perseroan Gelontorkan Kredit Untuk PNS Di LebakDalam rangka menyukseskan Program Satu Juta Rumah, Perseroan menggelar kemitraan dengan Korps Pegawai Pemerintah Daerah Kabupaten (Pemkab) Lebak dan PT Bintang Energi Lestari untuk menyediakan rumah bagi hampir 10.000 Pegawai Negeri Sipil (PNS) Pemkab Lebak yakni Maja di Kabupaten Lebak, Banten.

19

Perseroan Jadi Bank Buku 3 Paling MenguntungkanPerseroan mendapat pengakuan sebagai emiten bank kategori Bank Umum Kegiatan Usaha (BUKU) 3 yang paling menguntungkan. Pengakuan tersebut disematkan melalui predikat The Best Public Companies berdasarkan Wealth Added Index (WAI) 2018 untuk kategori perbankan. Saham Perseroan pun kembali masuk dalam jajaran saham paling likuid di pasar modal atau indeks LQ45.

26

Perseroan dan Grab Wujudkan Impian Ribuan Mitra Pengemudi Untuk Miliki RumahPerseroan dan PT Solusi Transportasi Indonesia (Grab Indonesia) bekerjasama mewujudkan keinginan para mitra pengemudi GrabBike untuk memiliki rumah impian. Kerja sama ini merupakan salah satu sinergi Perseroan sebagai agent of development untuk mendukung pemerintah mempercepat pencapaian program sejuta rumah bagi pekerja sektor informal yang memiliki pendapatan tidak tetap.

15

Juni

Incar Potensi Dana Asing, Perseroan Luncurkan Tabungan FelasPerseroan resmi meluncurkan produk tabungan valas dalam dua mata uang sebagai langkah strategis menggarap potensi dana asing dan menambah variasi produk serta layanan bagi nasabah perseroan. Dengan produk ini, Perseroan berupaya memenuhi kebutuhan masyarakat dalam menabung, bertransaksi, dan berinvestasi dalam mata uang asing.

04

Perseroan Sabet Predikat Bank Terbaik 2018Predikat tersebut diraih atas keberhasilan perseroan mencatatkan lompatan posisi aset selama enam tahun terakhir dan berhasil menembus peringkat ke-5 bank dengan aset terbesar. Berbagai transformasi akan terus dilakukan untuk mencapai target menjadikan Perseroan sebagai global player pada 2025 mendatang.

29


EVENT HIGHLIGHTS 2018

Agustus

Perseroan Restrukturisasi Kredit Korban Gempa LombokUntuk meringankan beban para korban gempa di Nusa Tenggara Barat, Perseroan memberikan kemudahan bagi debitur untuk mendapatkan restrukturisasi. Langkah Perseroan ini merupakan tindak lanjut dari arahan dan himbauan Otoritas Jasa Keuangan (OJK) untuk memberikan perlakuan khusus terhadap debitur yang terdampak gempa di Provinsi Nusa Tenggara Barat (NTB)

27

Dukung Infrastruktur Pengembangan Bandara Di Indonesia, Perseroan Kucurkan Kredit Rp1 Triliun Ke AP IIPerseroan mengucurkan kredit korporasi senilai Rp1 triliun untuk PT Angkasa Pura II (Persero). Pembiayaan tersebut diberikan untuk meningkatkan pengembangan bandar udara di lingkungan AP II sekaligus dalam rangka mendukung sinergi Badan Usaha Milik Negara (BUMN) dan meningkatkan kinerja bisnis Perseroan.

28

September

Bank Perseroan Tingkatkan DPK Ritel Lewat Tabungan e’Batarapose’Batarapos memiliki fasilitas perbankan yang lengkap dan menguntungkan, di antaranya bisa menabung di hari Sabtu & Minggu, dapat melakukan penyetoran dan penarikan di seluruh outlet Bank Perseroan, Kantor Pos maupun di mesin ATM yang tersebar luas, dapat melakukan transaksi di mobile banking, mendapatkan kartu ATM berlogo Visa dan saldo di atas 1 Juta tidak dikenakan biaya administrasi.

09

Perseroan Luncurkan Perseroan House Price Index (Perseroan HPI)Pertumbuhan permintaan hunian dan pengembangan kawasan hunian yang semakin pesat mendorong Perseroan merilis indeks harga rumah atau House Price Index (HPI) untuk dijadikan acuan bagi para stakeholder di bidang properti dalam berinvestasi. HPI yang diracik tim riset Housing Finance Center (HFC) Perseroan memberikan gambaran yang lebih rinci mengenai tren pertumbuhan harga rumah yang lebih akurat dengan metode matched sales menggunakan data penyaluran KPR Perseroan di seluruh wilayah di Indonesia.

13

Perseroan Sosialisasikan Penggunaan Fintech di Pondok PesantrenPerseroan terus mendukung pengembangan aplikasi fintech di Pondok Pesantren, dengan penambahan fitur-fitur yang memudahkan layanan transaksi para santri. Dengan pengembangan aplikasi fintech oleh santri di lingkungan ponpes diharapkan dapat benar-benar bisa menjawab kebutuhan fasilitas layanan perbankan sesuai dengan syariat Islam.

15

Sukseskan Program Satu Juta Rumah, Perseroan Gelar Perseroan Property Award 2018Perseroan kembali menggelar ajang penghargaan bertajuk Perseroan Property Award 2018. Ajang apresiasi bagi para pelaku bisnis properti di Indonesia tersebut digelar untuk terus memacu semangat bersinergi para pengembang terutama dalam mendukung kesuksesan Program Satu Juta Rumah.

15



KPR Mikro Untuk MBR Dengan Skim ABCG Diujicoba Di Jawa TengahPerseroan bersama Kementerian Pekerjaan Umum Perumahan Rakyat (PUPR), Badan Pertanahan Nasional, Pemerintah Kabupaten Kendal dan Universitas Diponegoro (UNDIP) melakukan sinergi dalam memfasilitasi Masyarakat Berpenghasilan Rendah (MBR) yang belum mendapatkan akses pendanaan dari Bank untuk memiliki rumah melalui skema KPR Mikro “Academy-Business-Community Government” atau ABCG untuk mendukung pembangunan perumahan swadaya yang berbasis komunitas yang membutuhkan rumah tinggal.

27

Perseroan Siapkan Restrukturisasi Kredit Bagi Korban Gempa & Tsunami Di Sulawesi TengahPerseroan meracik skema restrukturisasi kredit bagi para debitur yang terdampak bencana alam. Perseroan sangat prihatin dengan kondisi masyarakat Sulawesi Tengah, khususnya para debitur karena itu Perseroan akan memberikan restrukturisasi kredit kepada mereka dengan memperhatikan kondisi fisik serta psikologis nasabah serta situasi Sulteng ke depannya sehingga tidak memberatkan mereka.

04

Gandeng Notaris Seluruh Indonesia, Perseroan Tingkatkan Kualitas KreditDalam rangka meningkatkan kualitas kredit perseroan terutama dalam mengamankan portofolio kredit sebagai aset, Perseroan menggandeng Pengurus Pusat Ikatan Notaris Indonesia (PP-INI). Kemitraan strategis dengan PP-INI tersebut digelar untuk mengamankan dokumen kredit berupa akta tanah sesuai ketentuan yang berlaku.

23

Perseroan Sukses Lelang 563 Unit Rumah Sitaan Lewat Portal Rumahmurah PerseroanSemenjak diluncurkan pada tanggal 9 Februari 2018 lalu, jumlah peminat rumah lelang dari Portal www.rumahmurahPerseroan.co.id milik Perseroan semakin meningkat. Pelelangan agunan dari KPR atau KPA yang macet merupakan salah satu upaya Perseroan untuk melakukan restrukturisasi kredit bermasalah dan lewat portal rumahmurahPerseroan dan lebih efektif menarik peminat.

11

Ribuan Atlet Koi Bisa Nikmati KPR PerseroanSejalan dengan komitmen menyukseskan Program Satu Juta Rumah dan mendukung kesejahteraan para atlet nasional, Perseroan menggelar kemitraan dengan Komite Olimpiade Indonesia (KOI). Lewat kemitraan tersebut, pengurus, anggota dan ribuan atlet nasional yang tergabung dalam KOI bisa memiliki rumah dengan skema menarik dan terjangkau.

15

Oktober

Perseroan Luncurkan Progam KPR Khusus Milenial Bertajuk KPR Gaeesss!!Tidak mau ketinggalan merebut ceruk pasar para milenial, Perseroan merilis program KPR anyar bertajuk “KPR Gaeesss!”. KPR Gaeesss memberikan kemudahan, dari awal pengajuan aplikasi KPR atau KPA, dan biaya yang terjangkau untuk uang muka, biaya provisi dan administrasi.

03

November

Perseroan Jalin Kerja Sama Dengan Bluebird Untuk Program Pembiayaan Perumahan Para Pengemudi dan KaryawanSebagai bagian dari upaya untuk terus meningkatkan kesejahteraan pengemudi dan karyawan, Bluebird menjalin kerja sama dengan Perseroan dalam program pembiayaan perumahan bagi keluarga besar Bluebird. Pada kerjasama ini, Perseroan berkomitmen memberikan fasilitas pembiayaan Kredit Pemilikan Rumah, baik KPR Subsidi maupun KPR Non Subsidi bagi para karyawan serta pengemudi Bluebird yang telah memenuhi persyaratan yang telah ditetapkan Bluebird maupun Perseroan.

07


COMPANY’S VISION, MISSION, AND CORPORATE CULTURE VALUES [GRI 102-16]

Leading, and trusted in facilitating the housing sector and family financial services.

VISION

MISSION

Play an active role in supporting the housing

sector, both from the supply side and demand side, which is integrated in the housing sector in

Indonesia

Prepare and develop qualified, professional

and high- integrity human capital

Provide superior services in financing to the housing

sector and family financial needs

Increase stakeholder value by focusing on increasing

profitability growth in accordance with prudential

and good corporate governance principles

Increase competitive advantage through

innovation in digital product development, services and

strategic networks

Care for community, social and

environmental interests in a sustainable manner

The determination of the Company’s Vision and Mission is carried out periodically based on the mechanism for preparing the Bank’s Long Term Plan (RJP). The Company’s Vision and Mission have been reviewed and approved in the Blueprint of the BTN Bank Strategic Plan.



CORPORATE CULTURE VALUES

Corporate culture is built on values, becoming principles that are believed to be good and right in carrying out work, and become a guideline for every person to behave, act and make decisions to achieve common objectives. Corporate culture values direct the behavior of members of the organization and establish the basis for determining organizational rules, policies and systems (“the way we do things around here”).

Spirit to Achieve Excellence

Professionalism Innovation

Integrity

Sinergy

SYNERGYBuilding synergic cooperation with all stakeholders based on a sincere, open-minded attitude and encouraging productive collaboration by upholding mutual trust and respect to achieve common goals.

INTEGRITYConsistency in mind, manner, matter in line with the Company’s rules, code of professional conduct, and commendable principle of truth.

INNOVATIONContinual development of new ideas and continuous improvements that add value to the Company.

PROFESSIONALISMVisionary, competent in each field, always willing to move ahead using the latest technology to produce the best performance.

SPIRIT TO ACHIEVE EXCELLENCEDemonstrate passion and strong commitment to achieve the best results and provide services that exceed customer expectations (internal and external) by stressing the importance of quality in each activity,as well as in calculated risks.


COMPANY ORGANIZATION STRUCTURE [GRI 102-18]

Direktur Commercial

Banking

Direktur Consumer Banking

Direktur Collection & Asset

Management

Direktur Distribution &

Network

Direktur IT & Operation

Small Medium Enterprice Banking

Retail Funding & Personal

Lending

Subsidized Mortgage Lending

Retail Risk

Digital Channels & Contact

Center

Information Technology

Strategic Planning &

Development

Commercial Funding

ShariaConsumer

Collection & Remedial

Regional Offices

Operations & Business

Support

MortgageSEVP

Commercial Banking

Wealth Management

Non Subsidized Mortgage Lending

Commercial Risk

Service Quality & Distribution

Information Technology Operations

Corporate Syndication

& Transaction Banking

Segment Proposition & Marketing Development

Asset Management

Credit Operations

Procurement & General Services

• Branch Office• Priority Banking

Board of Directors

Sharia Supervisory Board

Asset & Liability

Committee

IT Steering Committee

Risk Management

Credit Committee

Personnel Committee

Credit Policy Committee

Committee Board of Commissioner Director SEVP Division Group



In line with the Company ongoing business transformation agenda, the Board of Directors has adjusted the organizational structure so that the process of executing business initiatives and operations can be effective. As of April 30, 2018, the Board of Directors has provided the amendment to the Decree of the Board of Directors Number: KD 04/KD/DIR/TMO/2018 dated 30 April 2018 concerning the Organizational Structure of the Head Office which has been approved

Direktur Finance

& Treasury

Direktur Strategy, Compliance & Risk

Direktur Utama

Direktur Strategic

Human Capital

Treasury

Corporate Strategy & Alliances

Management

Compliance & Governance

Human Capital Strategy

Intenal Audit

Digital Ecosystem Business

Build

Finance & Accounting

Housing Finance Center

Enterprise Risk Management

Learning Center

Digital Ecosystem

SEVP

Institutional Banking

Transformation Management

Office

Policy, Procedures &

Business Process

Reengineering

Human Capital Management

Corporate Secretary

Agile Development

Legal

Remuneration & Nomination

Committee

Integrated Corporate

Governance Committee

Audit Committee

Risk Monitoring Committee

Shareholders Meeting

Products Committee

Intergrated Risk Management Committee

Garis Komando Garis Koordinasi

Board of Commissioners


Spirit to Achieve Excellence

Professionalism Innovation

Integrity

Sinergy

CORPORATE CULTURE [GRI 102-18]



SYNERGY INTEGRITY INNOVATION PROFESSIONALISM SPIRIT TO ACHIEVE EXCELLENCE

Building a synergistic cooperation with every stakeholder sincerely, openly, and to encourage productive collaboration with mutual trust and respect to achieve mutual goals.

Consistency in mind, manner, matter, in line with the Company’s rules, code of professional conduct, and commendable principle of truth.

Constantly developing new idea and continuous refinement to improve added value of the Company.

Visionary, competence in the field, always developing itself with the latest technology so it will yield best performance.

Shows enthusiasm and strong commitment to achieve the best results and provide services that exceed customer expectations (internal and external) by enunciating the importance aspect of quality in every activities as well as the calculated risk

MAIN POINT BEHAVIOR

1. Sincere, Open, and Productive Collaboration

2. Mutual Trust and Respect

1. Consistency and Discipline

2. Honest and Dedicated

1. Responding ng to change

2. Creative & innovative in perfecting value-added enhancement

1. Competent, Entrepreneurship, and Responsible

2. Smart Working and Result Oriented

1. Enthusiastic, Proactive, and Unyielding

2. Effective, Efficient, and Prioritizes Customer Satisfaction

COMPANY’S BUSINESS ACTIVITIES [GRI 102-2]Based on the GMS Resolution Deed on Articles of Association of PT Bank Tabungan Negara (Persero) No. 51 dated March 24, 2015, the Company conducts business activities with the summary. Further detail explanation of the products or services can be referred to on the Company’s Annual Report 2018.

HOUSING LOAN AND CONSUMER BANKING

Products1. Consumer Credit consists of 4 types, i.e. Subsidized Housing Loan, Non- Subsidized Housing Loan, other Housing-Related

Loan, and Consumer Credit. 2. There are three types of savings, i.e. Demand deposit, savings, and Deposit Services3. Mortgage: Layanan pembiayaan berbasis rumah atau hunian

Consumer Loan:i. Layanan pembiayaan konsumer dan personalii. Layanan Pengembangan bisnis consumer loan dari value chain perumahan

4. Consumer Funding:i. Layanan produk dana dan jasa yang berorientasi pada nasabah individualii. Pengembangan bisnis wealth management

HOUSING AND COMMERCIAL BANKING

Products1. Kredit Komersial terbagi menjadi tiga yaitu Kredit Konstruksi, Kredit Mikro dan Usaha Kecil Menengah serta Kredit

Korporasi lainnya2. Simpanan terbagi menjadi Giro dan Deposito Services1. Commercial Loan: Commercial loan business services including SME construction loans: Financing services for micro and

small business segments2. Commercial & Institutional Funding: Services and fund products oriented to corporate and institutional customers

SHARIA BANKING

Products1. Financing products are divided into two, namely Sharia Consumer Financing and Sharia Commercial Financing 2. Funding products are divided into three, i.e. Sharia Demand Deposit, Sharia savings and Sharia Deposits ServicesSharia Business Unit: Sharia products and services that create the Company’s business synergy

TREASURY & ASSET MANAGEMENT

1. Manage Bank liquidity2. Manage the management of assets and liabilities


The company operates in 1 (one) region of the country, namely Indonesia with its head office in the Capital City of DKI Jakarta, having an office network spread throughout Indonesia.

OPERATIONAL AREA AND MARKET SHARE [GRI 102-3, 102-4, 102-6]

SUMATERA

KALIMANTAN

JAVA

BALI AND NUSA TENGGARA

Region Office 1

Branch Office 12

Sub Branch Office 51

Cash Office 57

Sharia Outlet 12

Priority Outlet 6

Pos Office 700

ATM 286

Region Office 4

Branch Office 46


Cash Office 356

Sharia Outlet 59

Priority Outlet 28

Pos Office 1.624

ATM 1.520

Region Office -

Branch Office 6


Cash Office 20

Sharia Outlet 4

Priority Outlet 5

Pos Office 299

ATM 113

SUMATERA JAVA KALIMANTAN



SULAWESI

PAPUA AND MALUKU

2016 2017 2018

Region Office 4 5 6

Branch Office 65 75 76

Sub Branch Office 243 279 304

Cash Office 477 485 468

Payment Point 28 32 48

KCP Center Service Office 3 3 3

Cash and Service Office Center 2.948 2.951 2.948

Mobile Cash Vehicle 10 22 23

Conventional Office Total Network 3.773 3.840 3.871

Sharia Branch Office 23 24 24

Sharia Sub Branch Office 36 42 48

Sharia Cash Office 6 7 8

Sharia Payment Point 11 13 13

Sharia Office Total Network 76 84 93

OFFICE NETWORK

Region Office 1

Branch Office 6


Cash Office 22

Sharia Outlet 4

Priority Outlet 2

Pos Office 126

ATM 116

Region Office -

Branch Office 3


Cash Office 9

Sharia Outlet 1

Priority Outlet 2

Pos Office 141

ATM 61

Region Office -

Branch Office 3

Sub Branch Office 3

Cash Office 4

Sharia Outlet -

Priority Outlet -

Pos Office 61

ATM 30

SULAWESI BALI AND NUSA TENGGARA PAPUA AND MALUKU


OPERATIONAL AREA AND MARKET SHARE [GRI 102-3, 102-4, 102-6]

DESCRIPTION 2016 2017 2018 (+/-)

I. CONVENTIONAL NETWORK

Region Office 6

Branch Office 64 75 76 1

Sub Branch Office 243 275 304 29

Cash Office 477 485 469 (16)

KCP Center Service Office 3 3 3 -

Cash and Service Office Center 2.948 2.948 2948 -

Payment Point 28 32 48 16

Total 3.763 3.818 3.848 30

II. SHARIA NETWORK

Sharia Branch Office 23 24 24 -

Sharia Sub Branch Office 36 40 48 8

Sharia Cash Office 6 7 8 1

Sharia Payment Point 11 13 13 -

Total 76 84 93 9

III. NETWORK

ATM 1.830 1.964 2.126 162

Mobile Cash Vehicle 10 22 23 1

Total 1.840 1.986 2.149 163



Shareholder Composition as per 31 December 2018

No Public Shareholder Amount Stock

Shares %

1 Government of Indonesia 1 6,354,000,000 60.00%

2 Public

• Local Public 17,895 1,781,005,375 16.82%

• Foreign Public 580 2,454,994,625 23.18%

TOTAL 18,476 10,590,000,000 100.00%

Details of shareholders can be read in the 2018 BTN Annual Report section of the Company - Shareholder Composition.


SUSTAINABILITY GOVERNANCE

Operasional yang lebih ramah Lingkungan 58Governance Strategy 59Governance Structure 62General Meeting of Shareholders 63Board of Commissioners 63Board of Directors 64Soft Structure GCG 65Risk Management 67Implementation of Prudent Principles 70Business Ethics and Code of Conducts 71Corporate Culture 73Internal Audit System 75Stakeholders’ Involvement 77Corporate Governance Appreciation 79


Overview of Sustainability Performance The Statement of the President Director About this ReportAbout the CompanySustainability GovernanceProviding the Economic Benefits for the NationThe Commitment to the Environmental ConservationHuman Resource Management Commitment to Provide Best ServicesInclusive Services and ProductContribution for the Improvement of Life Quality of the CommunitySupporting Information


AState-Owned Enterprise (BUMN) in the highly regulated financial services sector, the Bank/Company considers having and implementing

good corporate governance to be absolutely necessary in order to protect stakeholders.

The Company implements governance aiming and believing that this will guarantee the creation of a total business balance so that all forms of interests, both business and social, individuals and groups, internal and external, short and long term and the interests of shareholders and stakeholders will go towards equilibrium. The implementation of governance principles is also necessary to make the Bank more resilient and able to survive in the face of increasingly fierce competition.

The implementation of governance (GCG) in the Company has become a necessity to achieve the goal of Moving Beyond Corporate Governance to True Business Value. The Company has changed the paradigm of implementing governance from what was previously compliance driven to being a value driven in all of the Company’s business processes.

Since 2014, the score of the Company’s Corporate Governance Perception Index (CGPI) and ASEAN CG Scorecards has consistently improved parallel with increasing corporate value. This is an evident that improving sustainable governance practices can go hand-in-hand with increasing Company’s business performance and governance assessment.


MORE ENVIRONMENTALLY FRIENDLY OPERATIONS



Governance is one of the key focuses in the Business Transformation Program to create the necessary infrastructures for the Company’s business progress and sustainability.

In 2018, the Company has become the 5th largest bank in Indonesia based on asset value (bank only) compared to the Company’s 11th rank in 2013. Over the past four years, the Company has grown 7-9% above industry average while NPL (net) indicates positive trend that showed improvement from 3.04% at the end of 2013 to 1.80% at the end of 2018 compared to the industry average of 2.37% (gross) and 1.14% (nett) at the end of 2018 according to the Financial Services Authority.

GOVERNANCE STRATEGY To improve the implementation of governance on an ongoing basis, the Company has compiled and implemented the GCG Roadmap for the period 2017-2020. The preparation of the Roadmap is in line with the Company’s long-term Transformation plan. The 2017-2020 GCG Roadmap also includes the implementation of Integrated Governance Risk & Compliance (GRC), plans for implementing financial conglomerates through the establishment of subsidiaries as well as sustainable financial action plans.

PHASE 1 2017

PHASE 22018

PHASE 32019

PHASE 42020

Reinforcing the Foundation

Upgrading Governance Capability

Building Governance Sustainability

Pursuing Effective Governance

Preparing regulations to support the implementation of financial conglomerates and GRC initiatives

Enhancing governance capabilities that are in line with improving policies, developing governance applications, planning financial conglomerates and GRC initiatives

Building governance sustainability through the implementation of governance applications, plans for sustainable financial action and sustainable GCG award

Executing effective governance of the main entities and subsidiaries as well as achieving a sustainable financial action plan

The ultimate goal of “pursuing effective governance” Roadmap to achieve the implementation of effective governance level is a prerequisite to support prudential achievement of business transformation goals, through smart and measurable risk management, and to comply with all applicable laws and regulations.


Integrated Governance, Risk and Compliance (GRC)Since 2017 the Company has developed an integrated implementation of Governance, Risk and Compliance (Integrated GRC), in line with the Bank’s transformation blueprint to achieve integrated GRC. The Integrated GRC will incorporate these three aspects as performance appraisal components at the head office, branch, division and work units in the form of Key Performance Indicators (KPI), Key Risk Indicators (KRI), and Key Compliance Indicators (KCI), so that the overall achievement of financial performance is a reflection of internal control that has been carried out at every level of the organization.

Focus of GCG Implementation in 2018The Company implements governance strategies within the framework of the 4 governance pillars, namely commitment, structure, process and results. In 2018, the Company’s governance development activities were focused on improving governance capabilities in line with the implementation of the Integrated GRC through the improvement of governance policies and the implementation of the GRC Index, which included evaluating compliance aspects, implementing risk management and governance.

Struktur Tata Kelola Proses Tata Kelola Hasil Tata Kelola

Policy reviews and improvements:• Work Guideline of Corporate

Governance;• Hierarchy of internal company policies.• Organization Development that

separates the functions of policy, operation and sales;

• Development of a New Model of Operation such as BPI; Network & Distribution Design; and Organization Design

1. Development of People Capability which includes:

• Employee Engagement especially for Millennial employees;

• Strong Leadership & Capability for top and middle management levels (L1 and L2);

• Empower the Core for middle management and its subordinates (L3)

2. Excellent Process which includes: Business Process Improvement (BPI); Implementation of Compliance checklist; Implementation of GRC Index; Implementation of corporate culture program (SIIPS); and Provision of Management Information Systems in APU PPT

3. Product Competitiveness which includes: Customer centric: Mass, Emerging affluent, SME & Corp & Syndications and Simplification of savings products.

• Review of new structure of governance organization;

• Governance Training program;• Results of Governance Self Assessment

based on OJK with resulted in rank 2 (Good category);

• Governance Assessment based on Third Party Assessment:a. ACMFàTop 50 ASEAN PLC’s and

Top 3 PLC’s in Indonesia;b. CGPIà Indonesian Most Trusted

Company;c. KPK àBUMN with the Best Gratuity

Control System;d. IICDà Best Overall Issuer based on

ACGS;• ASEAN Risk Award.

Komitmen Tata Kelola Perusahaan yang Baik




Implementation of Sustainable FinanceThe Company supports the creation of a sustainable financial services sector to achieve the Sustainable Development Goals and to address climate change, in accordance with the policies of the Financial Services Authority. Provisions and criteria for sustainable finance have been stipulated in OJK Regulation Number 51/POJK.03/2017 concerning the Implementation of Sustainable Finance whose components will be implemented in 2018 for Financial Services Institutions, Issuers and Public Companies.

In sustainable finance, the Company has compiled a Sustainable Financial Action Plan (Rencana Aksi Keuangan Berkelanjutan/RAKB) 2018-2023 with the aim of “Realizing Bank BTN as a leader in the housing sector and a trusted family financial partner that applies sustainable financial principles to jointly achieve sustainable development goals in Indonesia” in 2023 , through strategic steps as follows:1. Strengthening policies and practices in managing

CSR programs that pay attention to the 3P aspects (People, Planet, Profit) with partnerships with elements of ABCG (Academy, Business, Community and Government).

2. Development of digital-based sustainable financial communication strategies by involving generations of millenials.

3. Strengthening risk management policies through strengthening policies and programs through the preparation of the sustainability policy and strategy.

4. Development of banking products and services through housing, consumption and MSME financing that pay attention to environmental and social aspects to strengthen portfolios.

5. Development of sustainable banking operations through the application of green office concepts and sustainable procurement.

6. Strengthening institutional capacity through institutional structuring and resource capacity development.

Prior to the existence of this RAKB, the Company had applied sustainable financial principles through certain banking activities, products and services, including:• Branchless financial services in line with OJK

Regulation Number 19/POJK.03/2014 concerning Branchless Financial Services in the Context of Financial Inclusion, in the form of BTN Savings Cermat based on cards and cellphones so as to increase community accessibility in banking services.

• This shows that the Company has implemented the practice of financial inclusion principles, where bank services have outreached and can be accessed by various layers of society. As of the end of 2018 there have been more than xx million accounts of customers using this service.

• In providing financing facilities for construction loans, land ownership loans and investment loans, prospective customers must meet the requirements of the Environmental Impact Analysis (EIA) and other permits in accordance with the stipulated Product Policy. This is to ensure that projects financed by the Company have complied with regulations that are required both legally and procedurally.

The paperless program is carried out by using various facilities to support the increase of fee-based income, namely through increasing electronic channel services such as ATM services, Cash Deposit Machine (CDM), Internet Banking, Cash Management, SMS Banking, and Mobile Banking.

Furthermore, the 2018-2023 RAKB contains the programs formulated in the Company’s Sustainable Finance Implementation Roadmap covering the design and preparation of Sustainability Policy & Strategy (structure adjustment policy and organizational roles), adjustments and launching of Green Finance Product & Index, as well as implementation of various Sustainability Programs and Initiatives.


GOVERNANCE STRUCTURE [102-18]The Company’s governance organs consist of the General Meeting of Shareholders, Board of Directors and Board of Commissioners with their respective duties, responsibilities and authorities in accordance with the laws and statutes. The Company’s organs are built to ensure the implementation of corporate governance principles can run effectively with clear roles and responsibilities to create a check and balance mechanism.

Board of Commissioners

Board of Commissioners’

Secretary

Board of Directors

Corporate Secretary

Risk Management Committee

Assets and Liabilities

Committee (ALCO)

Loan Committee *)

Credit Policy Committee

Remuneration and Nomination

Committee

Risk Monitoring Committee

Audit Committee

Internal Audit Task Force (SKAI)

Risk Management Task Force (SKMR)

External Audit

Information Technology

Steering Committee (KPTI)

Human Capital Committee

Product Committee

Compliance Unit (SKK)

Other Work Units

Sharia Business Unit (UUS)

General Meeting of Shareholders

(GMS)

Sharia Supervisory Board

Main Organ

Supporting Organ

*) Loan Committee is established in the Company’s organizational structure based on the Director’s Circular Letter No. 03/KD/DIR/SIPD/2017 dated April 20, 2017, on Head Office Organizational Structure.The Policies related to Loan Committee are currently under approval by the Board of Directors. At the operational level, the Loan Committee functions under the implementation of Board of Director’s Meetings in charge of loan.




GENERAL MEETING OF SHAREHOLDERSGMS is a forum where the Board of Commissioners and Board of Directors report their accountabilities for the implementation of their duties and performance to the Shareholders. Shareholders are not permitted to interfere with the Company’s operational activities which are the responsibility of the Board of Directors in accordance with the provisions of the Company’s Articles of Association and applicable laws and regulations.

There are two types of GMS held by the Company, namely the Annual GMS (AGM) and the Extraordinary GMS (EGM). In 2018, the Company holds 1 AGMS and 0 EGMS.

BOARD OF COMMISSIONERSThe Board of Commissioners is the Organ of the Company that is responsible to the GMS. The Board of Commissioners serves and is collectively responsible for supervising and providing advice to the Board of Directors and ensuring that the Company implements good corporate governance at all levels of the organization.

In carrying out its supervisory duties, the Board of Commissioners can form committees, whose members come from members of the Board of Commissioners. The committee is responsible to the Board of Commissioners. Other regulations regarding the Company’s Board of Commissioners function are in accordance with Law No. 40 of 2007 concerning Limited Liability Companies and Law Number 7 of 1992 concerning Banking, Minister of BUMN Regulations, OJK Regulations, Bank Indonesia Regulations, and Company Articles of Association. [GRI 103-2]

Based on the Resume of the Annual General Meeting of Shareholders (AGM) of PT. Bank Tabungan Negara (Persero) Tbk No. 42/KOM/BTN/III/2018 dated March 13 2018, the composition of the Company’s Board of Commissioners is as follows:

Table of Composition of the Board of Commissioners of the Company as of 31 December, 2018

Name Position Legal Basis for Appointment

I Wayan Agus Mertayasa President Commissioner/Independent Commissioner

Extraordinary General Meeting of Shareholders (EGM) dated January 7, 2016

Iman Sugema Commissioner Annual General Meeting of Shareholders dated April 12, 2016

Maurin Sitorus Commissioner Extraordinary General Meeting of Shareholders (EGM) dated January 7, 2016

Sumiyati Commissioner Annual General Meeting of Shareholders dated September 2, 2015

Parman Nataatmadja*) Commissioner Annual General Meeting of Shareholders (GMS) of PT Bank Tabungan Negara (Persero) Tbk on March 23, 2018

Arie Coerniadi Independent Commissioner Annual General Meeting of Shareholders dated March 24, 2015

Lucky Fathul Aziz H Independent Commissioner Extraordinary General Meeting of Shareholders (EGM) dated January 7, 2016

Kamaruddin Sjam Independent Commissioner Annual General Meeting of Shareholders dated March 24, 2015

Garuda Wiko Independent Commissioner Annual General Meeting of Shareholders dated March 17, 2017

*) To be effective once attaining approval from FSA subsequent to the Fit and Proper Test


BOARD OF DIRECTORSThe Board of Directors is a central and exclusive figure in the Company’s governance organs. Therefore, prospective members of the Board of Directors must go through the fit and proper test as stipulated in PBI Number 12/23/PBI/2010 which states that prospective members of the Board of Directors must pass the fit and proper test and obtain approval from Bank Indonesia before carrying out their duties and functions in their positions and POJK No.27/POJK.03/2016 concerning Fit and Proper Test for the Main Parties of Financial Service Institutions.

Appointment of members of the Board of Directors is conducted through the GMS and through the fit and proper test process that refers to PBI Number 12/23/PBI/2010 concerning Fit and Proper Test Article 17 stating that the Board of Directors must have integrity, financial competence and reputation. While the dismissal of members of the Board of Directors is regulated in article 11 of the Articles of Association. [GRI 103-2]

Based on the Resume of the Annual General Meeting (AGM) of Shareholders of PT. Bank Tabungan Negara (Persero) Tbk, the composition of the Company’s Directors is as follows:

Name Name Of Position Basis Of Appointment

Maryono President Director Re-appointed for a second term at the Company’s Annual GMS on March 17, 2017

Iman Nugroho Soeko Finance & Treasury Director Appointed at the Company's Annual GMS on February 25, 2014

Andi Nirwoto IT & Operation Director Appointed at the Company's Annual GMS on March 23, 2018

Oni Febriarto Rahardjo Commercial Banking Director Appointed at the Company's Annual GMS on March 24, 2015

Budi Satria Consumer Banking Director Appointed at the Company's Annual GMS on March 17, 2017

R. Mahelan Prabantarikso Strategy, Compliance & Risk Director Appointed at the Company's Annual GMS on March 17, 2017

Nixon L.P Napitupulu Collection & Asset Management Director Appointed at the Company's Annual GMS on March 17, 2017

Dasuki Amsir Distribution & Network Director Appointed at the Company's Extraordinary GMS on December 28, 2017

Yossi Istanto Strategic Human Capital Director Appointed at the Company's Annual GMS on March 23, 2018




SOFT STRUCTURE GCGFor the implementation of governance, the Company has compiled, implemented, and developed governance policies that regulate the relations between organs within the Company so that there are clear duties, responsibilities and authorities in accordance with the prevailing laws and regulations, GCG principles , sound business ethics and best practices. This governance mechanism is outlined in various core GCG policies (soft-structure GCG) which are living documents for all levels and ranks of the Bank’s organization.

The Company’s Soft Structure GCG

1. GCG Guidelines were ratified in Directors’ Decree No.06/DIR/DK/2009 dated May 27, 2009;2. Work Guidelines and Rules of the Board of Commissioners adopted in the Joint Decree of the Board of

Commissioners No. 01/KOM-BTN/2017 dated August 10, 2017 as a renewal of the Board Manual which was the previous work guideline;

3. Board of Directors’ Work Guidelines and Rules of Conduct adopted in the Directors Decree No. 07/DIR/KD/CMPD/2017 dated September 28, 2017 as a renewal of the Board Manual which was the previous guideline;

4. Working relationship of the Board of Directors and Board of Commissioners which is ratified in the Joint Decree of the Board of Commissioners No.02/DEKOM-BTN/2017 and Directors No. 01/DIR-BTN/2017 November 24, 2017;

5. Guidelines for Business Ethics and Code of Conduct which are ratified through Board of Directors Regulation No. 16/PD/CMPD/2015;

6. Implementation of Gratification Control ratified through Circular Letter No. 68/DIR/CMPD/2017;7. Whistle Blowing System – WBS and Anti-Fraud Policy that has been ratified through Circular of Directors SE No. 21/

DIR/IAD/2014.

Details of the Implementation of Corporate Governance can be found in the BTN Annual Report 2018 on section of Corporate Governance.

Assessment of Corporate Governance ImplementationThe Company conducts an annual independent assessment of the implementation of Corporate Governance in accordance with OJK Regulation Number 55/POJK.03/2016 concerning Implementation of Governance for Commercial Banks and also follows the provisions of OJK Circular Letter Number 13/POJK.03/2017 concerning Implementation of Governance for Commercial Banks .

Self Assessment Result of Corporate Governance

Governance Rank Rank Definition

BANK 2 Reflecting that the Bank’s management has implemented good governance in general. This is reflected in adequate fulfillment of the principles of Governance. In the event that there are weaknesses in the implementation of principles of Governance, in general these weaknesses are not significant and can be resolved by normal actions by the Bank’s management.

In addition to independent assessment, the Company follows a rating and survey of the Corporate Governance Perception Index (CGPI) every year held by the Indonesian Institute for Corporate Governance (IICG). CGPI is a research program and rating assessment of the quality of corporate governance. The Company ‘s 2018 CGPI score is 87.97 with the title of “Most Trusted Company”.


2014 2015 2016 2017 2018

85.75

86.59 86.86

87.97

84.94

CGPI Score

The governance performance assessment system that is also implemented is the GCG Assessment based on the ASEAN Corporate Governance Scorecard standards conducted by the OJK and the Indonesian Institute for Corporate Directorship (IICD), which assesses GCG practices referring to public information provided by the Company, especially in the annual report and the Company’s website.

In this assessment, the Company is considered successful in implementing governance practices in accordance with the ASEAN Corporate Governance Scorecard (ACGS) which is reflected in the results of the 2018 assessment of the Company’s total score of 106.19 points with the title “Leadership in corporate governance”. With this achievement for 3 consecutive years since 2016, the Company’s score is at level 5 with a score of more than 100.

2014 2015 2016 2017 2018

10.00

23.78

18.93

37.30

25.75

71.96 72.57

106.19101.74

Skor ACGS Perseroan

Rata-rata 100 Emiten




RISK MANAGEMENT [102-11]

The Company has a policy guideline in the field of risk management, namely the Risk Management Policy Guidelines (PKMR) which contains minimum provisions required by Bank Indonesia Regulation/Financial Services Authority. The Company’s risk management system is designed to support the Company in realizing sound business management and achieving sustainable growth, so as to optimize stakeholder value.

The Company has a Risk Management Policy Guideline (PKMR) in which it includes the provisions required by Bank Indonesia Regulation/Financial Services Authority. A review of PKMR has been conducted at least once a year by the Board of Directors and the Board of Commissioners to improve the guidelines for risk management policies. A review of internal policies was also carried out to comply with the current regulations by conducting gap analysis and accommodating best practices commonly used in the banking industry to improve the quality of risk management.

8 Types of Company Risks

• Credit Risk • Legal Risk

• Market Risk • Strategic Risk

• Liquidity Risk • Compliance Risk

• Operational Risk • Reputation Risk

Risk Management Coverage1. Active supervision by the Board of Commissioners and Directors2. Adequate policies, procedures and limits3. Adequate Risk identification, measurement, monitoring and

control processes and Risk Management information systems4. A comprehensive internal control system


Board of Commissioners and Board of DirectorsThe Board of Commissioners and Board of Directors play an active role in the risk management process in order to mitigate the Bank’s risk including risk governance, risk management framework, risk management process, and adequacy of management information systems and adequacy of internal control system. Active supervision by the Board of Commissioners and Board of Directors is conducted through Board of Commissioners meetings with the Risk Oversight Committee and Board of Directors through the Risk Management Committee meeting.

Risk Oversight CommitteePerform and be responsible for providing recommendations to the Board of Commissioners by evaluating the Company’s risk management policy guidelines, evaluating the suitability of the Company’s risk management policy guidelines with their implementation as well as monitoring and reviewing the implementation of the duties of the Risk Management Committee.

Risk Management CommitteeServe and be responsible for providing recommendations to the President Director regarding the inherent risks in the policies that will be determined by the Board of Directors as well as providing evaluations of the provisions that are deemed not in accordance with the latest developments and therefore, need to be adjusted.

The Risk Management Committee is actively involved in conducting risk assessments inherent in each new product and/or service/activity so that the Company can carry out the necessary mitigation measures and also conduct an evaluation of the Risk Management Policy Guidelines (PKMR).

Risk Management Task ForceEnterprise Risk Management Division (RMD) is a Risk Management Task Force (SKMR) in the Company, led by a Division Head who directly reports to the Managing Director of Strategy, Compliance & Risk.

Enterprise Risk Management Division Structure

Direktur Strategy, Compliance & Risk

Enterprise Risk Management Divison HEad

Market RiskManagement

Market RiskPolicy & Procedure

Credit RiskPolicy & Procedure

Operational RiskPolicy & Procedure

Policy QualityAssurance

Unit Basel

Risk Management Support & Reporting

Operational RIsk Assesment & Measurement

Credit RIsk Assesment & Measurement

Market RIsk Assesment & Measurement

Operational RiskManagement

Strategic RIskManagement

Credit RiskManagement




Risk Profile AssessmentThe Company evaluates risk profiles on a quarterly basis based on the inherent risk rating and risk management implementation quality rating to determine the Company’s risk rating.• Inherent Risk Assessment is an assessment of the

(quantifiable or not quantifiable) risks inherent in the Company’s business activities which has the potential to affect the Company’s financial position.

• Risk Management Implementation Quality Assessment is an assessment of four interrelated aspects including risk governance, risk management framework, risk management process, adequacy of human resources, and adequacy of management information systems, and adequacy of the risk control system.

Based on the results of the Company’s independent assessment of the Company’s soundness level, the Company’s Risk Profile based on Composite Ranking in Quarter IV-2018 is ‘Low to Moderate’ and the quality rating of risk management implementation in the ‘Satisfactory’ category.

In the context of implementing risk management, especially the application of Basel-II, especially pillar 1, which applies to all commercial banks, the Company has complied with the following provisions:

Requirement Status

Credit risk measurement uses a Standardized Approach in accordance with Circular Letter of OJK No. 42/SEOJK.03/2016 dated September 28, 2016 concerning Guidelines for Calculating Risk-Weighted Assets for Credit Risk by Using a Standard Approach.

√

The use of the Standardized Model for market risk is in accordance with OJK’s Circular Letter No.38/SEOJK.03/2016 dated September 8, 2016 concerning Guidelines for Using the Standard Method in Calculating the Minimum Capital Requirement for Commercial Banks to include Market Risk.

√

Calculation of minimum capital requirements using the Basic Indicator Approach for operational risk in accordance with Circular Letter of OJK No. 24 SEOJK.03/2016 dated July 14, 2016 concerning Calculation of Risk Weighted Assets for Operational Risk by Using the Basic Indicator Approach.

√

Related to regulator’s plan to implement Basel-III as stipulated in OJK regulations No. 11/POJK.03/2016, the Company has maintained a bank capital ratio or capital adequacy ratio (CAR) of XX% above the minimum provisions of the Basel-III framework of 10.5%. In addition, the Company has made preparations to fulfill the following conditions:

Requirement Status

Calculating and reporting Liquidity Coverage Ratio (LCR) to regulators on a monthly and quarterly basis according to POJK No. 42/POJK.03/2015 dated 23 December 2015 concerning Obligation to Fulfill Liquidity Coverage Ratio for Commercial Banks.

√

Calculate a trial Net Stable Funding Ratio (NSFR) on quarterly basis and report to the regulator in accordance with POJK No. 50/POJK.03/2017 dated July 13, 2017 concerning Obligation to meet the Net Stable Funding Ratio for Commercial Banks.

√

Calculate and report a trial calculation of quarterly Leverage Ratio (LR) to the regulator according to the LR Consultative Paper.

√

Menghitung dan melaporkan uji coba perhitungan Leverage Ratio (LR) kepada regulator secara triwulanan sesuai Consultative Paper LR.

√

Include computation of buffer in the calculation of minimum capital adequacy, namely:• Conservation Buffer in accordance with article 6 POJK No. 11/POJK.03/2016 dated 29 January 2016

concerning Minimum Capital Requirements for Commercial Banks• Countercyclical Buffer according to PBI No. 17/22/PBI/2015 dated 23 December 2015 concerning the

Obligation of Countercyclical Buffer Formation• Capital Surcharge for Systemic Banks in accordance with POJK No. 6/POJK.03/2015 dated December 23,

2015 concerning the Determination of Systemically Important Bank and Capital Surcharge as well as the existence of Systemic Bank Bucket letters submitted by the regulator.

√


Details of the Implementation of Risk Management can be found in BTN Annual Report 2018 on Corporate Governance section.

IMPLEMENTATION OF PRUDENT PRINCIPLES [102-11]

KYC and KYETo strengthen the implementation of the prudential principle in managing operational risk in bank business activities, the Company applies KYC (Know Your Customer) & KYE (Know Your Employee). Along the way, the implementation of KYC has evolved into Customer due diligence (CDD) which includes identification, verification and monitoring activities conducted by the Company to ensure that the transaction is in accordance with the profile of the prospective customer, WIC (walk in customer), or existing customer, in accordance with PBI No . 14/27/PBI/2012.

To improve employee understanding on the application of the Prudential principle, the Company provides access to CDD e-learning training that contains relevant case examples for employees’ perusal

Anti Money Laundering (APU) Program and Prevention of Terrorism Funding (PPT)The Company has been consistent in implementing its AML and CFT program by getting more acquaintance with all of its customers, having it referred to all applicable laws and regulations. In order to anticipate the practices of money laundering and terrorism funding, the Company implements AML and CFT programs in customer acquaintance activities, having it referred to all applicable laws and regulations. The Company’s AML and CFT programs include:1. Active Supervision by Board of Directors. The Board of Directors ensures that the Company

has a Policy and Procedure for Implementing the Anti-Money Laundering and Prevention of Terrorism Funding Program. The Company has issued internal regulations regarding APU and PPT which are the Company’s guidelines for implementing anti-money laundering and prevention of terrorism funding programs. The contents of this guideline are in accordance with Financial Services Authority Regulation Number 12/POJK.01/2017 concerning the Application of Anti Money Laundering and Prevention of Terrorism Funding in the Financial Services Sector and the Financial Services Authority Circular

Letter Number 32/SEOJK.03/2017 concerning the Application of Anti Money Laundering and Prevention of Terrorism Funding in the Banking Sector.

2. Active Supervision by the Board of Commissioners. The Board of Commissioners has an active role in

providing oversight, among others, giving approval on policies and procedures for implementing the AML and CFT programs proposed by the Board of Directors.

3. Implementation of APU-PPT Information System The Company has an information system that

can identify, analyze, monitor and provide reports effectively and will continue to be continually improved in accordance with the applicable regulatory changes and the experience of the Company.

In 2017 the Company has developed and improved the Information System for the management and reporting of AML and CFT that has been used in Branch Offices and Headquarters.

4. Employee Awareness The Company conducts continuous training related

to the AML and CFT program by:• Face-to-face meeting with the Branch Manager,

Service Quality Unit Head/DBM Business, Sub Branch Head, Cash Office Head, Priority Banking, Customer Service and Teller Service at several Branch Offices.

• Conducting a Sharing Module for the Implementation of the Anti-Money Laundering and Prevention of Terrorism Funding Program in the Knowledge Management System (KMS) that can be accessed by all employees.

• Conducting training through E-Learning media, namely Micro Film Customer Due Diligence to the entire Frontliner and the person in charge of APU and PPT at the Branch Office and conducting evaluations.

5. Reporting The Company carries out reporting obligations

to the Financial Transaction Reports and Analysis Center, including:• Reporting on Cash Financial Transactions

(LTKT) and Suspicious Financial Transactions (LTKM)

• Reporting of Fund Transactions from and to Foreign Countries (LTKL)/International Fund Transfer Instruction Report (IFTI)

• Reporting to Law Enforcement Officials and Regulators




Requirements for Management of Environmental and Social ImpactIn line with the role of banks to carry out the intermediary function, the Company has an indirect responsibility to manage the environmental and social impacts that occur to debtors, because if there is a discrepancy in management it will affect credit risk and reputation risk.

In line with the implementation of sustainable finance and Bank Indonesia Regulation (PBI) No.7/2/2005 concerning Asset Quality Assessment for Commercial Banks, which regulates that the assessment of business prospects as an element of credit quality includes evaluating the efforts made by debtors in order to preserve the environment , The Company always manages environmental risk in funding or lending.

Commercial credit is one of the Company’s portfolios which is very important to develop. To support commercial lending by adhering to the Bank’s prudential and good corporate governance principles, the Company has established commercial credit distribution policies and procedures with due regard to environmental and social aspects.

In the Circular Letter of the Board of Directors of PT Bank Tabungan Negara (Persero) Tbk Number: 17/ DIR/CMLD/2016, the legality of the project has been regulated, which consists of:1. Land/land use permit2. Site plan authorized by legal parties3. Building permit4. Proof of acquisition5. A copy of Notification of Due Tax (SPPT)6. Proof of entrance access7. Certificate of Piel Banjir8. PDAM certificate9. Environmental feasibility Certificate or

environmental management efforts and/or Environmental Impact Assessment (AMDAL)

AMDAL is a study of major and important impacts of a business and/or planned activities on the environment that are required for the decision-making process regarding the operation of businesses and/or activities. AMDAL is conducted during the planning of a project which is expected to have an influence on the surrounding environment (abiotic, biotic and. Aspects)

cultural). The legal basis for AMDAL in Indonesia is Government Regulation No. 27 of 2012 concerning “Environmental Permits”.

The Company starts this credit risk assessment by taking into account the results of the Environmental Impact Asessment (EIA) before deciding to approve credit line to a project. Furthermore, the Company also conducts monitoring or review by checking directly into the field to ensure that prospective debtors have met all environmental regulations. This is one form of applying the prudential principle in managing credit risk.

In addition, the Company also requires that every house built must have tree preservation and planting with the slogan “one one-tree house” and the existence of public and social facilities. This is one of the Company’s initiatives in maintaining environmental and social sustainability. [FS3]

BUSINESS ETHICS AND CODE OF CONDUCTS [102-16]The Company as a business entity encourages every element in it to behave properly and maintain a harmonious relationship with stakeholders and foster social sensitivity. Ethical behavior that is closely related to reputation risk and can further affect the Company’s operational risk and credit risk.

In this context the Company strives to implement ethics and behavior standards in carrying out all of its business activities in accordance with the vision, mission and cultural values through the implementation of Business Ethics and Code of Conducts. The Guidelines for the Business Ethics and Code of Conduct of the Company have been ratified through Directors Regulation No. 16/PD/CMPD/2015.

The Code of Conduct applies to all Managers, in this case the Board of Commissioners, Board of Directors and Employees in carrying out each of the Company’s business activities and guiding interaction between Commissioners, Directors and Employees with all stakeholders. Successful application of the Code of Conduct is the responsibility of all leaders in their respective work units.


Four Main Pillars of The Company’s Code of Conduct

This Code of Conduct is a codification or compilation of policies, employee regulations and agreements that have been jointly established between the Bank and employees, which will influence, shape and set standards of conducts, both for Managers and employees in carrying out all business activities.

Regulate Bank Ethics with Employees, Bank Ethics with Customers, Bank Ethics with providers of Goods and Services, Bank Ethics with Competitors, Bank Ethics with Partners, Bank Ethics with Government, Bank Ethics with the Community, Bank Ethics with Mass Media , and Bank Ethics with Professional Organizations

The Board of Directors and Board of Commissioners supervise the implementation of Code of Conduct within the company and provide guidance, disciplinary sanctions and/or corrective and preventive actions related to violations of the Code of Conduct

Code of Conduct Policy:• Conflict of Interest and Abuse of Position• Anti gratification and anti corruption• Compliance with bank laws and regulations

Introduction

Business Ethics Standards

Code of Conduct Policy

Implementation and Enforcement

The implementation of the Code of Conduct in the Company’s environment is carried out thoroughly including the introduction, campaign, implementation, reporting, and follow-up of violations of the Code of Conduct

Socialization Implementation Reporting and Follow-up

• Easily accessible Internal Management Standrad (AIMS) and website at any time

• Cascading-down socialization to the Most Valuable Player (MVP) of all Headquarters and Branch Offices

• ncluded in anti-fraud socialization conducted at the Head Office and Regional Office

• Awareness Code of Conduct and Gratification Control programs through compliance quiz activities

• Completion of the Integrity Pact by all employees according to the Code of Conduct values;

• Working closely with KPK to socialize gratification control programs and the Code of Conduct;

• Manage reports on receipt of gratification from all work units and report to KPK according to the regulations;

• Submission of Letter of Declaration of Clean Commitment to Stakeholders in all Head Office and Branch Offices;

• Use of PIN “Refuse Gratuity” by every member of the Company;

• Preparing micro learning gratification control programs through the Company’s Smartshare media;

• Implement the Whistleblowing System (WBS) program;

• Punishment for employees who violate the Code of Conduct in the form of administrative and financial sanctions in accordance with the category of violations

88%Number of Participants of Code of Conduct

Socialization

100%Completion of Integrity Pact

50Total number of gratification Reports

139 sanctions for violation of Code of Conduct in 2018 (1.41% of total

permanent employees)




CORPORATE CULTURE

SynergyBuilding synergic cooperation with all stakeholders based on a sincere, open-minded attitude and encouraging productive collaboration by upholding mutual trust and respect to achieve common goals.

IntegrityConsistency in mind, manner, matter in line with the Company’s rules, code of professional conduct, and commendable principle of truth

InnovationAlways develop new ideas and continuous improvements that add value to the company.

ProfessionalismVisionary, competent in their fields, always developing themselves with the latest technology to produce the best performance.

Spirit to Achieve ExcellenceDemonstrate passion and strong commitment to achieve the best results and provide services that exceed customer expectations (internal and external) by placing the importance of quality aspects in each activity as well as calculated risks. [GRI 102-16]


1. Be Sincere, Open with Productive Collaboration

2. Mutual Trust and Respect

4. Consistent and Disciplined5. Honest and Dedicated6. Respond Positively to Change

3. Creative & Innovative in making Value-Added Improvements

SYNERGY

INTEGRITY

PROFESSIONALISM

SPIRIT TO ACHIEVE EXCELLENCE

INNOVATION

7. Competent, Intrapreneurship and Responsible

8. Work Smart and Result Oriented

9. Enthusiastic, Proactive and Determined

10. Effective, Efficient and Prioritizing Customer Satisfaction

Anti-FraudThe Company is committed to implementing business activities honestly, fairly and without corruption or bribery and trustworthiness, because the Company realizes that negative actions will have a major influence on the name, brand, reputation and business sustainability of the Company.

Every violation of the anti-corruption policy and fraud is a serious matter and is strictly dealt according to the existing policies and regulations. The implementation of anti-corruption and fraud is regulated by Circular Letter of Board of Directors no. 22/DIR/IAD/2014 dated May 28, 2014 concerning the Company’s Anti-Fraud Standard Operating Procedure. This anti-corruption and fraud policy applies to all permanent or contract employees, management of the Company, Board of Commissioners and Directors who act on behalf of the Company.

The Company implements the Zero Tolerance to Fraud and Zero Defect program that is guided by the Implementation of Anti-Fraud Strategies for Commercial Banks as stipulated in the provisions of Bank Indonesia Circulars Number 13/28/DPNP dated December 9, 2011. Implementation of the Zero Tolerance to Fraud and Zero Defect program in 2018 is act of prevention through awareness activities or socialization of Zero Tolerance to Fraud and Defect programs in Regional Branches and Offices.

To ensure that every effort to mitigate fraud risk is effective, the Company continues to increase the awareness of BITNIZ Persons regarding compliance aspects through continuous socialization of anti-fraud programs and establishing Anti-Fraud Team. Anti-Fraud Strategy is supported by the implementation of 4 (four) pillars, namely (a) Prevention; (b) Detection; (c) Investigation, Reporting and Sanctions; and (d) Monitoring, Evaluation and Follow-Up. Furthermore, anti-fraud commitments are also indicated by submission of Declaration of Clean Commitment to all stakeholders of the Company. “Clean Commitments” include free from bribery, Corruption, Collusion and Nepotism (KKN), and practices of extortion, mark-up and all other actions that lead to KKN.

In addition, the Company engages employees in training and seminars organized by non-government institutions and government agencies such as the financial services authority (OJK) and other parties related to Anti-Corruption and fraud. This was carried out with objective that the implementation of an anti-corruption prevention policy within the Company can be carried out properly in accordance with applicable standards and conditions.




Table of internal fraud through 2018 [GRI 205-3]

Internal Fraud

Number of Cases by

Administrators Permanent Employee Non-Permanent Employee

Previous Year Current Year Previous Year Current Year Previous Year Current Year

Number of internal frauds - - 16 24 4 -

Resolved - - 16 13 2 -

On-Going Process of internal settlement - - - 11 - -

No Resolution Yet - - - - - -

Follow-up by legal process - - 4 4 3 -

INTERNAL AUDIT SYSTEMThe Company has implemented an effective internal

audt system in line with Bank Indonesia regulations

and the Standard Implementation of Commercial Bank

Internal Audit Functions in order to reduce the risk of

financial losses, irregularities and violations of the

principle of prudence.

The Company’s internal audit system is in line

with Bank Indonesia regulations and the Standard

Implementation of Commercial Bank Internal Audit

Function in order to reduce risk of financial loss,

irregularities or violations of the prudential principle.

In addition, this system is prepared in accordance with

regulations concerning the Standard Guidelines of

Internal Audit System for Commercial Banks and best

practice of Committee of Sponsoring Organizations

of the Treadway Commission (COSO) framework,

where the monitoring mechanism is determined by

the Company’s management on an ongoing basis to safeguard and secure the Company’s assets, guarantee the availability of accurate reports, increase compliance with applicable regulations, reduce the impact of financial losses and deviations including fraud and violation of prudential aspects, and increase

organizational effectiveness and improve cost efficiency.

Whistle Blowing SystemThe Company has established, implemented and developed a Whistleblowing System (WBS) that supports the internal audit system in an effort to prevent irregularities and fraud practices. WBS mechanism ensures that every report receives appropriate attention and follow-up, including enforcement of sanctions that can provide a deterrent effect for violators and also for those who intend to do so.

WBS aims at strengthening internal audit mechanisms to support business growth.1. Early detection and prevention of irregularities or

violations;2. Gradually creating an open, sincere, honest and

responsible work climate in the Company.

[email protected]

Violation Reporting Channel

Mail BoxPO Box Whistle Blowing System (WBS) Perseroan Jakarta 10000

Telephone/SMS0811 92 45678


Whistle Blowing System Mechanism (GRI 103-2, GRI 103-3)

WBS Team receives complaints/disclosures then

records and pours in the standard report format

Investigation Team investigates and reports

the results to the Board of Commissioners/Directors

Decide appropriate sanctions to the perpetrator

and awards to the whistleblower

WBS Team submits disclosure reports to the Board of Commissioners/

Directors

Initial review/clarification and investigation process is

written in official records

WBS Team conducts an initial review/clarification of the complaints and makes a summary which is then submitted to the Board of Commissioners/Directors

WBS Team reports the results of investigations

to the Board of Commissioners/Directors

The Company guarantees protection and security for whistleblower to encourage enforcement of discipline within the Company. The Company does not impose a time limit for reporting violations, but it should be carried out as soon as possible after the whistleblower believes the truth of the violation is submitted no later than three months after the violation occurred to facilitate further investigation

Details of the Implementation of the Internal Audit System can be found in the BTN Annual Report 2018 on Corporate Governance section.

Jumlah Pengaduan dan Tindak Lanjutnya

Tahun

Reporting Channel Follow Up

Mail/PO BOX

SMS/HP/ Direct Visit

E-MailCase

Closed (not proven)

On-Going Process (Audit Process/

Reporting Process/ Inter Division

Process)

Imposed Sanctions on

Reports (including administrative

sanctions)

Reports forwarded to Investigators

(related to public crime or corruption)

2016 5 2 1 0 1 7 0

2017 1 0 4 0 2 2 1

2018 1 0 5 0 6 0 0

Details of the Implementation of the Internal Audit System can be found in the BTN Annual Report 2018 on Corporate Governance section.

Supply Chain Management [102-9]Banking operations activities require the support of goods and services obtained from various types of suppliers and vendors. The main types of suppliers of the Company include contractor services, planning consultant services, supervisory consulting services, appraisal services, other consulting services, stationery suppliers, mail and expedition services,

security personnel services, cleaning services, secretarial services, and archiving or documentation. Suppliers and vendors of the Company are dominated by national suppliers.

All of the Company’s suppliers and vendors are required to comply with the procurement policies contained in the Company, which include compliance with applicable Indonesian Government and Bank Indonesia laws and regulations, especially human rights, and labor practices




In outsourcing management, the Company complies with Bank Indonesia Regulation (PBI) Number 13/25/2011, dated December 9, 2011, regarding the Submission of Part of the Work Implementation to Other Parties, the Company does not outsource core activities to other parties.

STAKEHOLDERS’ INVOLVEMENT

The Company has identified the Company’s primary stakeholder groups by using stakeholders mapping method with the objective to enable the Company understands who has the most interests in the Company on a reciprocal manner, what relationships are established, what needs to be communicated, and how to maximize the characteristics of communication media. Therefore the Company can communicate with stakeholders effectively which in turn will make the Company be able to reach the expected follow up targets, namely those who directly has the potential to influence the Company’s operational and sustainable activities and performance.[102-40, 102-42]

Stakeholders and its InvolvementStakeholders[GRI 102-40]

Involvement Method[GRI 102-43]

Frequency [GRI 102-43]Priority Topics[GRI 102-44]

Shareholders Annual General Meeting of Shareholders

Once a year The Company’s Target Achievement

Performance Exposure Quarterly

Extraordinary General Meeting of Shareholders

Once a year

Custoomers Customer Satisfaction Survey Twice a year Customer Service and Quality

Communication Media for Customers

Once a month

Customers’ Call Center Service Every time it is necessary

Website of BTN and Frontline Information

Direct Visit


Stakeholders[GRI 102-40]

Involvement Method[GRI 102-43]

Frequency [GRI 102-43]Priority Topics[GRI 102-44]

Development Partners

Property Awards Every year Opportunities of housing sale The Success of One Million Houses Program TransparencyGathering Every time it is necessary

Capacity Development Every time it is necessary

Employee Employee Engagement Survey Once a year Employee Satisfaction Level

Internal Bulletin Once every month Employment policy and strategy

SmartShare Accessible anytime Discussion Forum; work, quiz and information sharing

Innovation Award Once a year Accelerating business process

Work Suppliers Work Contract Every time it is necessary Procurement Process

Investment Partners Business partnership

Seminar Workshop Pengembangan merchant perseroan

Labor Union Discussion on Employee Agreement

Once a year Harmonious working relationship, rights and obligations of Employees

Government and Financial Authority

Once a year Report on the Implementation of GCG of BTN Sharia Business Unit

Fulfillment of information and report related to the implementation of GCG in the Company’s Sharia Business Unit

Self-Assessment GCG Twice a year Fulfillment of information and reportrelated to the implementation of GCG in the Company

GCG Compliance Report Once a year Fulfillment of report related to the implementation of GCG in the Company

Reporting of PKBL Activities to the Ministry of SOEs

Four times a year Means to deliver report related to the implementation of PKBL activities in the Company

Reporting of SOEs Synergy PKBL Program once a year

Fulfillment of information and reporting related to implementation of Synergy PKBL Activities in SOEs

Reporting of Sharia Supervisory Board of Bank BTN’s Sharia Banking Unit

Twice a year Delivering information related to compliance to Sharia principles in BTN’s Sharia operasional actvities

Business Organization

National, Regional and International Meetings and activities

Every time it is necessary Improvement of the Company’s corporate governance

Community Organization/Social/ Non Governmental Organizations

Strategic cooperation to carry out corporate social responsibility, both in social and environmental areas

Every time it is necessary Optimalization of the Company’s CSR Program

Media Press Release Press Conference

Every time it is necessary Release of Public Information related to banking business

Membership of External Associations and Organizations [102-13]

Name of Associations Position in Associations

Himpunan Bank-Bank Milik Negara (HIMBARA)/State-Owned Banks Association Chairman 1

Ikatan Bankir Indonesia (IBI)/Indonesia’s Bankers’ Association Secretary General

World Saving Bank Institution (W5BI) Chairman WBSI Asia - Pacific Regional Group

Perhimpunan Bank-Bank Umum Nasional (PERBANAS)/Association of National Commercial Banks Vice Chairman 1

Forum Humas BUMN/SOEs Public Relations Forum Member

Asosiasi Emiten Indonesia/ Indonesian Public Listed Companies Association Member

Konsorsium Data Kerugian Eksternal (KDKE)/External Loss Data Consortium Member

Certified Wealth Manager's Association (CWMA) Member

Asosiasi Sistem Pembayaran Indonesia (ASPI)/Indonesia’s Payment System Association Member

Associate Cambiste Internationale (ACI) Indonesia (Forexindo) Member




Name of Associations Position in Associations

Forum Komunikasi Direktur Kepatuhan Perbankan (FKDKP)/ Banking Compliance Directors Communication Forum

Member

Lembaga Alternatif Penyelesaian Sengketa Pl (LAPSPI) Member

Ikatan Auditor Intern Bank Member

Perhimpunan Audit Internal Indonesia Member

The Institute of Internal Auditor (IIA)-lndonesla Chapter Member

CORPORATE GOVERNANCE APPRECIATIONThe Company continues to strive to follow the development of the best GCG practices at the relevant national, regional and international levels and to make neccesary adjustments. With serious commitment and effort, the Company gained recognition for its success in improving governance performance. Among the awards are:

BUMN Award 2018 • Ranked First for The Best Good Corporate Governance Category for Publicly Listed SOEs

• Best Talent Development Award • Best CEO for Driving Execution Category.

CG Conference & 10th Award from Institute for Corporate Directorship (IICD)

Best Overall of Top 50 Big Capitalization PLC’s.

Corporate Governance Perception Index, in cooperation with SWA magazine and Indonesian Institute Corporate Governance (IICG)

Rank as “The Most Trusted Company” with score of 87,97.

ASEAN Capital Market Forum (ACMF) Award • Ranked Third in GCG Score with score of higher than 105 in TOP 50 Company in ASEAN (with participants from 6 ASEAN Member Countries)

• Top 3 Public Listed Companies representing publicly listed BUKU III banks in Indonesia


PROVIDING THE ECONOMIC BENEFITS FOR THE NATION

BTN Business Performance 83Credit Distribution 83Infrastructure Fiinancing 85Asset 85Financial Performance 86Distribution of Economic Benefit 87Housing Finance Center 87Mini MBA in Property 91Master Developer Indonesia (MDI) 91Basic & Advanced Level of Education on Housing Financing 92


Overview of Sustainability PerformanceThe Statement of the President Director About this ReportAbout the Company Sustainability GovernanceProviding the Economic Benefits for the NationThe Commitment to the Environmental ConservationHuman Resource ManagementCommitment to Provide Best ServicesInclusive Services and ProductContribution for the Improvement of Life Quality of the CommunitySupporting Information


BTN’s core business is home financing and its derivative industries for millions of Indonesian families. The Company carries out the trust as

State-owned bank to offer Home Ownership Loans (KPR). House provision presents both an opportunity and a challenge for Indonesia since there is a backlog of housing ownership for more than 11.38 million heads of household in terms of ownership or 7.6 million in terms of occupancy.

To meet the needs of residential homes, the Government has initiated a Million Houses Program in 2014 with a proportion of 60-70 percent of homes for low-income communities (MBR). The Million Houses Program involves all stakeholders in the housing sector, both the Central Government, Local


Governments, Housing Developers, Banking sector, Private Companies and the public to overcome the housing backlog in Indonesia. [GRI 103-1]

The Company is an anchor bank that distributes housing loans (KPR) while also acting as an integrator in this program. The Company provides financing access to all levels of customers and supports the supply side by offering Construction Loans in the housing supply chain.

To distribute financing, the Government provides facilitation assistances such as Housing Loan (KPR) scheme, Housing Financing Liquidity Facility (FLPP), interest rate subsidies, advance payment assistance, and houses built by developers without subsidies.



With the core business of providing home ownership financing, the Company provides economic added values from loans distribution, as well as from financing and developing partners.

“ “

BTN BUSINESS PERFORMANCEIn 2018, domestic economy was marked by a rise of the benchmark interest rate and global economic turmoil. Bank Indonesia had gradually adjusted its benchmark interest rate from 4.5% to 6%. However, there was not much influence on public interest in meeting the needs of their homes.

The effect of the increase in interest rates does not have a significant impact because the portion of the Company’s non-subsidized loans is relatively small. Meanwhile, KPR interest for subsidized housing has been set at 5%.

On the other hand, the Government attempted to increase the possibilities of credit disbursement with the relaxation of Loan-to-Value (LTV) policy which also relaxes the calculation of risk weighted assets in banks, effective from 1 August 2018, modifying the ban on lending to land procurement and preparation for developers, encouraging KPR financing through securitization, increasing limits of financing with collateral, and increasing coordination with other agencies.

With this condition, the Company implements a business development strategy that is in line with BTN Transformation agenda that enters its second phase, namely the digital banking period and continues to innovate developing KPR products and credit schemes that make it easier for low-income people to own homes. In semester II 2018, the Company also returned to being a FLPP channeling bank that would help reduce the cost of both operational and funding costs. [GRI 103-2]

CREDIT DISTRIBUTIONAs a result, the credit and financing channeled by the Company in 2018 reached RpXX trillion compared to Rp198.99 trillion in 2017, which was mainly driven by the absorption of housing loans, namely Subsidized KPR and Construction Loans.

In 2018 the Company was able to record a total credit growth of 19.18% compared to the industry average while data from the Financial Services Authority said that national banking credit only grew by 13.31% in 2018. KPR and home ownership financing reached Rp237.76 trillion, up 19.84% of Rp198.99 trillion in 2017 compared to data from Bank Indonesia who recorded that domestic banking industry’s KPR and KPA only grew at 11.63% level in 2018.

In order to support the One Million Houses Program, the Company distributes loans for 757,159 houses. The realization consisted of disbursement of subsidizing credit for 583,700 housing units of Rp39.215 Trillion and non-subsidized loans for 173,459 housing units of Rp33.047 trillion.

In the context of implementing One Million Houses Program, the Company recorded an increase in the Housing Financing Liquidity Facility (FLPP) by 29.70%% while non-subsidized lending increased 12.19% until 2018.


From 1976 to October 2018, or for 42 years, BTN has helped realize the dream of 4.5 million Indonesian families to own a home, both in the form of subsidized and non-subsidized KPR. The realization value of KPR has reached more than Rp. 257.6 trillion.

ONE MILLION HOUSES PROGRAM

667

757

595

474

700661

431

750

Government Target BTN Realization

2015 2016 2017 2018

With this positive performance, BTN is still the leader of the mortgage market in Indonesia in 2018 with a share of 37.73% (data as of March 2018). In the subsidy KPR segment, the Company dominates 94.12% of the total realization of subsidized mass KPR. (data as of June 2018).

(Others are controlled by BCA (17.18%), BNI (8.94%), Mandiri (9.47%), BRI (5.5%), CIMB Niaga (6.45%) and other banks, 14.67%).

As an integrator in the One Million Houses Program, the Company also contributes to the construction of 750 houses through Construction Loans for housing


developers so as to support the growth of the property business through financing for developers, contractors and construction sub-sectors as well as financing new contractors. Total Construction Loans disbursed in 2018 reached Rp25,780 trillion, up 13.09% compared to the previous year Rp22,795 trillion.

Together with the tagline ‘Friends of the Indonesian Family’, the Company offers consumer credit products to finance the needs of families living in the homes of KPT customers. Consumer loans disbursed by the Company in 2018 reached Rp172,194 trillion, up 18.87% compared to Rp144,860 trillion in 2018.

CONSUMER CREDIT

144,860

68,40563,478

8,442 4,535

172,194

87,386

71,033

8,323 5,452

2017 2018

DISTRIBUTIONCREDIT

MORTGAGESUBSIDY

NON MORTGAGESUBSIDY

OTHER HOUSING CREDITS

NON CREDITHOUSING



22,759

8,324

5,024

25,780

11,088

6,654

COMMERCIAL CREDIT2017 2018

KMKLOAN

INVESTMENT LOAN

MORTGAGECREDIT

INFRASTRUCTURE FINANCINGInfrastructure development that is actively implemented by the Government will have a multiplier effects on other industries in the form of stimulus for the economy in the neighbouring community so that it will increase the purchasing power and economy of the region.

To support national development, the Company through its commercial banking business line provides infrastructure financing worth Rp2 trillion to state-owned PT Angkasa Pura-I (Persero) for the development of airports that become National Strategic Projects such as the construction of New Airport in Yogyakarta and revitalization of Syamsuddin Noor Airport in Banjarmasin.

In this cooperation the Company provides a non-revolving loan facility to PT AP I for business activities, airport development and routine investment. In the future, the Company will increase infrastructure financing by initiating other BUMN cooperation related

to infrastructure, transportation and its supporters such as BUMN Karya to build, roads, bridges and so on.

ASSETThe growth of the Company’s assets is sustained by growth of credit and financing. The total realization of assets in the amount of Rp300 trillion exceeds the 2018 target set at Rp306,27 trillion or reaching 100.72% of the target. Compared to the achievements of 2017, the Company’s assets increased by 17% from Rp261.5 trillion. As a comparison, the Financial Services Authority (OJK) data shows the assets of the national banking industry to grow by around 9 percent in 2018.

With this achievement, the Company is ranked 5th as the largest bank in Indonesia in terms of assets (bank only) in the first quarter of 2018. Previously, the Company was ranked 11th in 2013.


214,17

147,79

261,37

177,09

300

2

ASSET AND THIRD-PARTY FUNDS GROWTH (TRILLION RUPIAH)

2016 2017 2018

ASET DANA PIHAK KETIGA

FINANCIAL PERFORMANCEThroughout 2018, the Company recorded satisfactory financial performance as indicated by good financial performance indicators. One indication is credit expansion, with double-digit growth accompanied by a significant reduction in non-performing loans (NPLs).

On the other hand, fee-based income also increased from Rp460 billion to Rp2,090,329 billion, up by 28.71%. The Company managed to maintain portfolio growth amid an economic slowdown. In 2018, the Company received a subsidy payment from the Government in the amount of Rp2,091 trillion for Housing Financing Liquidity Facilities (FLPP) and Rp21,764 trillion for Interest Subsidies (SSB).

Description 2018 2017 2016

Total Asset 306.436.194 261.365.267 214.168.479

Productive Asset 254.611.882 215.459.823 178.199.217

Bank Credit/Financing 237.757.674 198.990.581 164.446.381

Third Party Funds 230.264.033 192.948.964 160.191.669

Operational Revenue (IDR) 24.924.511 21.692.530 19.136.929

Operational Cost (IDR) 21.330.711 17.800.627 15.784.697

Net Profit (IDR) 2.807.923 3.027.466 2.618.905

Performance Ratio

Minimum Capital Adequacy Ratio 18.21% 18.87% 20.34%

Ratio of Non-Performing Productive and Non Productive Assets to Total Productive and Non Productive Assets

2.50% 2.31% 2.42%

Ratio of Non Performing Productive Assets to Total Productive Assets 2.65% 2.48% 2.64%

Provisions for Impairment Losses (CKPN) of financial assets against productive assets 1.30% 1.10% 1.20%

NPL gross 2.82% 2.66% 2.84%

NPL net 1.83% 1.66% 1.85%

Return on Asset (ROA) 1.34% 1.71% 1.76%

Return on Equity (ROE) 14.93% 18.11% 18.35%

Net Interest Margin (NIM) 4.32% 4.76% 4.98%

Efficiency Ratio (BOPO) 85.58% 82.06% 82.48%

Loan to Deposit Ratio (LDR) 103.25% 103.13% 102.66%

Nilai Liquidity Coverage Ratio (LCR) 108.99% 150.06% 162.25%

Net Stable Funding Ratio (NSFR)* 118.83% -* -*

Notes :LCR will be published in Q1 2019 Financial Report whilst has been calculated since 2016*Regulation on NSFR had just enacted in 2018.




The Company’s financial performance report can be found in more detailed in BTN Annual Report 2018 in the Management Analysis and Discussion section.

DISTRIBUTION OF ECONOMIC BENEFITLending and financing by the Company have an impact on many industrial lines, especially the housing sector. Other sectors that intersect with housing finance are also affected. As an agent of development, the Company contributes to support national economic growth.

To achieve this tremendous goal, the Company has partnered with around 10,000 developers both for subsidized and non-subsidized houses. In addition to enhancing the partnership the Company also carried out various other initiatives to energise housing sector in Indonesia.

HOUSING FINANCE CENTERThe company seeks to create prospective developers through the Housing Finance Center (HFC) initiative. HFC establishes partnership with many parties, both formal education institutions and developers through various education and training.

BTN HFC was established to become a data and information center related to the housing industry in Indonesia. HFC is expected to fill the information gap regarding the development of the housing sector and become a trusted reference institution. HFC programs include. The services provided by HFC include Learning, Advisory, and Research.

PROGRAM

HFC

Mini MBA in Property

Potensi

Daerah

Updating

Perseroan Housing

Index

Penyelenggaraan Pendidikan Pembiayaan

Perumahan Tingkat Dasar dan Tingkat Lanjut

Master D

eveloper

Ind

onesia (M

DI)

BTN Housing Finance Center (HFC)National problem in providing housing or settlement is always rising up every year. This is due to the housing supply that is less than the housing demand, which increasing rapidly every year. The home ownership rate in Indonesia is still relatively low compared to other countries in the world. For example, 90% of Singapore’s population has a home or housing. Ministry of Public Works revealed that based on Statistics Indonesia data in 2015, the backlog or gap reference between the needs and availability of Indonesia’s occupancy currently reached 11.4 million units. This figure also shows the housing ownership rate of the Indonesian people, which only reached 82%.


The need for housing each year reaches 800,000-1,000,000 units per year. Meanwhile, the ability of the Government and developers to provide the housing is 400,000 units per year. If the condition does not change, then the backlog (national housing will be higher, especially seeing the average population growth in Indonesia that reaches 1.49% per year or reach 3.2 million people. Under the assumption of fixed capability of the government, the housing backlog will skyrocket.

The problem of housing backlog in Indonesia has been a dilemma for a long time. The increase in housing gap comes from supply, demand, and regulators. In terms of demand, the increasing demand for housing is increasing every year. In addition, the number of uninhabitable houses and the number of uninhabitable prone houses support the increase in the demand for the houses.

Meanwhile, the supply from the developers’ construction cannot fulfill the society’s demand. The number of developers is still limited. Thus, this is one of the cause in such housing backlog. In terms of regulator, the Government has not established a regulation or agency that regulates/ controls the movement of land prices, which is the main component in forming the selling price of houses.

To address the high level of backlog, Jokowi-JK Government initiated the “One Million Houses Program for the People” in 2015. The Program targets housing needs for Low-Income Communities (MBR). In the early stages, the target is to build 603,516 housing units for MBR and 296,484 housing units for non-MBR. Financing for MBR houses is prioritized from Housing Loan (KPR), which are almost entirely financed by the Company.

FOUR PILLARS OF PROPERTY DEVELOPMENT

• Financing Strategies• Taxes Strategies• Financial Management and Accounting

• Land Identification Technique• Analysis of Land Development• Land Tenure and Land Acquisition Strategy

• Permits• Legal Property• Agreement with Third Parties

• Project Management• Sales and Marketing Strategies• Financing Strategies• People & Organization Strategies• Negotiation skill• Risk management

Capital Land & Environment Legal Skill

In line with the government’s program, the Company established BTN Housing Finance Center (HFC) to support the government in resolving the housing backlog issue, through a series of research and education in the property sector since October 2014. The inauguration of HFC secretariat is conducted in April 2015. The objectives, vision, and mission are as follow:




• The leading professional banking and residential Research Center in Indonesia• Be the source of inspiration for business actors in the field of housing finance• Answering the needs of the housing finance business both in the banking world and the

housing developers.

To be the research, education, and consultation centers related to the advance housing finance

• To provide superior, innovative, and integrated services in research, education, and finance for clients

OBJECTIVES

VISION

MISSION

HFC has three main activities, i.e. Research & Development (Information Center and Innovation of Indonesian Housing Financing through various scientific studies related to market, business actor, and housing industry trend). Learning (Education Center for housing finance in Indonesia through various forms of education and training programs), and Advisory (Consultation center for property and housing finance in Indonesia, in order to assist stakeholders, i.e. communities, developers, and government in decision making).


BTN HFC is established to be the data center and information related to the housing industry in Indonesia. HFC is expected to fill the information gap related to the development of the housing sector and become a trusted reference institution. Other HFC programs, among others:

HFC’s Main Activity

Advisory

Research andDevelopment

Learning

The seminar is a technical and academic meeting with the objective to conduct a thorough study of a particular topic by solving a problem that requires interaction among seminar participants, assisted by a professor or scholar.

• Workshops are meetings designed to teach or introduce the participants to technical skills, practices, or ideas that can be used in their work in the similar interests and fields.

• In following-up the cooperation of the Company with UNDIP Semarang which has been signed, In January - June 2017, the Company conducted briefing in the form of one-day seminar for final year students and prospective developers of 700 participants.

• Foundation Property Developer: targeted for small or beginner developer. In addition, the program is designed for the general public who have a passion to be a developer.

• Professional Developer: targeted for medium-sized developers, who have construction in multiple site simultaneously.

• Executive Property Developer: Targeted for large-scale developers, oriented towards the development of an area or independent city.

• Developing the concept of Housing Supermarket, where the Company is working on industry in a totality of Upstream

- Downstream. The Company shall be the gateway of housing in Indonesia.• The housing project financing solution focuses on commercial credit activities, which not only focus on

housing developers, but also other resources support.

Cooperation with leading academics and research institutions. The objective is the Company’s research will benefit the Company in terms of bank business and for the community as well.

• The facilitator of housing problems bridges the housing solution with third parties, which acts as the resource persons, decision makers, and regulators.

• The Company develops strategic partnership relationships with those who can assist in resolving housing issues, especially in relation to Housing Projects.

• Property and housing development covers a wide range of activities ranging from land selection, facility and building development to meet the customers’ needs. This includes sale or lease of property of land upon completion.

• Developers generally coordinate activities by making plans, and taking into account the needs and then applying their ideas into property projects.

• In addition to the development of other parties who contribute to the development of housing, such as the Government, Actors of Financial Sector, Law Sector, and other related Sectors, the Company may contribute to the creation of new projects based on an innovation or incorporate some innovations from actors related to the development of the housing.

• Development pages in HFC website will discuss and show various ideas, concepts, and innovations applied by the housing projects developers.

Workshop

Seminar

Short Course

Supply Chain Consultancy and Housing Project Financing Services

• Housing Finance Solutions focus on the consumer credit activities, which provide solutions for subsidized and nonsubsidized Housing Loan ownership and home development solutions.

• Other financing solutions provide loans for the inside of a house and other family needs.

Housing Finance Consultation and Other Needs Services

Research

Housing Solution Facilitator Services

Housing Business Incubator Service

Development




Mini MBA in Property

Potensi Daerah

Updating

BTN Housing

Index

Penyelenggara Pendidikan Pembiayaan Perumahan

TIngkat Dasar dan TIngkat Lanjut

Master Developer Indonesia

(MDI)PROGRAM

HFC

MINI MBA IN PROPERTYAs a form of cooperation program in the field of education, the Company and SBM-ITB initiated the Mini MBA in Property program, which is a comprehensive education program in the property sector, which refers to the four pillars of property development, i.e. Land and Environment, Capital, Legal, and Skill Set. The learning subjects for Mini MBA in Property consists of General Property Policy, Property Business Mindset, Property’s Land and Business Environment, Property Business Financing, Legal and Licensing, Property Management, and Field Studies. Each participant who attended the training and met the requirements of attendance will be given a Mini MBA in Property certificate, signed by the Company & SBM ITB. Participants who pass the thesis exams will also have the opportunity to receive construction financing from the Company (in accordance with applicable provisions in the Company).

MASTER DEVELOPER INDONESIA (MDI)Master Developer Indonesia (MDI) is a developer education program that focuses on the development, marketing, and management practices of the property business. The MDI program is a continuation of the Mini MBA in Property program, in which the participants are expected to be able to go into the property business. The program four areas of competence as follows: 1. Digital Marketing Property Digital Marketing is a more prospective strategy

because potential customers start product through internet, including property.

2. Property Financing After assessing the feasibility of the project, are

also required to rotate the funds available for all purposes from all sources. Developers must be able to make proper financial planning up to a thorough financial audit.


3. Establishing Super Team This module focuses on building a solid and

synergistic group so that each job can be more focused and controlled. Super team is very important because the development of property business involves a wide range of professional expertise or skills. Thus, the management must be able to manage the allocation of human resources (HR).

4. Project Operation Property The material will discuss the stages of planning a

project property so that each process or stage can run in sequence. This material also discusses how to monitor and evaluate project implementation.

MDI Program has several advantages, i.e.:1. The program is in the form of mentoring in the first

week and field assignment for one week. On the second week, there will be checkpoint assignment and FGD (Focus Group Discussion) to see the progress of mentoring in the project.

2. Participants may have priority in credit/financing of the property of the Company for the best participants in the MMDI program (in accordance with the terms and conditions applicable in the Company).

3. The Participants have the opportunity to obtain a free advisory/coaching clinic in the property sector.

4. After graduation, participants can directly practice as a developer together with MMDI alumni.

ADVANCED HOUSING FINANCE EDUCATION

Basic level housing finance educationBasic Housing Education Funding is a property education program to educate prospective housing developers in Indonesia. This education includes the basics of understanding about the construction of housing projects that focus on the construction of small-scale housing projects, syllabus or curricula compiled referring to the four pillars of property namely licensing and legality, financing or capital, skill sets in property, and land. This program aims at literacy for students.

Advanced Housing Finance Education Advanced Housing Finance Education is a property education aimed at developers who already own a residential project business. In this program, participants will be challenged to complete case study or business property related issues. Participants are also invited directly to practice in constructing a property business. The expected outcome of this training is that participants can have enriched knowledge and upgrade new skills in property business management. In this program, participants are taught to develop the construction of medium-sized housing projects or areas.

BTN Housing IndexThis activity aims to develop and update a property database owned by the Company, thus maintaining its reliability and validity. The development and update of property database and regional potential will be complemented by the preparation of property-related studies, focusing on analyzing the trend of property growth, development, and housing potential, consumer preferences on mortgage (housing/apartment loan) financing schemes, mapping of housing developers with banks in mortgage financing, property finance market, property related credit mapping, housing development policy, and property development licensing process.

The research area covers Medan, Pekanbaru, Batam, Bandar Lampung, Jakarta, Bekasi, Bekasi Regency, Bogor, Bogor Regency, Purwakarta Regency, Karawang Regency, Bandung, Bandung Regency, Cimahi, Surabaya, Bantul Regency, Sleman Regency Yogyakarta, Mojokerto Regency, Mojokerto, Gresik, Bangkalan, Surabaya, Tangerang Regency, Tangerang, South Tangerang, Cilegon, Denpasar, Banjarmasin, Balikpapan, Gowa Regency, Maros Regency, and Makassar.




HFC Corporation

MoU BTN - HDFC India

May 2, 2017MoU BTN with Balai Pustaka

April 21-22, 2015

MoU BTN with Developers

October 24, 2015

MoU BTN - SBM ITB

April 20, 2017

MoU BTN with UNDIP Semarang

March 3, 2016

MoU BTN - IAEI

HFC performance throughout 2018 includes: 1. Number of HCF graduates up to 2018 HFC

graduates from the Mini MBA in Property program up to 2018 as many as 518 participants

2. HFC collaboration with university Throughout 2018, HFC has collaborated with

Gadjah Mada University for Training Programs, Property Development Consultation and Research Supporting Housing Finance Center Services and with Diponegoro University to Fulfill Home Needs and a Decent and Affordable Environment for Low-Income Communities (MBR) in the District Kendal through ABCG Collaboration (Academic, Business, Community and Government)

3. The strategy that has been implemented in 2018 for HFC development- Strengthening from the skillet side of the

developer such as training to developer associations for example APERSI

- Strengthen property literacy programs with roadshows to both public and private universities, such as binus, trisakti and ipb

- Establish an advisory scheme design to implement the property advisory system program

4. Future strategies in 2019- Strengthening cooperation with educational

institutions or institutions to print developers from millennials with vocational schools, such as at UMM

- The implementation of Property Advisory System programs and applications in the form of consultations in the field of property involving several mentors from both BTN and instructors from the mini MBA program in order to strengthen the engagement of mini MBA in property alumni to Bank BTN Spy can increase credit potential for BTN Bank.


- GRADUATION MINI MBA IN PROPERTY BATCH 4, 5, 6, AND 7




- DOCUMENTATION COLABORATION ABCG KENDAL


Indonesian Master Developer (MDI)Master Developer Indonesia (MDI) is a developer education program that focuses on developing, marketing and managing practices of property businesses. The MDI program is a continuation of the Mini MBA in Property program where participants are expected to be able to go directly into the property business.

Basic level of housing financing educationIt is a property education program to educate prospective housing developers in Indonesia. The program includes the basics of understanding housing construction projects that focus on the construction of small-scale housing projects.

Advanced Level of Housing Financing EducationIt is an education program in the field of property intended for developers or developers who already have a housing project business. In this program, participants will be challenged to complete a case study or problems related to the property business. Participants were also invited directly to field practice in building a property business.

BTN Housing IndexIt is the Company’s own development and updating property database program in order to maintain data reliability and validity. The program is complemented by the preparation of property-related studies which focuses on analyzing trends in property growth, development of potential housing needs, consumer preferences for KPR/KPA financing schemes , mapping the collaboration between housing developers and banks in KPR/KPA financing, property financing markets, property-related credit mapping, housing development policies, and property development licensing processes.


In the initial stages the research area included Medan, Pekanbaru, Batam, Bandar Lampung, Jakarta, Bekasi Kota, Bekasi Regency, Bogor Kota, Bogor Regency, Purwakarta Regency, Karawang Regency, Bandung City, Bandung Regency, Cimahi City, Surabaya City, Bantul Regency, Sleman Regency, Yogyakarta City, Mojokerto Regency, Mojokerto City, Gresik, Bangkalan, Surabaya, Tangerang Regency, Tangerang City, South Tangerang City, Cilegon City, Denpasar, Bandung Regency, Banjarmasin City, Balikpapan City, Gowa Regency, Maros Regency, and City of Makassar.

For Further information at https://hfc.btn.co.id/

BTN Property AwardThe BTN Property Award is the Company’s step to improve synergy with the developers so that it will be able to push on the housing supply side. This push on the housing supply side is instrumental in supporting the success of the Million Houses Program.

The Company gives appreciation to developers and work partners in the country who have high quality work and professionalism in providing quality homes. Award categories given by BTN are namely national state-owned (BUMN) property developer partners, national private property developer partners, best BTN Sharia developer partner at national level, developers with the best contribution to small and medium scale credit at national level, developers with the best credit commercial contributions at national level, best developers with subsidized KPR at national level, best developers with non-subsidized KPR realization at the national level, and BUMN developers with the largest non-subsidized KPR realization.

In addition to the developers, at the event, BTN also gave special awards for key national partnership to partners who had assisted in lending and housing finance.



Managing Director PT Bank Tabungan Negara (Persero) Tbk, Maryono and Minister of Public Works and Public Housing Basuki Hadimuljono handed over the award certificates to the winners of the National Property Developer Partners SOE category and the National Main Partnership at the 6th BTN Property Award in Jakarta, Wednesday, August 15 2018 .

Generated and Distributed Economic Values (Rp billion)

Economic Value 2018 2017 2016

Interest Revenue and Interest Sharing 20,781.51 18,446.73 16,501.47

Sharia Revenue Share 2,070.24 824.85 637.35

Other Operational Revenue 2,071.59 1,605.93 1,282.82

Non-operational Revenue 16,475 (30.35) (22.15)

Distributed Economic Value 41,398.34 20,847.17 18,399.49

Interest Expenses and Bonus 10,355.00 9,930.64 8,975.27

Other Operational Expenses *) 3,966.00 3,616.14 3,264.95

Salary and Employee Benefits 2,876.56 2,554.43 2,121.65

Procurement of Goods and Services 526.74 556.77 415.80

Dividend Payment to Shareholders 605.49 523.78 370.18

Expenditure for Government 1,247.30 2,467.50 1,948.50

Expenditure for Social Investment **) 5.18 5.15 4.37

Total Distributed Economic Value 19,582.27 19,654.41 17,100.73

Total Retaied Economic Value 21,816.07 1,192.76 1,298.76

*) Operational Expenses excluding salary and employee benefits**) Realization of CSR Program Fund Disbursement


Contributions to the StateSAs a State-Owned Enterprise with 60.00% of its shares owned by the Government of the Republic of Indonesia, the Company always contributes to national economic development through dividends and tax deposits. In 2018, the Company pays dividends of RpXX billion, an increase of XX% compared to 2017, which is valued at Rp523.78 billion. This value is equivalent to XX% of the Company’s profit for fiscal year 2017, which is worth RpXX trillion.

Contribution to the state in the form of tax payments paid by the Company in 2018 amounts to RpXX trillion. This was an increase by XX% from 2017, which was valued at Rp2.47 trillion.

The Company’s Contributions to Government (billions Rupiah)

Tax Classification 2018 2017 2016

Corporate Income tax 976,955.75 1,090.16 743.02

Tax Deduction Obligations 270,300.50 1,353.54 1,188.94

VAT 16.57 16.13 7.93

- 7.67 8.61

Total 1,247.30 2,467.50 1,948.50

Empowerment of Local SuppliersEconomic contribution to the Indonesian economy is also manifested in the purchase of goods and services to support business activities. The Company always works with suppliers of goods and services both in the long term and short term to meet operational needs. In the process of selecting suppliers, the Company refers to the principles of effective, efficient, open and competitive, transparent, fair and non-discriminatory, accountable, responsible, and independent. In addition, as a company that cares about sustainability aspects, the Company also continuously empowers local suppliers, namely suppliers from Indonesia. This policy is listed in Directors Regulation No. 13/PD/PGSD/2015 concerning Procurement of Goods and/or Services.

During 2018, the total value of the procurement of goods and services of the Company reached Rp526.74 billion, increasing by -5.39% from 2017, which was valued at Rp556.77 billion. All procurement carried out by the Company comes from local suppliers. In addition to reducing operational costs, it also aims to support the economy of domestic business activities. [GRI 103-2, GRI 103-3]

Amount of Procurement of Goods and Services (Millions Rupiah) [GRI 2014-1]

Type of Suppliers 2018 2017 2016 Percentage of Local Suppliers

Local (Nasional) 526,743 556,768 415,797

100%Non-Local (International) 0 0 0

Total 526,743 556,768 415,797





THE COMMITMENT TO THE ENVIRONMENTAL CONSERVATION

The Company’s Commitment to the Environmental Conservation 102Head Office Green Building 103Energy 103Paper 104Other Waste and Emission Management 104


Overview of Sustainability PerformanceThe Statement of the President Director About this ReportAbout the Company Sustainability GovernanceThe Commitment to the Environmental Conservation The Commitment to the Environmental ConservationHuman Resource ManagementCommitment to Provide Best ServicesInclusive Services and ProductContribution for the Improvement of Life Quality of the CommunitySupporting Information


The Bank actively participates in environmental preservation activities by implementing green office policy that aims to reduce environmental

impacts directly.

The Bank commitment to environments preserve are implemented through two approaches, as follow: managing environmental, social and governance risks (LST) in distributing loans and its running banking operations by paying attention to the efficiency of natural resources and minimizing pollution. [GRI 103-1]

THE COMPANY’S COMMITMENT TO THE ENVIRONMENTAL CONSERVATION Bank BTN has actively implemented the Financial Services Authority Regulation Number 51/POJK.03/ 2017 concerning the Implementation of Sustainable Finance by managing its banking operations based on environmental protection principle. The Company banking operations management is designed to reduce pollution from the Company banking activities and financial products. This pro-environment commitment is a form of the Company’s compliance to laws and regulations related to the environment, especially Law No. 32 year 2009 regarding Environmental Protection and Management.




Compliance is the core principle of the Company environmental preservation activities and its environmental impact management in all of the Company business activities. By paying attention to the principle of prudence, the Company ensures that all relevant activities have environmental permits in accordance with the provisions. During 2018 there were no incidents of violations of environmental regulations within the Company. [GRI 102-11, 307-1]

In addition, in 2018, the Company has develop its Sustainable Financial Action Plan (RAKB) which will serve as guidance document for the Company to effort in an integrating environmental, social and governance aspects (LST) into the Bank’s strategy and operations.

The purpose of sustainable finance implementation initiative is explicitly stating at the Company RAKB in the section of environment program, namely conducting social and environmental risk assessment as an initial stage of Sustainability Risk Policy implementation, which includes:• Requirements for AMDAL, Peel Flooding, and

Licensing.• Conduct a site visit or field observation directly

investigating the land status of is not a green land, on disputed and so on.

• Incorporate ecolabelling regulations or the use of environmentally friendly materials that have been certified by the Indonesian Ecolabel Institute (LEI) in the middle-class construction financing.

• Ensure that the housing and or building construction has been certified Greenship category by Green Building Council of Indonesia.

• Make requirements for developers to plant trees in each housing project and or provide a large portion of social and environmental related facilities and infrastructure.

• Create an Exclusion List that lists every activities and practices that the bank does not want to do, namely activities that have a negative impact on people and the planet.

HEAD OFFICE GREEN BUILDING Environmental management in banking operations is also one of the objectives of BTN RAKB, namely; “Development of sustainable banking operations through the application of green office concepts and sustainable procurement”. In this report, the scope of implementation of the green office is focused on the activities of the Company’s Head Office.

ENERGYEnergy management at the Company head office aims to optimize the usage of energy and prevent energy improvidence. The Company energy management programs is implement at the Company Head Office are includes:a. Operational electricity and utility system such lights

outages, elevators and chiller units use the BAS (Building Automation System), this arrangement aims to makes utility operation management to be more efficient.

Bank BTN has actively implemented the Financial Services Authority Regulation Number 51/POJK.03/ 2017 concerning the Implementation of Sustainable Finance by managing its banking operations based on environmental protection principle.


b. Lighting settings are divided by zone or division this arrangement aims to made it easier in turning the light out.

c. Energy savings Education and socialization by encouraging turning off unused electrical equipment (Turn off lights when not in use, removing unused electrical equipment, installing signage on toilets related to water saving, etc.)

d. Installing solar water heaters at the Board of Directors’ rest room.

e. Setting the chiller and elevator unit operation schedule according to operational requirements

f. Replacement of TL and essential types of lights into LED lights

g. Modernization of 10 elevator units with the latest system control and mechanical upgrades that are more efficient in electricity consumption and replacement of damaged AC units or the procurement of new AC units with inverter types.

h. Media Advertisements uses the Videotron LED system. [GRI 103-2]

Air-conditioning equipment in the form of chillers are significant energy users in the BTN Tower Building as well as elevators. To manage both, the Company has set operating hours based on daily load requirements.

Water is used for hygiene purposes for employees working in the BTN Tower, water management efforts are aimed at minimizing excessive use of water and to reduce consumption of clean water. This is carried out by:a. The use of water is maximized using the PDAM

as the main water source in accordance with the Regional Regulation related to the use of ground water.

b. Build 2 (two) infiltration wells with a capacity of 48 m³ each, so that the total absorption capacity of rainwater reaches 96 m³.

c. Setting water discharge for water consumption (toilets, ablution places, etc.).

d. Wastewater has been processed through STP (Sewage Treatment Plan) so that it is not harmful to the environment and has obtained a Waste Water Disposal Permit (IPAL) from the relevant Service.

e. The wastewater treatment plant (WWTP) of the BTN Tower building currently has a capacity of 260m³ per day. The current condition of output is

220 m3/day in accordance with the Waste Water Disposal Permit (IPAL) issued on July 19, 2018. [GRI 103-2]

By implementing good efficiency measures, throughout 2018 the Company has succeeded in reducing water use by 7,861 m3 or reduced by 7.90% compared to water use in 2017. [GRI 103-3]

PAPERPaper use is mainly carried out in banking operations and services for customers. By digitizing documents, reducing paper usage can be reduced by:a. No longer using faxes, correspondence is done

using e-mail.b. Paperless: Disposition and distribution of letters

using the Iflow system.c. Smart Branch: Do not use Deposit Slip and

maximize digitization.d. Use used paper for Internal Memos.e. Reducing the use of tissue by installing hand driers

in the rest room. [GRI 103-2]

OTHER WASTE AND EMISSION MANAGEMENTSome of the efforts that have been made throughout 2018 are:a. The company restoring and re-arranging the BTN

Tower Building park in order to improve air quality and improving the environment quality.

b. Providing temporary garbage disposal with a capacity of 5 m³ and temporary storage of B3 waste (Toxic Hazardous Materials) with a capacity of 104.5 Kg.

c. Prevent environmental pollution through continuous maintenance and repair activities.

d. Using Air Conditioning types R32, R134A and R410 which are more environmentally friendly.

e. Reducing the noise level by replacing the generator silencer.

f. Processing leaf waste to be used as compost.g. Avoid using disposable plastic utensils. [GRI 103-2]




The Company comprehensive waste management system made the Company reducing 9,600 kg non-B3 waste in 2018 or as much as 25% compared to 2017. While the number of B3 waste generation decreases from 160 kg in 2017 to 104.4 kg in 2018 or decreases by 34.75%. [GRI 103-3]

14.80% Electricity consumption saving on 2018

7.9% Water consumption saving on 2018

25% Waste reduction on 2018

Numbers of operating chillers

Number of operating lift

- 05.45 WIB Chiller on = 5 unit - 14.00 WIB Chiller off = 1 Unit- 16.00 WIB Chiller off = 1 Unit - 17.00 WIB Chiller off = 2 Unit- 19. 00 WIB Chiller off = 1 Unit

- 06.00 all lift unit operates - 18.00 WIB Lift Off = 2 Unit- 20.00 WIB Lift Off = 2 Unit - 22.00 WIB Lift Off = 2 Unit

With comprehensive energy management system at the BTN Tower, throughout 2018 the Company managed to save electricity consumption by 14.80% from a decrease in usage of 1,188.98 MWh and reduce the use of diesel fuel by 1,015 litters. [GRI 302-4, 103-3].

Total Energy Consumptions (MJoule) [GRI 302-1]Energy Source 2018 2017 2016

Electricity Consumptions 24,648,120 28,928,448 28,309,608

Solar 203,876.10 240,314.60 320,802.40

Total 24,854,014.10 29,170,779.60 28,632,426.40

Catatan:1 kWh = 3,6 MJouleNet Calorific Value solar (Diesel) = 35,90 MJoule/liter

Water Consumption Based on Source (M3) [GRI 303-1]Water Source 2018 2017 2016

PDAM Water Consumption 89,142 97,370 68,200

Deep Well 537 171 321

TOTAL 91,697 99,558 70,537


B3 Waste Management [GRI 306-2]No Waste Type Treatment 2018 2017 2016

1 Used Oil

Produced 20 kg 120 kg 50 kg

Saved in TPS 0 0 0

Submitted to Authorized Third Parties

Yes Yes Yes

2 Used Battery


Saved in TPS 0 0 0


Yes Yes Yes

3Lights and Electrical Waste(TL lamp, PLC, ballast, cable)

Produced 4.4 kg 10 kg 10 kg

Saved in TPS 0 0 0


Yes Yes Yes

4 Freon Tube Leftover


Saved in TPS 0 0 0


Yes Yes Yes

Environment Preservation And Management Costs Throughout 2018, the Company spent Rp150,3 million for environmental preservation and costs includes for the STP management (Sewage Treatment Plan) and for waste management cost

Biaya Pengelolaan Limbah Padat dan Cair Gedung Menara Perseroan Dengan Pihak Ketiga No. Description January February March April May June July August September October November December

1 Pengangkutan Sampah Basah dan Kering

4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000

2 Perawatan STP 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000

Total 12,400,000 12,400,000 12,400,000 12,400,000 12,400,000 12,400,000 12,650,000 12,650,000 12,650,000 12,650,000 12,650,000 12,650,000





HUMAN RESOURCE MANAGEMENT

Human Resource Development Strategy 110Human Capital Management 112Employee Rights Protection 114Occupational Health and Safety Management 117




Competent and motivated Human Capital has a central role in ensuring successful Company transformation and achieving the Company

vision.

Human Resources (HR) are one of the most important aspect of sustainability to achieve the Company vision “To be the leading and trusted bank in facilitating housing financing sector and family financial services” as a responsible employer the Bank implement corporate social responsibilities through providing competency development opportunities and employee protection. [GRI 103-1]


HUMAN RESOURCE DEVELOPMENT STRATEGY

As long-term human capital development strategy, BTN have developed a Human Resource (HR) Roadmap which inline with the Bank three-staged transformation agenda as follow:

The Bank initiates a comprehensive human capital development initiative beginning with organizational alignment, builds an agile and high capability operating system based on the Bank human capital transformation process in order to improve the Bank competitiveness through employee. [GRI 103-2]


Overview of Sustainability PerformanceThe Statement of the President Director About this ReportAbout the Company Sustainability GovernanceProviding the Economic Benefits for the NationThe Commitment to the Environmental ConservationHuman Resource Management Commitment to Provide Best ServicesInclusive Services and ProductContribution for the Improvement of Life Quality of the CommunitySupporting Information

Organizational Structure Transformation ImplementationThe organizational development plan is directed to support the implementation of the Company transformation to builds an agile and high capacity organizational structures in order to achieve the Bank’s business targets.

Digital Workforce PlanningIn order to support the Bank’s business targets and to increase its digitalization aspects, therefore, a workforce plan and strategy has been develop. The developed Digital Workforce Planning is in line with the Company three-staged transformation agenda.

Acceleration career path and succession planning to develop employee competencies consistent with industry 4.0 developmentThe Bank realizes the importance of human resource factors in the banking industry, especially in the 4.0 industrial era where the Bank is required to be able to produce successors with competencies in line with the required industrial era 4.0 needs.

Performance Management Development that encourages Talent Management System ImprovementImprovement of the Bank performance management system through the following stages: a. Improve performance management system policies

in line with the Bank organizational transformation in order to support the Bank’s targets achievement.

b. Implement a precise, measurable, and realistic performance management system in order

to encourage talent management systems improvement.

c. Optimizing coaching and counseling activities to increase the Bank performance.

Implement Best Practice Remuneration System Management Implementation of the Company remuneration system good governance is aim to increase employee engagement with the Bank. The Bank’s remuneration system is designed according to best practice and is maintained to remain competitive in the market and based on the principle of fairness.

Strengthening Corporate Culture Towards a Global Era of PlayershipIn accordance with the Company three-staged transformation, the Corporate Culture is directed at strengthening the internalization of culture to support digital transformation towards global playership stages.

Optimizing Employee Communication & Social Media Network to increase Bank EVPThe development of information technology opens up social media access as a tool to convey management messages as an effort to increase bank EVP.

Improvement of Human Capital Governance and Alignment Talent Mobility with Subsidiaries & Affiliated CompaniesThe governance of human capital policies is also directed at integrating talent mobility banks with subsidiaries and affiliated companies.

Human Resources (HR) are one of the most important aspect of sustainability to achieve the Company vision “To be the leading and trusted bank in facilitating housing financing sector and family financial services”


Integration of the Human Capital Information System to strengthen people analyticsHCIS (Human Capital Information System) is an integrated application to support the implementation of the Bank Human Capital system management alignment. With the development of global human capital and talent competition, HCIS is required to function as a people analytic or talent analytic that can help management make decisions about employees.

Learning & Development system which focuses on the Integrated Talent Management Development of SystemThe learning & development process is directed to focus on developing employee competencies that refer to the integrated talent management system.

HUMAN CAPITAL MANAGEMENT

Recruiting Best Talent During 2018, the Company recruited 1,400 new employees (fresh graduates & professional hire)s. BTN also ran a status transfer program where 324 front liners (CS tellers) and 168 TAD lines (initially outsourced) were permanently hired.

The Bank policies regarding recruitment process are regulated in a Director Circular Letter Number. 43/DIR/ CMO/ 2011. The Company implement two recruitment approaches as follow:1. Internal Recruitment, this recruitment approach

utilizes the Company existing employees to fill a vacant position in a particular unit, based on organizational needs and Workload Calculation Analysis. There are two stream of employee recruitment through this internal mechanism:• Promotion• Rotation

2. External Recruitment, this approach utilizes conventional and headhunt recruitment approach in order to recruit best candidates in the market to fill vacant position in certain units within the Bank. This recruitment mechanism is carried out by:2.1. Direct Hire mechanism, consisting of:

• Fresh Graduate recruitment • Experienced (Prohire) recruitment

2.2. Outsourcing

In order to meet the needs of employees, the Bank has develop its Man Power Plan document based on the Bank organizational needs. Implementation of this document is the Bank conduct recruitment through several event as follow: job fairs, campus hiring, seminars and public lectures to support recruitment employees at universities in Indonesia, including ITB, UI, UGM, UNDIP, UB, and UNAIR. This process is also supported by online/digital recruitment tools, namely the BTN Bank recruitment website. [GRI 103-2]

Throughout 2018, the Company has recruited 1,400 new employees (fresh graduate & professional hire). With recruitment rate reachs 12.85%. BTN also implemented 517 employee status transfer programs from frontliner lines (CS tellers) and 168 from TAD lines (outsourcing).

The Company gender equality principle implementation could be seen from the amount of the Company female employee which reaches up to 686 women (49%) and 714 men (51%).

The Company sets a minimum age requirement of 18 years for prospective employees recruitment. This commitment is also a prerequisite for establishing cooperation with universities. The Company provides equal opportunities to all people to obtain career opportunities regardless of differences in gender, ethnicity, race, religion or any form of discrimination.

This commitment is a form of the Company’s compliance to Law Number. 13 year 2003 regarding Manpower Article 68. Therefore, during 2018 there were no incident relating to violation of underage employees policy or cases related to discrimination that occurred within the Company and or suppliers of goods and services.

Employees’ Training and Competence Development Program In order to improve the employee competency and skills the Company provides periodical training program, both internally and externally. The Training and Education opportunities is provided to the employees based on individual development plans and according to the needs of the Company. The employees training and education management is




regulated in the Company Board of Directors’ Decree No.04/KD/SIPD/2017 dated May 29, 2017, on the amendment to the Board of Directors’ Decree No.3/KD/DIR/ SIPD/2017 on the Head Office Organizational Structure in Article 8 point 5h on the Organizational Structure of Learning. [GRI 103-2]

In 2018 based on number of training batches organized and number of number of participant target the Company Learning Center had achieved its 92% performance target. The Learning Center organized three specific training themes for employees, namely:1. School of Leadership. Providing leadership training that aimed to

shape and strengthen leadership soft skill at the Company’s Leader level. This program consists of ODP (Officer Development Program), MDP (Management Development Program), SDP (Supervisor Development Program), overseas and domestic graduate Scholarship Program, SESPIBANK (School of Staff and Bank Leaders) Board of Commissioners and Directors, EDP (Executive Development Program) overseas for Division Heads, and other leadership programs.

2. School of Operation Banking. Providing training that aims to provide expertise

or competency to the supporting aspect of the Company. This training consists of the Faculty of Audit, Faculty of Compliance, Faculty of Corporate Affairs, Faculty of Human Capital, Faculty of Information Technology, Faculty of Legal, Faculty of Management System, Faculty of Risk, Faculty of Risk, Finance & Accounting, Operational Banking, and Others.

3. School of Business Banking. Providing training that aims to provide expertise

or competency that focuses on business and management development consisting of the fields of Collection & Asset Management, Commercial Funding, Retail Funding & Service, Commercial Lending, Consumer Lending, Digital Banking, Sharia Financing, Service Quality, Sharia Funding, Sharia Others, Treasury, Wealth Management, and Others. [GRI 404-2]

Employee competency development is also implemented by facilitating employees to continue their education to a higher level. It aims to fulfil and improve employee competencies, developing skilled, resilient, and responsive workforce according to the needs and development of the Bank. Employee education is regulated in the Directors’ Circular Number: 43/DIR/CMO/2011 concerning Human Capital Development. During 2018, the Company has provided Scholarship Program facilities to 23 employees for domestic S2 education and 10 employees for overseas S2 education.

In 2018 the Company learning process was developed by applying virtual classroom and improvement of its Knowledge Management System (KMS) to encourage e-learning experienced opportunities. Both are important platforms to facilitate access to learning for all employees, especially those in remote areas. The company is also preparing a tool to develop BTN Corporate University in the future.

Corporate Culture DevelopmentBTN does not only develop employees banking skills and competencies but also strives to build a corporate culture in the context of implementing digital transformation. The implementation of cultural development in 2018 themed ‘Going Digital through People Empowerment to Win the Competition’ with the following activities:- Kick of Training and Socialization regarding cultural

programs in 2018 to CL and CA, namely SIIPS thank you card, SIIPS Idea, SIIPS Story, Follow-up session, and Risk Champion. For Change Leaders there are currently 140 employees and change agents totaling 1,228 employees.

- Making digital monitoring tools for corporate culture, namely DigiSIIPS.

- Implementation of the 2018 Innovation Award in order to foster an attitude of creation and innovation for all Bank BTN employees to perfect or improve a business process at BTN Bank.

- Implementation of the 2018 Culture Assessment Index in order to find out how far all Bitniz employees understand the implementation of the Corporate Culture Program.


Performance Assessment System and Employee’s Career Development We make the results of performance appraisals as an indicator to determine employee career development. In employee career development, the Company does not discriminate against gender, but rather distinguish its employees purely based on competence and potentials. The Company has specifically made policies for employee career planning and development as specified in the Board of Directors’ Circular No.26 /DIR/HCD/2014 concerning Career Planning for Employees of PT Bank Tabungan Negara (Persero) Tbk. Through SMK system analysis, the Company’s targets are equally distribute to all Working Units within the Company and subsequently handed down to each employee based on the potential and capability of employees as outlined in the Key Performance Indicator (KPI) as a basis for performance evaluation.

The performance appraisal results, become the core indicator for the Company to make decisions in employee career development. Related to its employee’s career development, the Company does not differentiate based on sex, but based on the competency and potency of the employees. In particular, the Company has policies related to employee career planning and development as contained in the Circular of Directors Number 29/DIR/ HCD/2014 concerning Career Planning for Employees of PT Bank Tabungan Negara (Persero) Tbk.

To create opportunities for growth and motivating its employee, the Company has established career paths based on position clusters and job families and individual career planning structures based on employee core competencies (core, leadership, and job family) and learning curriculum.

Throughout 2018, all of the Company’s employees (100%), both men and women at all organizational levels, received performance appraisals. Based on the evaluation results, it has been followed up with internal career planning through transfer and promotion of 2,520 employees. [GRI 404-3]

Leadership sustainability at BTN is managed through a Talent Management System, in 2018 1,779 employees have undergone the assessment process as a basis for mapping employee talent.

EMPLOYEE RIGHTS PROTECTION

Employee’s Diversity and Equal Opportunities The Company applies the principle of diversity and equality to all employees in accordance with the basic principles of employment contained in Law No.13 of 2003 on Employment. This implementation starts from the existence of Company’s regulations or policies on human rights contained in the Directors’ Regulation, Directors’ Circular Letter, and Collective Work Agreement. In the regulation, the Company implements equality principles for employee recruitment, training programs, employee competence development, employee career development, remuneration, and employees welfare, regardless of gender, religion, ethnicity, race and other diversity. [GRI 103-2]

Harmonious Industrial RelationsAs a Company’s compliance with Article 28E paragraph (3) of the 1945 Constitution of the Republic of Indonesia, which stipulates that “Every person shall have the right to the freedom to associate, to assemble and to express opinions”, Law No. 21 of 2000 on Trade Unions, and International Labour Organization Convention No. 87 of 1948 on Freedom of Association and Protection of the Right to Organize, the Company, on June 24, 1999 established a union called SP- BTN and obtained a record number at the Department of Manpower of DKI Jakarta No. Kep-2241/W.26/K.2/1000. The establishment of SP-BTN is an effective means of communication between the Company’s management and all employees.

The Company provides freedom of association to all Company’s employees, which includes: • To become a member of SP-BTN • Delivering aspirations through SP-BTN • To gather in SP-BTN activities

As a result of the Company’s commitment to providing the freedom to associate for employees, there were no violations or complaints related to the freedom to associate in the Company in 2018. [GRI 407-1]




Collective Labor Agreement since October 2 2012, the Company established and registered a Collective Labor Agreement (CLA) to the Ministry of Manpower and Transmigration of the Republic of Indonesia No. Kep.157/PHIJSK-PKKAD/ PKB/X/2012.The Company has a commitment to prevent forced labor incidents within its premises by having internal regulations as specified in details in its Board of Directors’ Circular No.11/DIR/HCD/2013 on Working Days and Hours in the Sub Human Capital Administration. CLA is updated periodically with the Workers’ Union to be registered with the Manpower Office. In 2018, all employees of the Company (100%) their rights have been protected by the PKB. [GRI 102-41, 103-2].

The Company fosters two-way communication with employees including to provide information regarding important changes within the Company such as changes in organizational structure and the addition of business units to employees and other matters related to staffing.

Notifications related to these changes, are informed through memos to all work units and can be accessed through AIMS (internal applications related to the Company’s provisions).

The Company is committed to preventing the occurrence of forced labor incidents in the Company with the existence of regulations related to employee work time which are regulated in the Directors’ Circular Number: 43/DIR/CMO/2011 concerning the Human Capital Administration. The regulation regulates the working days and hours of the bank so that employees can attend, work and rest according to a predetermined time. However, if in certain circumstances there is work that must be completed beyond working hours, the Company provides compensation in the form of overtime money to employees who work beyond working hours. This has been regulated in the Board of Directors Circular Number: 43/DIR/CMO/2011 concerning Human Capital Rewards. [GRI 103-2, GRI 409-1]

Remuneration System and Employees Welfare The Company’s employee remuneration and welfare system is specified in its Board of Directors’ Circular No.43/DIR/CMO/2011 on Human Capital Rewards. In

providing remuneration, the Company applies fair rewards and equal treatment without discrimination to all employees, regardless of gender, ethnicity, race, religion, skin colour, and other diversity. The remuneration shall be based on the performance’s achievement and responsibilities of the positions held. [GRI 103-2, GRI 405-2]

Based on the employment status, the Company provides leading remuneration component and facilities to permanent employees compared to the contract employees. However, the Company ensures that the rights of the Company’s contract employees have been in line with the standards prevailing rules. [GRI 401-2]

In 2018, the Company has made improvements relating to employee remuneration including; salary adjustments according to P75 percentile in order to made the Company remuneration system competitive, improvement in provisions related to benefits (facilities for moving employees, credit, health, overtime) and variable compensation systems for salespeople.

The Company applies salary adjustments due to rising inflation and adheres to the minimum wage provisions based on the Republic of Indonesia’s Minister of Manpower and Transmigration Regulation Number 7 of 2013 concerning Minimum Wages. The Company is committed to always providing employee salaries for entry level positions above the Minimum Wage standard applicable in the Company’s operational area. [GRI 103-2]

In 2018, the amount of employee costs reached Rp2,474 billion or up 29,75% compared to the HR investment that we planted in 2017 amounting to Rp1,906 billion.

The company provides maternity and miscarriage leave to permanent female employees for 1.5 (one and a half) months before and 1.5 (one and a half) months after delivery or three months of labor. Whereas a miscarriage leave is given for 45 days after the miscarriage occurs. In addition, the Company also gives five days permits for male employees whose wife gives birth (paternity leave). This facility has been regulated in the Board of Directors Circular Number 43/DIR/CMO/2011 concerning the Human Capital Administration. [GRI 103-2]


Throughout 2018, the number of female employees who used their maternity leave rights was 374 person, with retention of employees returning to work after the leave period ended at 100%. This shows that the availability of collateral works for employees to return to work after using maternity leave rights. [GRI 401-3]

In accordance with the Board of Directors’ Circular Letter No. 43/DIR/CMO/2011 on Human Capital Engagement, the Company provides several pension benefits to employees to finance their lives after the Company’s employment relationship ends. Employee who is entitled to a pension benefit is a permanent employee who has reached the normal retirement age of 56 years. Pension Benefits consist of: [GRI 103-2, GRI 201-3]1. Definite Benefit program, permanent employees

receive benefits according to the formula set by the Pension Fund.

2. The Defined Contribution Program, permanent employees receive pension from accumulated contributions i.e. 2.5% deducted from the employee’s salary, 7.5% from the Company, and the investment result.

Referring to the Board of Directors’ Decree that stipulates the PT Bank Tabungan Negara (Persero) Tbk Pension Fund Regulation (Dapen BTN), the amount of Pension Benefit is at most 80% of the Basic Pension Income.

Employee Complaint Management In order to encourage dynamic employee interaction, The Company utilize BTN Employee Service Intelligence staffing digital tool (iBES/HCIS) that makes it easy for employees to access the personnel management system. [GRI 103-2]

In order to manage employees complaints which related to violations of labor practices and human rights, the Company utilized the Whistleblowing System (WBS). This is regulated in the Circular of Directors Number: 21/DIR/IAD/2014 concerning Whistle Blowing System of PT Bank Tabungan Negara (Persero) Tbk. The regulation also regulates the mechanism for handling complaints of employees as follows:

a) The WBS process & mechanism is the responsibility of the Managing Director and WBS Manager, this entity consist of the WBS Committee and WBS Monitoring Committee.

b) The WBS Committee consists of several divisions and WBS management units, while the WBS Monitoring Committee consists of the President Commissioner and other board of commissioners at BTN.

c) except if the reported party is a member of the board of directors and someone who has a special relationship with the directors and or members of the WBS committee, then the report can be submitted to the WBS Monitoring Committee.

d) If the reported party is a member of the board of commissioners and someone who has a special relationship with the commissioner, then the report can be submitted to the President Director.

Employee Turnover RateThe Company manages employee work termination policy based on its Board of Directors’ Circular No.66/DIR/HCD/2014 - sub Human Capital Engagement – on work termination. In 2018, 267 employees left the Company, meaning that its employee turnover rate was 2.26%.[GRI 401-1, 103-3]

Employee Engagement SurveyOn 4-19 December 2018, the Company carried out an Employee Engagement Survey aimed at:• Provide an opportunity for employees to express

their personal opinions honestly through online surveys related to matters that have been going well and matters that can be improved in the Company.

• Analyze gap between the employees’ experience and Company’s objectives, and improve insight to enhance performance and productivity.

• Encourage improvement of the employees’ engagement level to the Company.

The survey method is the distribution of questionnaires for all the Company’s permanent employees. The questionnaire contains 63 standard questions, 10 specific questions, and 2 open questions. [GRI 103-3]




Comparison between New Recruits with Minimum Wage

Area of OperationsSalary of New

Recruits (Rp)

Minimum Wage (Rp)

Ratio of New Recruit to

Minimum Wage

Cluster 1 4,100,000 3,919,291 1.05

Cluster 2 3,200,000 3,091,346 1.04

Cluster 3 2,500,000 2,310,087 1.08

Cluster 4 3,700,000 3,583,313 1.03

Cluster 5 2,700,000 2,574,807 1.05

Cluster 6 2,700,000 2,127,157 1.27

Cluster 7 2,800,000 2,595,995 1.08

Cluster 8 3,200,000 2,755,443 1.16

Cluster 9 2,800,000 2,717,750 1.03

Cluster 10 2,500,000 2,046,900 1.22

Cluster 11 3,200,000 2,454,671 1.30

Cluster 12 3,200,000 2,543,331 1.26

Cluster 13 3,000,000 2,895,650 1.04

Average 1.12

Area of Operations Area of Operations

Cluster 1 Jakarta, Bekasi, Bogor, Tangerang, Cilegon, Depok, Karawang, Purwakarta, Cilegon

Cluster 2 Bandung, Cimahi, Cirebon, Tasikmalaya

Cluster 3 Madiun, Pekalongan, Purwokerto, Semarang, Solo, Yogyakarta, Tegal

Cluster 4 Gresik, Sidoarjo, Surabaya

Cluster 5 Jember, Kediri, Malang

Cluster 6 Bali, NTT, NTB

Cluster 7 Lampung, Bengkulu, Jambi, West Sumatera, South Sumatera, Riau

Cluster 8 Bangka Belitung, Kep. Riau

Cluster 9 Nanggroe Aceh Darussalam, North Sumatera

Cluster 10 West Kalimantan

Cluster 11 South Kalimantan, Central Kalimantan

Cluster 12 East Kalimantan

Cluster 13 Maluku, North Maluku, Gorontalo, Papua, Sulawesi

OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT

Referring to Law No. 13 of 2003, Article 86 paragraph 2, which stipulates that “In order to protect the safety of workers/ labor for realizing optimal productivity, occupational safety and health efforts shall be done”, the Company has a policy related to Occupational Safety and Health Management System (SMK3), which is stated in:

• Directors’ Regulation No. 5/PD/PGSD/2017 dated October 31, 2017, on the Occupational Health and Safety Management System Policy.

• Directors’ Circular Letter No. 60/DIR/PGSD/2017 dated October 31, 2017, on the Standard Operating Procedure of Occupational Health and Safety Management System. [GRI 103-2]

With comprehensive OSH management, in 2018 there were no reported work accident incidents in the Company. [GRI 403-2, 103-3]


Employee Safety Program• All operational offices are equipped with safety

equipment such as PPE (Personal Protective Equipment), Smoke Detector, Diesel Pump, and Emergency Ladder, which is in accordance with the standard of fire safety equipment under the Minister of Public Works Regulation on Technical Requirements of Fire Protection System in Building and Environment.

• Regular safety work checks to determine the feasibility level.

• Has a certificate issued by the Office of Manpower and Transmigration of DKI Jakarta Province for operators of safety equipment, such as lifting and hauling aircraft.

• Has fire evacuation/situation plan, fire safety operational procedures are placed in every employee’s room and every floor in the building, thus all employees are adequately educated.

• Involves the employees in the certification of “Training and Certification of Occupational Health and Safety (AK3U) Specialist” held by BPJS Health.

Employees Health Program• Provides medical facilities in the form of regular

Medical Check Up and medical treatment facilities, such as reimbursement of inpatient hospital treatment, outpatient care after discharge from the hospital, maternity costs, cost of dental treatment, replacement of glasses, hearing aids, laboratory tests, and other medical treatment recommended by doctor after hospitalization.

• Provides clinic facilities and doctors to provide medical services to employees and their families.

• Provides the employees and their families with health insurance organized by BPJS Health.

9,873 peoplePermanent employee includes

44.3% female employee

58% Millennials employee aged

less then 30 years

297 peopleFemale employee in the position of manager, GM

and VP

2.53% rerata turnoverThe lowest in the last three

years


Remuneration and Facility Component Permanent Staff Contract Staff

Basic Salary √ √

Holiday Allowance √ √

Paid Leave √

Basic Needs Fund √ √

Allowance (functional position, housing, vehicle, competency, Gasoline, Location and Tax)

√

Performance Bonus √ √

Housing loan √

Pension √

BPJS √ √

Periodically Health Care Facilities √ √

Medical Assistance √ √

Relief Fund √ √

Standard Operational Procedure (SOP) of Safety and Healthy Management (SMK3)• Identification of Legislation and other OHS requirements and Compliance Evaluation • Formulation and Establishment of OHS Management Goals, Targets, and Programs • Improvement and Development of Competence, Training, and Awareness • Communication Optimization, Participation, and Consultation • Documents Control • Records Control • Establishment of Emergency Relief Team (TKPD) • Personal Protective Equipment Management • Management of OHS Infrastructure and Emergency Relief Access • Monitoring and Assessment of OHS Performance • Incident Reporting and Investigations



• Identification of Non-Conformity, Corrective Action, and Precautions • SMK3 Internal Audit Implementation • Management Review • Change Management The Company’s Occupational Safety and health Management System (OhS) Special policy 1. Prohibition of Narcotics Abuse, Psychotropic and Addictive Substance (NAPZA) 2. Prevention of Infectious Diseases Spreading 3. Management of Partner/Third Party Related to OHS

Human Resources Data

Age Group2018 2017 2016

Male Female Male Female Male Female

< 30 years 673 748 838 790 419 295

30 – 50 years 75 20 38 19 46 33

> 50 years - 1 3 1 - 1

Total 748 769 879 810 465 329

Total 1,517 1,689 794

% Recruitment 12.85% 15.80% 8.46%

Turnover [GRI 401-1]

Age Group2018 2017 2016


< 30 years 85 114 91 149 57 145

30 – 50 years 39 39 20 20 19 26

> 50 years 1 - 3 - 2 -

Total 114 153 114 169 78 171

% Turnover 2.1% 3.1% 1.9% 3.5% 1.5% 4.1%

Total 267 283 249

% Turnover 2.26% 2.65% 2.65%

Employee Demographic [GRI 102-8, 405-1]

Description2018 2017 2016


BASED ON AGE

< 30 years 3,522 3,252 3,250 2,957 2,742 2,631

30 – 50 years 2,500 1,863 2,134 1,538 1,925 1,271

> 50 years 443 230 536 275 561 250

Total 6,465 5,345 5,920 4,770 5,228 4,152

TOTAL 11,810 10,690 9,380


Based on Office Rank



EMPLOYMENT, total employees based on office rank

Directors 9 0 7 - 7 1

VP level 210 43 198 42 169 38

GM Level 160 36 171 34 182 35

Manajer Level 572 218 469 182 430 165

Supervisor Level 1,561 792 1,613 751 1,274 586

Staff 3,962 4,256 3,469 3,761 3,173 3,328

Overall

TOTAL 6,474 5,345 5,927 4,770 5,235 4,153

Based on Educational Background



EMPLOYMENT, total employees based on educational background

Undergraduate 5,154 3,642 4,605 3,166 3,818 2,545

Diploma 952 1,150 934 1,017 1,033 1,001

Equivalent to high school 359 553 381 587 377 606

Equivalent to Junior high school 0 0 0 0 0 0

TOTAL 6,465 5,345 5,920 4,770 5,228 4,152

Based on Employment Status


Male Perempuan Male Perempuan Male Perempuan

EMPLOYMENT, total employees based on employment status

Permanent 5,660 4,532 4,921 3,859 4,748 3,813

Non permanent 805 813 999 911 480 339

Outsourced 0 0 0 0 0 0

TOTAL 6,465 5,345 5,920 4,770 5,228 4,152

Based on Years of Service

Description2018 2017 2016


EMPLOYMENT, total employees based on years of services

< 3 years 2,124 1,930 1,832 1,429 1,664 922

3-5 years 1,119 537 1,272 697 954 942

5-10 years 1,596 1,968 1,181 1,763 955 1,416

10-15 years 239 377 132 303 27 259

> 15 years 1,387 533 1,503 578 1,628 613

TOTAL 6,465 5,345 5,920 4,770 5,228 4,152





COMMITMENT TO PROVIDE BEST SERVICES

Transformation plan and implementation of BTN iGRC 125Customer Education 127Digital Application 128Appreciation 128




Indonesian Family Friends is the Company’s tagline to serve millions of families in Indonesia. As an Agent of Trust, the Company has established a

policy to prioritize customer satisfaction and trust.

Therefore, the Bank offers the following:(1) Products and services that meets sets of quality

standards.(2) Better service to customer and fair, non-

discriminatory handling of customer complaints.(3) Continuously healthy, fair, honest, not misleading

and acceptable promotions


b. Employees must support the Bank in an effort to achieve customer satisfaction and trust.

In addition, BTN is aware of the importance of the role of employees (People) in achieving the vision. With the theme of Digital Banking, BTN also emphasizes Technology aspect. BTN continues to ensure that IT systems are well planned and adaptable to the needs and direction of business development (IT as a Business Enabler). BTN also understands the importance of Risk Management, the implementation of effective Compliance Functions, and the implementation of Internal Control.



TRANSFORMATION PLAN AND IMPLEMENTATION OF BTN IGRCBTN has established several strategic pillars in this transformation process, namely: focused and specific business segments, agile organizations, human capital and work culture, sales channel optimization, and IT infrastructure.

To carry out this strategic pillar, BTN has launched a transformation of the main functions of the head office, regional offices and branch offices. Then, this transformation plan is also supported by the development of a new operating model that includes: (1) Business Process Improvement, (2) Network & Distribution Design, and (3) improving organizational design such as increasing the role of risk management and increasing human capital capacity.

The role of iGRC is very important to be able to ensure that the head office, region, and branches can carry out their functions properly and in integrated way. iGRC is also very important to ensure that business processes and risk management run properly and are supported by human capital with adequate competence.

Plan for transformation and implementation of BTN iGRC (continued)The iGRC Framework includes the following aspects:1. Business Strategy: This aspect is very important for

the head office in determining the overall strategy and direction of the bank’s risk strategy.

2. Business Management: This aspect is urgently needed for the head office to determine policies, monitoring tools and risk analysis.

3. Business Platform: This aspect includes necessary things to implement a new operating model, namely GRC as it related to business processes, human capital, and data and IT infrastructure.

Digital

Disrupsi ekonomi tidak dapat dihindari, selain mengoptimalkan perputaran dana dari para unicorn di ekosistem digital, perbankan pun harus fleksible membuka peluang kerjasama dengan startup dan fintech untuk meningkatkan service excellence layanan perbankan, yang berdampak pada peningkatan customer trust dan peningkatan fee based income

With the theme of Digital Banking, BTN also emphasizes Technology aspect. BTN continues to ensure that IT systems are well planned and adaptable to the needs and direction of business development (IT as a Business Enabler).


This year, Bank BTN will focus on the stages of digital banking transformation that will enter the second stage of the transformation that is being carried out. Maryono said, in 2018 all supporting infrastructure for digital banking transformation are expected to be implemented to serve the public in easier and faster way.

The company has prepared supporting infrastructure by creating a new platform, which will later support the needs of BTN in publishing new products such as e-money cards, credit cards and QR Payment. “At present we are preparing to submit a license for issuing e-money cards, credit cards and QR payments to Bank Indonesia. It is expected that this year these three new products can be launched, so that later Bank BTN will be able to issue the cards themselves,” said Adi.

In the future, he said, e-commerce is predicted to continue to dominate the development of start-up in Indonesia along with financial technology. Maryono also saw the need for funds and credit will continue to increase. “Therefore the Bank must quickly adapt


to the development of digital technology which also competes with the growing of fintech enthusiasts. BTN plans to make mobile applications or mobile apps for branchless banking and on-board digital agents for credit applications and account opening.

BTN makes use of the development of digital ecosystems in Indonesia. The first strategy, he said, was to partner with Plug n Play Indonesia to look for start-up companies that would become strategic partners to answer Bank BTN’s needs for digital transformation.

The second strategy is to strengthen e-channels. Maryono said that BTN focused on increasing collaboration with e-commerce and fintech. One of them is by becoming an e-commerce acquirer considering that e-commerce transactions in Indonesia are growing very rapidly.

STRATEGIC COOPERATION WITH THE COMPANY

Such collaboration delivers service that help customers in gaining convenient access to financial services through cellphones. As starter, Malang became the first city that develops strategic partnership between T-Cash and BTN Cermat. This T-Cash - BTN financial service will be used for non-office financial services within the framework of inclusive finance.

This service will facilitate customers in conducting transactions via T-Cash electronic money and BTN-Cermat savings accounts.

The objective of this service is to include more customers from the micro segment into the financial services and support financial inclusion. The service is a solution for customers

of this segment in remote parts of Indonesia, by utilizing T-Cash’s extensive network and Laku Pandai services of BTN Cermat, to be able to enjoy financial services in a more practical and safe manner.

The connection account presented by T-Cash and the Company is the right solution to expand and facilitate access for micro communities in obtaining a variety of financial services.

Meanwhile, the President Director of the Company, Mr. Maryono, added that during the initial stage, he was aiming for 10 thousand Laku Pandai agents with 200 thousand savings accounts through this partnership.

Going forward, the Company and Tcash will also provide Micro Mortgages and People’s Business Credit (KUR) services in hand for its customers.



Among other things, the company strengthens marketing efforts through exhibitions and partnerships, enhances digital line to facilitate credit submission through www.btnproperti.co.id portal, and makes the www.rumahmurahbtn.co.id portal accessible to people who join auction in order to own houses with cheaper prices.

Meanwhile on BTN anniversary celebration, more than 6,800 BTN staffs and their families throughout Indonesia participated in the funwalk held by BTN. The Funwalk took a 6.8 km route. In addition, BTN also revitalized the BTN Bank Museum.

On the same occasion BTN launched a new portal, ttps://rumahmurahbtn.com to sell property assets to the public, including auctioned houses, second-hand homes, apartments, and so on.

The property assets sold are collateral from consumer credit and commercial credit debtors. The site https://rumahmurahbtn.com and BTN low-cost house applications will make it easier for consumers to find assets that match their abilities and needs. With this, the company’s efforts to improve the ratio of non-performing loans will go hand-in-hand with boosting its profits.

Recovery assets sale was quite successful. In 2017, sales reached nearly 18,000 units with a value of approximately Rp1.7 trillion. “So this portal complements our previous portal, namely www.btnproperti.co.id which is increasingly trusted by consumers to process mortgages. Hopefully this new portal can be as successful as our previous portal, “explained Maryono.

CUSTOMER EDUCATION

BTN ZoneThe Company provides BTN Zone facilities on several college campuses. The facility is a system and service infrastructure with a digital solution concept from BTN aiming at increasing convenience and facilitating transactional services and smartcard/digital based access.

BTN Zone provides access to students to connect to the internet, learn about the Company’s banking products, and experience the ease of transactions with digital solutions that can drive a cashless society.

BTN Zone has been present at Diponegoro University, Syiah Kuala University, Jenderal Sudirman University, Yogya State University, and Bandung Institute of Technology.



DIGITAL APPLICATION Customer education program is also done through a banking application for smart phones, in addition to internet banking. Smart phones application can be downloaded via the playstore/appstore. This application makes it easy for customers to pay credit cards/insurance bills, transfer and pay for e-commerce purchases as well as to top up digital money such as gopay, grabpay, and so on.

CUSTOMER DATA PRIVACY AND SECURITY [GRI 418-1]Prioritizing privacy and customer data security has become the top priority at Bank BTN. We always comply with relevant laws and regulations. In this context, the Bank refers to Law Number 7 of 1992 on Banking, Law Number 10 of 1998 on changes to Law Number 7 of 1992, and Bank Indonesia Regulation Number 2/19/PBI/2000 on Requirements and Procedures for Giving Orders or Bank Secret Written Licenses related to customer confidentiality.

We always maintain the privacy and security of customer data in every banking transaction. [GRI 103-1, GRI 103-2].

To realize this commitment and to increase information security that is able to ensure smooth business and create better, safer, smoother and uneditable operational activities, and maintain BTN’s image as a trusted bank, the Bank has a special policy, namely Circular of Directors Number 40/DIR/ICTD/2016 on Information Security Guidelines of PT Bank Tabungan Negara (Persero) Tbk. Requirements on this policy has been set to ensure that all confidential and sensitive information is protected from computer viruses so as to minimize the infiltration of the virus.

Various efforts made by the Company to safeguard customer data include installing all software that has been authorized (approved) and updated it regularly, providing information technology (IT) training to users who use IT resources, implementing management or standardizing passwords to ensure security access to protected information.

Periodically, the Company has thoroughly evaluated the data security system. Until now, in general, the data security system that we have is still very adequate and effective to provide security protection for customer data. [GRI 103-3].



The implementation of the above policies has brought good and effective results. Throughout 2018 there were no disobedience incident related to privacy and loss of customer data.

APPRECIATIONBanking Service Excellence Awards 2018 as banks that have succeeded in increasing the role of technology in supporting harmony between the front and back offices so as to make bank services easier, faster. and more effective

To understand level of services provided by national banks to their customers in Indonesia, MRI’s Bank Service Excellence Monitor (BSEM) Survey has been conducted with respondents of 39 banks which consists of 23 public banks and 16 Islamic banks. The method used in the survey is the mystery shopping method.

The 2018 BSEM survey is the 22nd annual survey conducted by MRI since the first time it was conducted in 1996. At BSEM this year, there are two points of banking service being evaluated. First, on process observations or operational of each transaction on all touch points for each service channel.Second. on the transformation of bank services that have consequences for the changing role of the in-channel, e-channel and the emergence of a variety of digital service channels.

“Evaluation of digital branch services is focused on reviewing the extent to which these channels can replace the role of conventional branches to serve various customer needs


INCLUSIVE SERVICES AND PRODUCT

Providing Sustainable and Inclusive Products 133Digital Financial Services 136Inclusive KPR 138BTN Micro KPR 138KPR BTN BP2T 139Innovation to Open Access for the Society to Have the House 141Financial Literacy Program 152




The core business of BTN is housing finance and related-industries. Having been carrying out the trust from the government as a bank that

channels the housing loan (KPR), the Company never ceased to strive for innovation in developing KPR’s product in accordance with the needs of Indonesian society.

From 1976 to 2018, or about 42 years, the Company has realised more than 4.37 million of house units for Indonesian families, both in the form of subsidized KPR loan and non-subsidized loan. The realised KPR value reached more than Rp273.32 trillion for more than 4 million families, ranging from low-income, middle-income, to upper-income society.


Low-income communities (MBR) is a group that has lower purchasing power which thus requires government’s support to obtain or build a house.

In 2018, the Company has channeled construction credit and the KPR for 757,159 thousand house units in order to support the Million House Program, comprising 583.700 units for the Subsidized KPR and 173.459 unit for the non-subsidized house construction, as well as non-subsidized KPR. The Company has realised KPR for 757.159 thousand house units, among others, 583.700 thousand unit for the Subsidized KPR.



PROVIDING SUSTAINABLE AND INCLUSIVE PRODUCTS Inclusive and sustainable products are created primarily to provide easy access to banking services and improve the financial services to reach various layers of society in an inclusive manner. The Company has provided various products that can provide social benefits for low-income communities (MBR).

In addition, there are also products that are developed in order to educate the public to use banking services, such as SimPel (Student Savings), that can encourage the saving culture from an early age.

Inclusive and Sustainable Products [FS7]

Product Description Target

Portfolio (Rp Million)

2018 2017

Consumer Banking

BTN Subsidized KPR

Home Ownership program of the Ministry of Public Works and People’s Housing of the Republic of Indonesia with low-interest rates and affordable installments for the purchase of Rumah Sejahtera Tapak (Landed Homes) and Rumah Sejahtera Susun (Modest Apartment)

Low Income Communities (MBR) 24.657.784 20.504.547

BTN Micro KPR Banking product for the ease of purchasing land or house, or gradual house renovation.

Customer workings in the informal sector

2.406 -

BTN Junior Saving

A saving product to educate children on saving. children up to 12 years old. 828.713 769.632

BTN Juara Saving

Saving for education financing and transaction in line with the needs of the young generation.

Youth between 12-23 years old 573.165. 591.116

MySaving Individual savings with easy requirements to promote the saving culture and improve public welfare.

General public 766.031 720.546

Student Saving (SimPel)

Saving for students with easy and simple requirements as well as interesting features, in order to educate and include finance to promote the saving culture since early age.

Student 63.134 59.343

BNT e-BATARAPOS Saving

Easy and comfortable savings for the public because the transaction can be done online in all Post Office throughout Indonesia.

General Public 2.488.754 2.880.196

From 1976 to 2018, or about 42 years, the Company has realised more than 4.37 million of house units for Indonesian families, both in the form of subsidized KPR loan and non-subsidized loan.


Product Description Target

Portfolio (Rp Million)

2018 2017

BTN Cermat Saving

Saving program that give access and easiness of banking transcation through EDC and phone account throughout the country needless to go to the Bank. This saving program is part of the Laku Pandai Program.

Society throughout the country 80.725 28.366

Commercial Banking

BTN Small and Micro Enterprises Credit (KUMK)

Loan for customer who has productive business in line with the requirement of MSME. The loan may be utilised to fund the capital and/or investment with a maximum loan up to Rp 5 billion.

Micro and Small Business Actors 1.565.332 1.530.665

Partnership Program

Program to increase the competence of small business in order to grow stronger and independent.

Small business actors 37.274 6.201

Community Business Credit (KUR)

Capital loan and/or investment granted to debtor in MSMEs status, in a productive and viable business field but do not have additional collateral or insufficient additional collateral.

Micro, Small, and Medium Enterprises (MSMEs)

111.192 9.775

BTN Linkage Credit

Loan to facilitate legal entities i.e. Rural Banks (BPR) and Cooperatives, to be disbursed to Mirco, Small, and Medium Enterprises (MSMEs) sector.

Rural Banks and Cooperatives 153.605 48.076

Sharia Business Unit

KPR BTN Prosperous iB

BTN Prosperous IB Housing Loan is a BTN Sharia financing product that enable Low-Income Communities to purchase a house with low margin, low and fixed installments throughout the loan term, with a “Murabahah” (deed of sale) in order to own a House, Flat, or apartment as part of government program

Low Income Communities (MBR) 10247122 993.277

MySaving iB Saving product with Wadi’ah (Entrusted) principle which has attractive bonus. Issued simultaneously by banks in Indonesia in order to foster the culture of saving and to improve the public welfare.

General Public 3805 3.323

BTN Simpel iB Saving

Saving product special for Students up to 17 years old who do not have Identity Card yet. The initial deposit is very small and it still gives lucrative bonus.

Student under 17 years old. 2141 1.733




In 2015, the Financial Service Authority (OJK) launched Branchless Financial Services for financial inclusion (Laku Pandai), that is a financial inclusion program that enable communities to open saving accounts, save, and withdraw money through bank agents intermediaries.

Laku Pandai is designed for the unbanked society to know more about banking and its products in accordance with the objectives of the Indonesian government stipulated in the National Strategy of Financial Inclusion (SNKI) in June 2012. With the access for formal financial services, the society can be protected from the burdening loan practices.

The Company takes role in the Laku Pandai with “Griya BTN” brand by maximizing agents with the information technology support that equipped with payment applications for PLN, PDAM, Telkom, BPJS, KPR BTN, and the like. Beside of the payment, Griya

BTN also provides saving and withdrawal facilities by utilizing BTN Cermat Saving Product.

The BTN Cermat Saving is a saving program based on Card without a passbook and the registration can be done through the Electronic Data Capture (EDC) machine owned by the Agent. The BTN Cermat Saving in the BTN Griya enables customers to withdraw and deposit money with the minimum limit of Rp2,000 and the withdrawal of existing saving accounts of at least Rp5,000.

BTN Cermat LAKU PANDAI Saving Products is based on cell-phone by using USSD (Unstructured Supplementary Service Data) system so that it can be done via a regular cellular phone or feature phone. In addition, the Company also collaborates with PT Pos Indonesia (Persero) as an agent. Therefore, the customer can simply come to the nearest Post Office and make direct transaction.


In 2018, the Company collaborates with PT Telekomunisasi Selular or known as Telkomsel to create synergy in improving the penetration of financial inclusion services through Tcash. This product will ease the Griya BTN agents in providing financial services for the unbankable society.

BANKING PRODUCTS AND SERVICES INNOVATION BTN is not the only provider for the financing product of House Ownership Loan in Indonesia. With the experience spanning for more than 69 years, the Company never ceased for carrying out the financial service and product innovation so that the Company has various innovative KPR products based on targeted cosumer and accompanied by the supplementary

products, such as planning saving products, namely SIAP saving, and the latest one Simuda saving.

In addition, the Company has also been proactively engaging the private sector to enable the lower-income community to get access for the Subsidized KPR, among others with the online ojek and taxi company. Meanwhile, for the higher segmentation, the Company has also been responsive towards the need and capability of lower-income communities that are mostly comprising millenials generation, including the latest product, KPR Gaeesss! that is designed in line with their desire and lifestyle in order to enable them get access for the housing loan.


DIGITAL FINANCIAL SERVICES

The Company developed digital services particularly for supporting the business, among others improve the customer service quality, one of strategy carried out is by collaborating with the startup in line with the business development needs.

In 2018, the Company cooperated with four startup companies, namely KYCKI, Manpro, Gradana, and Buildeco. These four startup companies were chosen based on the recommendation of collaborative partners Plug’n Play Indonesia that identifies startup companies who are considered eligible for becoming the strategic partner to meet the needs of Company in transforming digital. Aside from actively collaborating with the digital startup, the Company also strengthened the e-channel by adding features required by the society.

Start-up Company Collaboration

KYKC! Ease BTN consumer to fill the data for opening a saving account by applying the technology of optical character recognition (OCR) whereby the opening of saving account only requires the ID card photo.

ManPro The use of monitoring application for the housing project development in order to meet the budget plan and its collateral sale.



Start-up Company Collaboration

Gradana Autoapproval KPR for the property market either the primary or secondary market. Gradana also provides credit analysis and help debtor in the KPR deposit installment.

Buildeco

Collaboration in the electronic commerce portal for purchasing the construction materials for Company’s business partner in order to support the Million House Program, construction program, and other infrastructure programs.

In addition, the Company never cease to develop the digital products and features, both of existing products and new product. What have been developed in 2018 are as follows:

Platform Feature development

BTN Mobile Banking • The acceptance of SPP payment in the university, such as: Jember University, Pamulang University, Jenderal Soedirman-Purwokerto University, Halu Oleo-Kendari University, Sam Ratulangi-Manado University, Bandung Technology Institute, and Lhokseumawe Polytechnic.

• Quick Respond Pay (QR Pay) Feature that can be used by the BTN consumer in making payment to merchants that have been joining the BTN QR Merchant via QR code and BTN Mobile Banking.

BTN Internet Banking • Purchasing State Obligations (SBR) online retail through BTN Cash Management System. • Vehicle tax payment (Samsat Online)

Agents ApplicationBTN Griya Payment

Cooperate with Telkomsel in order to widen the BTN Griya Payment’s agent networks by using the Reseller T-Cash.

E-Retribution BTN Market Application

Widen the cooperation with the traditional market seller and the Local Government, including markets in Jember City, Semarang, and Yogyakarta. In addition, Bank also cooperates with the Indonesian Market Manager Association (ASPARINDO) in utilizing the product and banking services for the traditional markets throughout Indonesia.

BTN Open Account Application The use of Optical Recognition Character (OCR) technology in opening the online account through the BTN Open Account application, so that the prospective customer can just simply take the ID card photo to input ID card’s data into the BTN Open Account Application.

BTN Property Portal Portal development is equipped with the comprehensive feature, comprising housing down payment and etc.

Electronic Money The Product and New Activity (PAB) development process that has been finished, comprising EDO Acquiring (Visa and Master Card), Prepaid Server Based, and E-Wallet whose license requests have been submitted to the Regulator (OJK and Bank Indonesia).

As the service is becoming more comprehensive and the lifestyle change has also influenced the customer’s habit, e-channel transaction has been always higher than conventional transaction in the branch office since 2012. In 2018, 92% of customer’s transaction has used the Company’s e-channel.

2%

16,000,000

14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

Jan-

10M

ar-1

0M

ay-1

0Ju

l-10

Sep

-10

Nov

-10

Jan-

11M

ar-1

1M

ay-1

1Ju

l-11

Sep

-11

Nov

-11

Jan-

12M

ar-1

2M

ay-1

2Ju

l-12

Sep

-12

Nov

-12

Jan-

13M

ar-1

3M

ay-1

3Ju

l-13

Sep

-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep

-14

Nov

-14

Jan-

15M

ar-1

5M

ay-1

5Ju

l-15

Sep

-15

Nov

-15

Jan-

16M

ar-1

6M

ay-1

6Ju

l-16

Sep

-16

Nov

-16

Jan-

17M

ar-1

7M

ay-1

7Ju

l-17

Sep

-17

Nov

-17

Jan-

18M

ar-1

8M

ay-1

8Ju

l-18

Sep

-18

Nov

-180

92%

14,436,252

1,222,057

Transaksi E-Channel Transaksi Loket Teller

Perbandingan Transaksi E-Channel VS Loket Teller Periode 2010-2018


INCLUSIVE KPR

BTN Subsidized KPR for Indonesian Families The Company offers subsidized KPR product in the scheme of Housing Financing Liquidity Facility (FLPP) in which the government covers 90 percent of the cost and the bank covers the remaining 10 percent; Interest Subsidy (SSB) where the Government only pays for the interests ; and the Advance Payment Subsidy (SBUM). These three programs are launched by the Government in aims to realise the One Million Housing Program.

Majority of the subsidized KPR emanates from the civil servants and informal workers. The KPR interest for the subsidized housing is set at 5% and the easy installement for the landed home and modest apartment.

In 2018, the Company has disbursed the subsidized housing for XX unit or amount to RpXX trillion. Meanwhile, in 2015, the Company overall has channeled the housing payment for XX unit or amount to RpXX trillion.

Realisation of the BTN KPR 1976-2018 - 69 Years for the Country

• Subsidized KPR: 3,320,112 unit units amounted to Rp141.94 trillion

• Non-subsidized KPR: 1,054,593 unit units amounted to Rp131.38 trillion

• Total BTN KPR: 4,374,705 unit units amounted to Rp273.32 trillion

24%Non-subsidized KPR

76%Subsidized KPR

BTN MICRO KPR Micro KPR is a financing scheme with the credit ceiling of Rp75 million for housing payment, renovation, and construction for the informal workers that have unstable income. This product combines saving, loans, insurance/guarantee in a micro scale.

Micro KPR program is the Company’s pure initiative for the lower-income communities, ranging from Rp1.8 million to Rp2.8 million per month, who are not in the category of subsidized KPR recipients. Lower loan interests, namely 6-7% per year or about Rp900-956 thousand per month. Should the debtor feel burdened, they can adjust the celing taken from the installment payment, which can be done monthly, daily, or even weekly based on their capacity.

Micro KPR deposits is very low to only 1% for the first-home purchase or 10% for the renovation. This Micro KPR program can also be used to build house on their own land. This scheme will help the community that already owned the land but constrained by the custom land where the Company offers help in the land certification process prior to the land development by the debtor.




Statistic Data Resources • With assumption that not have home yet using the Gini Ratio uses the Indonesian Statistic Central Board (BPS) Data per September 2016 of 10.7%. • Fisherman and Micro Seller data per 2016 • Cattleman and Farmer Data per 2013.

The BTN Micro KPR Market Potential

Fisherman Micro Seller Cattleman Farmer

Total population 2.80 million Not have home yet 300 thousand

Total population 22 million Not have home yet 2.3 million

Total population 12.9 million Not have home yet 1.3 million

Total population 26.1 million Not have home yet 2.7 million

Conditions of Micro KPR Prospective Debtor

Open the Smart Saving and active at least for 3 months with the account nominal average at least enough to cover the monthly installment projection. The opening of Smart Account just requires the first deposit of Rp10,000 and without administration fee.

Have been running business minimal 1 year. Such standard is required to assess whether their business can run well or not.

Join the community, paguyuban, or cooperatives member that can give recommendation that its members have been given trust through the BTN Micro KPR.

Certification must be carried out by the BTN as each prospective Micro KPR debtor provides guarantee in the form of house or land being financed that are bound by the SHT and SKMHT.

As the early stage, the Company has facilitated informal workers that joined the Association of Noodle and Bakso Seller (Apmiso), Garut Barber Solidarity, Blue Bird Driver, and Ojek-application based driver (Go-Jek and Grab). In the future, workers from other informal sectors like fisherman, vegetable seller, or artisans will be given an equal opportunities in order for them to have their own houses.

Through the BTN Micro KPR program, the informal workers are indirectly being forced to save some parts of their income, particularly for buying important assets in the future such as houses and other property. Most importantly, they now can dream having a house and then accomplish it.

KPR BTN BP2TSaving-based House Financing KPR (BR2BT) is a subsidized home ownership loan that is a part of collaborative program between the BTN Bank and the PUPR Ministry which is disbursed along with the deposit subsidy for communities who have savings for the landed-home purchase and house construction, as well as benefits of BPJS Employment additional services.

Home ownership financing through this scheme emanates from the Company KPR, propsective debtor’s savings, and BP2BT Funding from the Ministry of PUPR. The targeted group is family or individuals having aggregate income of Rp2-5 million per month to build landed-home or modest apartment as well as self-help houses. Through this scheme, the debtor can enjoy the subsidized depost from the BP2PT and maximum installment for 20 years with particular conditions.


Financing Scheme of KPR PB2BT

KPR50-80%

Saving5%

BP2BT Fund6.4% - 38.8%

PURRProspective Creditor Bank

KPR with this scheme was just introduced in 2018 where the Company together with the Government set the target of house provision of 105,500 units in 2018-2020. BTN BP2BT KPR is a collaborative program among the Company, PUPR Ministry, and the World Bank.




INNOVATION TO OPEN ACCESS FOR THE SOCIETY TO HAVE THE HOUSE

KPR Special for Athletes In mid-2018, the Company launched the KPR Special for Athlete product as part of support for national athletes by enabling them to have affordable and quick-built houses.

KPR Special for Athlete has specialities, among other interest rate starting from 5%, deposit from 5% without administration fee, provision, and appraisal fee. In addition, different from the regular KPR product that has the longest term up to 20 years, with this special KPR, athletes can make installment up to 30 years.

KPR Gaeesss!The Company prepares “KPR Gaeesss!” product targeted for millennials, as the community is expected to dominate Indonesian population by 2020 and simultaneously drive the national economy until 2030. The KPR Gaeesss! offers easy access for the customers, ranging from the initial application for the KPR or KPA, competitive deposit rate, provision and administration fees. The biggest market potential for the KPR Gaeesss! program marketing is in big cities across Indonesia.

This product also prepares those who are now 21 to 30 years old and have income to own residential assets. Based on statistics, household growth reached 2.31% whereas the growth rate of house ownership was 2.82%. Concerning the backlog of houses that reached 1.37 million units in 2016, for millenials, it is now worth investing residential assets.

ABCG Micro KPR

ABCG Micro KPR combining elements of Academy-Business-Community-Government (ABCG) is the Company’s approach to channel credits by collaborating with four parties, consisting of academics, business, communities, and government in aims to support the development of community-based self-help housing.


This KPR Scheme targets the lower income and unbankable communities (MBR) in Indonesia that are still living in rented houses and uninhabitable environments. Included here are those who live in rented houses, uninhabitable environments, work as honorary workers such as temporary teachers, enterpreneurs, private employees, and others.

There are at least 6 million unbankable MBR that have not yet had house. This challenge is not only the responsibility of local and central government, but also of all stakeholders, including BTN by engaging academics and communities.

1 2 3 4

Develop Collaboration Framework among Institutions

related with the research innovations that support the realization of inhabitable and

affordable house.

• Conduct socialisation, education, training, and community assistance.

• Create innovation in the house provision

• Research and Development

The Company channels the loan both in the form of Land

Financing and of House Construction.

Facilitate credit (KPR Micro) to help MBR acquiring land as

the requirement of BSPS.

Organize House Development Groups and ensure their

members saving and paying installment.

- Organising Self-Help Community Groups

- Facilitate community in the process of kavling distribution and land certification

- Planning and implementing the housing construction

Provide technical assistance to fasten the development

process as well as giving the BSPS loan.

Ministry:• Channeling the housing

assistance through BSPS • Providing easy splitzing

process and certification fees. District Government:• Provide PSU • Establishment and

Empowerment of Community

ACADEMY

University

BUSINESS

Bank BTN

COMMUNITY

Community

GOVERNMENT

Ministry

Implementation

Prospective Debtor Verification Deposit and Installment Certificate

At least 21 years old, average income below the Provincial Minimum Wage or equivalent to Rp2.5 million, and not yet having house and land.

The verified MBR can purchase kavling on the land prepared by the Local Government.

Debtor can get the loan with the bundling scheme through the BSPS assistance. Debtor is only required to prepare 5% of deposit, accompanied by the easy installment, starting from Rp500 thousand per month for 10 years.

The existing land certificate can be divided so that the society can immediately afford house and land with cheaper price and in a shorter period.

For the early stage, the Company started the pilot project of ABCG Micro KPR in Garut, Kendal, and Jember. In the future, the Company will expand the cooperation with about 30 local or regencies government throughout the country, with the estimation of KPR Micro BTN disbursement target using total ABCG scheme amounting to 2,000 units.

The trial in Kendal District was implemented in the Curug Sewu Village, Petehan Sub-district. In this area, the Company collaborated with the Diponegoro University to facilitate the ABCG Micro KPR to 58 debtor. On the land of one hectare, this scheme recorded the credit value at Rp2.06 billion. Project groundbreaking was carried out on 27th September 2018 by the General Director of Housing Provision of PUPR Ministry, represented by the Public and Commercial Housing Directors, Mr. Yusuf Hariagung MM, MT; Kendal Regent, dr. Mirna Annisa, Msi; the Chancellor of Diponegoro University, Prof. Dr. Yos Johan Utama SH, M. Hum.




Learning from the sucess of pilot project in Kendal, the Company now is expanding opportunities to apply similar scheme in the Pageruyung Region, Kendal District with the potential of 200 people from the Pageruyung Self-Help Community, 109 people from the Gempol Sewu Self-Help Community, 2,000 people from the Cigarettes, Food, and Drink Worker Association (SP RTMM) in the Kabus District and other potential regions that meet the quota of BSPS totaling 3,000 units.

Education Loan At present, the Indonesian society not only considers housing as a primary need, but also places education as their basic need. However, access to higher education for some parts of society members is hindered by their economic capacities.

As a solution in the face of the challenge, the Company has launched education loan to support the Government’s policy in improving the quality of Indonesian human resources as well as reach the Company’s lending target in 2018. The BTN education loan offers a ceiling of up to Rp200 million and flat interest at 6.5 percent during five years.

The target of this product is the existing debtors of Bank BTN including both KPR and KPA customers, both subsidized and non-subsidized, as well as Housing Collateral Credit (KAR). The existing debtor with fixed and non-fixed income can also access the loan.

Until the end of 2018, the Company has collaborated with 23 other Universities and will always continue to hold similar partnership with other universities so that more Indonesian people can get higher education.

Fintech Application for Santri Financial product innovation is not only restricted to the financing products, but also funding products. In the beginning of 2018, the Company’s Sharia Business Unit (UUS) launched financial technology (fintech)


titled Fintech Ponpes Mobile Apps to increase fund raising. The digital-based financial services will make it easier for santri and the guardians of Pondok Pesantren (Ponpes) Al Ashiryyah Nurul Iman to top up virtual account so that can be used for close loop transaction (special transaction for ponpes community) and purchase products (e-commerce) produced by business units under the guidance of ponpes, which ultimately increase the cheap funds raising in BTN Syariah.

Financial Technology is one of BTN Bank’s strategy within the business transformation held since 2015. With the presence of the Fintech Ponpes Mobile Apps, there are 15,000 santri ; 15,000 guardians; 300 teacher; and 31 business unit that will gain benefits from the facility. Aside from launching services to facilitate transaction at the Ponpes, the Company will provide haji and umrah savings facilities for teachers, administrators, and guardians of the Al Ashiriyyah Nurul Iman Foundation.

Mass KPR Credit Agreement The KPR agreement is one of the procedures carried out by the debtor after the loan proposal has been approved by the bank. In the celebration of Anniversary of BTN Home Ownership Loan on 20 December and of the success of the One Million House Program, the Company holds mass mortgage agreement simultaneously throughout Indonesia from November 23, 2018 to December 7, 2018.

In this event, the Company announced 19,760 KPR agreements throughout Indonesia.

Director of PT Bank Tabungan Negara (Limited Liabilities). Budi Satria symbolically handed over KPR to representatives of mass KPR agreement participants, ranging from millenials, online ojek, civil servant, TNI, to Polri at the BTN branch office in Karang Ayu, Semarang, Central Java.




Micro, Small, and Medium Enterprises Development (MSMEs) MSMEs are a very potential market for the financial services industry, particularly banks to channel financing. Beside of contributing to economic growth of up to 60.34%, Micro, Small and Medium Enterprises (MSMEs) absorb 96% of the national workforce based on data from the Coordinating Ministry for Economic Affaris. Therefore, the development of this business sector will improve people’s welfare on an ongoing basis.

The Company provides the best access to capital for the entire society, especially in providing business capital to encourage the development of MSME Loans in all feasible economic sectors, in aims to finance investment and/or working capital in order to run and develop their businesses.

In 2018, the Company’s MSME loan portfolio has reached 13% and will be increased to 20% with the largest disbursement allocated for the SME-scaled property developers who run the business of low-cost residential projects . With this approach, the Company also benefits from an increase in housing supply.

In addition, the Company channels Construction Credit for small developers who build houses for the MBR and business activities related to the small-scale construction value chain, ranging from brick, ceramic, tile, or those who own furniture business.

Another approach taken by the Company to improve the loan portfolio in this segment is through the development of BUMN Creative House (RKB). Here the Company synergizes with other SOEs to facilitate the development of economic activities of the local community. Until 2018, the Company has managed 11 RKBs in 11 regions with more than 798 Fostered MSMEs, all of which are facilitated with digital banking services, and the development is also done by opening access for various MSMEs to go-online. Until now, a total of 316 business activities have been facilitated by the Company to go-online through the blanja.com website.

In addition to supply capital for the MSMEs, the Company contributes to develop the capacity of the MSMEs’ customers to be more productive, competitive, and knowledgeable through the monitoring, coaching, mentoring activities for MSMEs that received credit facilities, research & socialisation, and sponsorship. As of 2018, the total number of MSMEs business actors empowered by the Company is 760 debtors.

The MSME development activities facilitated by the Company include:- April 2018, invites the Guided MSMEs to participate

in the 2018 Indonesian Creative Product Festival (ICPF) Exhibition in Kuala Lumpur, Malaysia to open global access for local products.

- November 2018, the cooperation between the Regional Office of the Directorate General of Taxes of South Sumatra and Kep. Babel with the BTN Creative Home (RKB) with around 200 MSMEs in aims to implement BDS (Business Development Services) a program to develop and empower MSMEs continuously. The scope of this program is empowering, noting/accounting, management, marketing, product packaging, customer service in the form of communication forums, MSMEs’ help desk services, bazaars, seminars and the like.

Beside of the commercial credit product line, starting at the end of 2017, the Company has also been trusted by the Government to channel the People’s Business Credit (KUR). KUR is a credit or the financing of working capital and/or investment to individual debtors/individual, business entities and/or business groups that are considered productive and feasible but have not yet had additional collateral or sufficient additional collateral.

During 2018, the Company has distributed Retail KUR and Micro KUR to 454 debtors with a total distribution of Rp115.345 billion from the target of Rp275 billion focused on the construction, housing, and supporting sectors. Within the same year, the Government has realized the disbursement of KUR distribution up to Rp120 trillion.


2016 2017 2018

1,508.231,537.42

1,013.05

MSMES CREDIT DISTRIBUTION

9.78111.19

0.00

PEOPLE BUSINESS CREDITDISTRIBUTION

MSMEs Credit Distribution by Economic Sector (Rp Million) [FS6, FS7]

Economic Sector

Total of disbursement Total of disbursement Total of disbursement

2018 2017 2016

Up to 100 Juta

100 million up to 500 million

500 Juta up to 5 billion

Total Up to 100 million100 million to

500 million500 million to

5 billionTotal Up to 100 million

100 million to 500 million

500 million to 5 billion

Total

Agriculture, Hunting, and Forestry - - - - - 325 - 325 32 350 - 382

Fishery - - - - - - - - 60 - - 60

Mining and Excavation - - - - - - 50 50 - 120 8,299 8,419

Processing Industry - 1,067 5,240 6,307 155 2,371 10,679 13,205 - 2,947 13,370 16,317

Electricity, Gas, and Water - 390 34,095 34,485 - 4,183 66,583 70,766 - 2,095 18,029 20,124

Construction 700 33,074 1,164,304 1,198,078 - 26,397 918,993 945,390 - 15,301 552,569 567,870

Wholesale and Retail Trade 94 11,524 148,390 160,008 214 22,317 209,688 232,219 818 25,951 149,903 176,672

Accomodation and Food Service - 130 2,794 2,924 - 394 3,637 4,031 - 250 7,099 7,349

Transportation, Warehousing, and Communication

- - 3,950 3,950 50 359 500 909 79 250 300 629

Real Estate, Rental Business, and Company Service

98 8,954 68,110 77,162 - 17,536 115,706 133,242 80 18,158 76,863 95,101

Education Service - - - - - - - - - - 3,283 3,283

Health Service and Social Activity - - - - - - - - - - - -

Public Service, Social and Culture, Entertainment and Other Independent Service

91 1,479 44,465 46,035 50 2,161 99,254 101,466 134 2,510 92,296 94,939

Activity with Indeterminate Definition - 1,897 6,576 8,473 50 1,641 4,938 6,630 125 6,507 15,267 21,899

Total 983 58,515 1,477,924 1,537,423 519 77,685 1,430,028 1,508,232 1,328 74,438 937,280 1,013,045




MSMEs Credit Distribution by Economic Sector (Rp Million) [FS6, FS7]

Economic Sector


2018 2017 2016

Up to 100 Juta

100 million up to 500 million

500 Juta up to 5 billion

Total Up to 100 million100 million to





Total

Agriculture, Hunting, and Forestry - - - - - 325 - 325 32 350 - 382

Fishery - - - - - - - - 60 - - 60

Mining and Excavation - - - - - - 50 50 - 120 8,299 8,419

Processing Industry - 1,067 5,240 6,307 155 2,371 10,679 13,205 - 2,947 13,370 16,317

Electricity, Gas, and Water - 390 34,095 34,485 - 4,183 66,583 70,766 - 2,095 18,029 20,124

Construction 700 33,074 1,164,304 1,198,078 - 26,397 918,993 945,390 - 15,301 552,569 567,870

Wholesale and Retail Trade 94 11,524 148,390 160,008 214 22,317 209,688 232,219 818 25,951 149,903 176,672

Accomodation and Food Service - 130 2,794 2,924 - 394 3,637 4,031 - 250 7,099 7,349

Transportation, Warehousing, and Communication

- - 3,950 3,950 50 359 500 909 79 250 300 629

Real Estate, Rental Business, and Company Service

98 8,954 68,110 77,162 - 17,536 115,706 133,242 80 18,158 76,863 95,101

Education Service - - - - - - - - - - 3,283 3,283

Health Service and Social Activity - - - - - - - - - - - -

Public Service, Social and Culture, Entertainment and Other Independent Service

91 1,479 44,465 46,035 50 2,161 99,254 101,466 134 2,510 92,296 94,939

Activity with Indeterminate Definition - 1,897 6,576 8,473 50 1,641 4,938 6,630 125 6,507 15,267 21,899

Total 983 58,515 1,477,924 1,537,423 519 77,685 1,430,028 1,508,232 1,328 74,438 937,280 1,013,045

MSMES CREDIT DISTRIBUTION BY ECONOMIC SECTOR

MSMES CREDIT DISTRIBUTION BY PROVINCE

Construction DKI Jakarta

63%22%

27%

36%

7%

8%

1%5%7%

9%

15%

Real Estate East JavaElectric, Gas and Water Others

Trade West JavaPublic Services North SumateraOthers


MSMEs Credit Distribution by Province (Rp Million) [F56, FS7]

Province


2018 2017 2016

Up to 100 million



Total Up to. 100 million100 million to





Total

Nanggroe Aceh Darussalam 100 850 33,940 34,890 _ 2,190 8,635 10,825 _ 860 6,100 6,960

North Sumatera - 1,438 51,863 53,301 - 608 101,411 102,019 - 136 49,305 49,441

West Sumatera - 1,020 20,870 21,890 - 946 18,838 19,784 - 1,901 15,690 17,592

Riau - 220 18,443 18,663 - - 23,465 23,465 - - 11,475 11,475

Jambi - 7,741 15,785 23,526 - 17,149 9,763 26,912 - 15,169 3,251 18,420

South Sumatera - 500 21,885 22,385 - - 23,580 23,580 - 490 2,575 3,065

Bengkulu - 500 31,347 31,847 - 1,410 19,821 21,231 100 1,886 7,806 9,792

Lampung - - 23,423 23,423 - 500 14,468 14,968 - - 6,147 6,147

Riau Islands - 675 19,435 20,110 - 500 17,340 17,840 - 810 21,804 22,614

Bangka Belitung - 1,168 11,305 12,473 - 2,370 14,815 17,185 - 385 6,010 6,395

DKI Jakarta 320 8,762 305,975 315,058 50 9,483 394,666 404,199 100 10,884 323,128 334,112

West Java 24 11,633 290,270 301,927 81 17,192 324,704 341,977 255 16,756 220,796 237,807

Central Java - 2,906 100,930 103,836 - 3,205 56,305 59,510 - 1,894 17,973 19,866

D.l. Yogyakarta - 500 24,198 24,698 - 225 18,227 18,452 - 373 8,574 8,947

East Java - 5,644 152,417 158,061 155 6,366 110,781 117,302 133 5,363 72,766 78,261

Banten - 3,916 54,025 57,940 - 6,449 48,073 54,523 194 11,451 56,613 68,258

Bali - 460 28,816 29,276 - - 14,470 14,470 - - 12,510 12,510

Wet Nusa Tenggara - - 27,722 27,722 50 1,304 20,215 21,569 185 2,304 12,438 14,927

East Nusa Tenggara 200 2,010 25,578 27,788 83 915 38,011 39,009 112 642 31,292 32,046

West Kalimantan - - 4,255 4,255 - - 9,500 9,500 - - 4,100 4,100

Central Kalimantan - 400 8,535 8,935 - - 5,078 5,078 - - 2,570 2,570

South Kalimantan 80 1,450 30,516 32,046 - 3,780 11,220 15,000 - 450 2,070 2,520

East Kalimantan 70 952 25,301 26,323 - - 26,689 26,689 249 - 15,752 16,001

North Sulawesi - 475 10,079 10,554 - - 1,000 1,000 - 250 - 250

Central Sulawesi - 250 5,758 6,008 50 495 6,567 7,112 - 680 1,810 2,490

South Sulawesi Selatan - 1,200 44,091 45,291 - - 32,178 32,178 - - 7,490 7,490

Sulawesi Tenggara - 900 16,093 16,993 - - 13,274 13,274 - - 8,750 8,750

Gorontalo - 788 12,804 13,592 - 520 12,624 13,144 - 1,086 1,958 3,044

Maluku 189 1,547 4,700 6,436 50 1,188 - 1,238 - 319 - 319

North Maluku - 390 44,713 45,103 - 590 24,860 25,450 - 150 4,526 4,676

Papua - 221 12,852 13,073 - 300 9,450 9,750 - 200 2,000 2,200

Total 983 58,515 1,477,924 1,537,423 519 77,685 1,430,028 1,508,232 1,328 74,438 937,280 1,013,045




MSMEs Credit Distribution by Province (Rp Million) [F56, FS7]

Province


2018 2017 2016

Up to 100 million



Total Up to. 100 million100 million to





Total

Nanggroe Aceh Darussalam 100 850 33,940 34,890 _ 2,190 8,635 10,825 _ 860 6,100 6,960

North Sumatera - 1,438 51,863 53,301 - 608 101,411 102,019 - 136 49,305 49,441

West Sumatera - 1,020 20,870 21,890 - 946 18,838 19,784 - 1,901 15,690 17,592

Riau - 220 18,443 18,663 - - 23,465 23,465 - - 11,475 11,475

Jambi - 7,741 15,785 23,526 - 17,149 9,763 26,912 - 15,169 3,251 18,420

South Sumatera - 500 21,885 22,385 - - 23,580 23,580 - 490 2,575 3,065

Bengkulu - 500 31,347 31,847 - 1,410 19,821 21,231 100 1,886 7,806 9,792

Lampung - - 23,423 23,423 - 500 14,468 14,968 - - 6,147 6,147

Riau Islands - 675 19,435 20,110 - 500 17,340 17,840 - 810 21,804 22,614

Bangka Belitung - 1,168 11,305 12,473 - 2,370 14,815 17,185 - 385 6,010 6,395

DKI Jakarta 320 8,762 305,975 315,058 50 9,483 394,666 404,199 100 10,884 323,128 334,112

West Java 24 11,633 290,270 301,927 81 17,192 324,704 341,977 255 16,756 220,796 237,807

Central Java - 2,906 100,930 103,836 - 3,205 56,305 59,510 - 1,894 17,973 19,866

D.l. Yogyakarta - 500 24,198 24,698 - 225 18,227 18,452 - 373 8,574 8,947

East Java - 5,644 152,417 158,061 155 6,366 110,781 117,302 133 5,363 72,766 78,261

Banten - 3,916 54,025 57,940 - 6,449 48,073 54,523 194 11,451 56,613 68,258

Bali - 460 28,816 29,276 - - 14,470 14,470 - - 12,510 12,510

Wet Nusa Tenggara - - 27,722 27,722 50 1,304 20,215 21,569 185 2,304 12,438 14,927

East Nusa Tenggara 200 2,010 25,578 27,788 83 915 38,011 39,009 112 642 31,292 32,046

West Kalimantan - - 4,255 4,255 - - 9,500 9,500 - - 4,100 4,100

Central Kalimantan - 400 8,535 8,935 - - 5,078 5,078 - - 2,570 2,570

South Kalimantan 80 1,450 30,516 32,046 - 3,780 11,220 15,000 - 450 2,070 2,520

East Kalimantan 70 952 25,301 26,323 - - 26,689 26,689 249 - 15,752 16,001

North Sulawesi - 475 10,079 10,554 - - 1,000 1,000 - 250 - 250

Central Sulawesi - 250 5,758 6,008 50 495 6,567 7,112 - 680 1,810 2,490

South Sulawesi Selatan - 1,200 44,091 45,291 - - 32,178 32,178 - - 7,490 7,490

Sulawesi Tenggara - 900 16,093 16,993 - - 13,274 13,274 - - 8,750 8,750

Gorontalo - 788 12,804 13,592 - 520 12,624 13,144 - 1,086 1,958 3,044

Maluku 189 1,547 4,700 6,436 50 1,188 - 1,238 - 319 - 319

North Maluku - 390 44,713 45,103 - 590 24,860 25,450 - 150 4,526 4,676

Papua - 221 12,852 13,073 - 300 9,450 9,750 - 200 2,000 2,200

Total 983 58,515 1,477,924 1,537,423 519 77,685 1,430,028 1,508,232 1,328 74,438 937,280 1,013,045


KUR Distribution based on Economic Sectors [FS6, FS7]

Sektor Ekonomi

Jumlah Penyaluran

2018 2017

KUR Mikro KUR RitelTotal


(up to 25 million) (25 million up to 500 million) (up to 25 million) (25 million up to

500 million)

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Pertanian, Perkebunan dan

Kehutanan 113 10 1,830 8 1,943 18 - - 200 1 200 1

Perikanan 25 1 80 1 105 105 - - - - - -

Pertambangan dan

Penggalian

- - - - - - - - 500 1 500 1

Industri Pengolahan 45 2 6,381 29 6,426 31 - - 150 1 150 1

Listrik, Gas, dan Air - - - - - - - - 3,600 8 3,600 8

Konstruksi - - 26,408 60 26,408 60 - - 3,275 10 3,275 10

Perdagangan Besar dan

Eceran

290 16 47,894 207 48,184 223 25 1 300 2 325 3

Penyediaan Akomodasi dan

Penyediaan Makan Minum

75 3 5,123 23 5,288 26 - - - - - -

Transportasi, Pergudangan

dan Komunikasi

- - 2,490 9 19,396 59 - - - - - -

Real Estate, Usaha

Perwewaan, dan Jasa

Perusahaan

25 1 19,396 19,396 19,421 60 - - - - - -

Perantara Keuangan - - - - - - - - 700 2 700 2

Jasa Pendidikan - - 200 1 200 1 - - - - - -

Jasa Kesehatan dan

Kegiatan Sosial

- - - - - - 25 1 - - 25 1

Jasa Kemasyarakatan,

Sosial Budaya, Hiburan,

dan Perorangan Lainnya

50 2 3,099 17 3,149 19 - - - - - -

Badan Internasional dan

Badan Ekstra Internasional

Lainnya

- - - - - - - - 1,000 3 1,000 3

Kegiatan yang belum jelas

Batasannya

- - - - - - - - - - - -

Total 623 35 114,7223 419 115,345 454 50 2 9,725 28 9,775 30




Penyaluran KUR Berdasarkan Provinsi [FS6, FS7]

Province

Jumlah Penyaluran

2018 2017



(up to 25 million) (25 million up to 500 million) (up to 25 million) (25 million up to

500 million)

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Plafon(Rp

million)Debitur

Bali - - 1,450 4 1,450 4 - - - - - -

Bangka Belitung - - 780 3 780 3 - - - - - -

Banten 104 6 8,759 34 8,863 40 - - 300 1 300 1

Bengkulu 20 1 900 3 920 4 - - - - - -

D.I. Yogyakarta - - 3,860 16 3,860 16 - - 400 1 400 1

DKI Jakarta 70 3 15,773 50 15,843 53 - - 3,000 9 3,000 9

Gorontalo - - 140 2 140 2 - - - - - -

Jambi - - 2,500 5 2,500 5 - - - - - -

West Java 131 11 15,486 60 15,617 71 - - 2,600 6 2,600 6

Central Java 195 9 9,146 55 9,341 64 25 1 975 4 1,000 5

East Java 48 2 20,222 72 20,270 74 25 1 1,150 4 1,175 5

West Kalimantan - - 300 2 300 2 - - - - - -

South Kalimantan - - 5,821 17 5,821 17 - - - - - -

Central Kalimantan - - 420 2 420 2 - - - - - -

East Kalimantan 25 1 4,715 14 4,740 15 - - 400 1 400 1

Riau Islands - - - - - - - - - - - -

Lampung - - 960 3 960 3 - - - - - -

Maluku 10 1 285 3 295 4 - - - - - -

North Maluku - - 150 1 150 1 - - - - - -

Nanggroe Aceh

Darussalam

- - 1,100 3 1,100 3 - - - - - -

West Nusa Tenggara 20 1 5,205 16 5,225 16 - - 400 1 400 1

East Nusa Tenggara - - 1,555 4 1,555 4 - - 500 1 500 1

Papua - - 2,000 5 2,000 5 - - - - - -

Riau - - 4,656 17 4,656 17 - - - - - -

South Sulawesi - - 4,790 13 4,790 13 - - - - - -

Central Sulawesi - - 225 1 225 1 - - - - - -

Souteast Sulawesi - - 500 1 500 1 - - - - - -

North Sulawesi - - 300 1 300 1 - - - - - -

West Sumatera - - 1,455 7 1,455 7 - - - - - -

South Sumatera - - 625 2 625 2 - - - - - -

North Sumatera - - 645 4 645 4 - - - - - -

Total 623 35 114,7223 419 115,345 454 50 2 9,725 28 9,775 30

Financial Services for Low-Population Areas and Underdeveloped Regions

To improve financial access, the Company has operated in some low-population provinces and underdeveloped regions. Access to financial services in these areas is expanded by providing bank offices and ATMs.


The Company’s Network Access Index in the Low Population Province in 2017 [FS13]

Province/ RegionTotal population*

Access Point

Branch Office

Sub-branch office

Cash office Office equivalent

to cash office

ATM Total Access Index**

Low-population province

Kalimantan Tengah 2,183,668 1 3 2 40 12 58 37,649

Papua 3,265,202 1 3 2 30 11 47 69,472

Rata-rata 53,561

Daerah Tertinggal

Bondowoso 736,721 - - 1 - 1 2 368,361

Situbondo 669,713 - - 1 - 1 2 334,857

Bangkalan 937,497 1 2 3 39 17 62 15,121

Sampang 884,204 - - 1 - 1 2 442,102

Pandeglang 1,200,512 - - - - 1 1 1,200,512

Lombok Barat 644,586 2 - 1 - 13 16 40,287

Lombok Tengah 912,879 - - 1 - 2 3 304,293

Lombok Timur 1,173,781 - - - - 1 1 1,173,781

Sumbawa 445,503 - - - - 1 1 445,503

Kupang 360,228 1 1 1 32 6 41 8,786

Ketapang 485,118 - - - - 1 1 485,118

Sintang 396,392 - - - - 1 1 396,392

Gorontalo Utara 104,133 - - - - 1 1 104,133

Mamuju Tengah 105,495 - - - - 1 1 105,495

Sorong 82,784 - - - - 1 1 82,784

Rata-rata 367,168

* Population based on data from the Central Statistics Board (BPS). ** Access Index = Total population/Number of Access Point *** Low population level is determined by using standard measurements with population densities below 20 people per km2. From these standards and based

on the 2015 Central Statistics Board (BPS) Population Density data, the provinces classified as low population are Central Kalimantan, North Kalimantan, West Papua and Papua.

****The underdeveloped area is stipulated in the Presidential Regulation Number 131/2015 concerning the Determination of Underdeveloped Regions in 2015-2019. The indicators used as the determination of underdeveloped areas are the community economy, human resources, facilities and infrastructure, regional finance, accessibility, and regional characteristics.


FINANCIAL LITERACY PROGRAM Based on the national literacy and national financial inclusion survey carrying out by the Financial Services Authority in 2016, it showed that only 29.7 percent of society are able or understand about the financial inclusion. This implies that there are still many people who already have financial access but are not equipped with proper financial knowledge. Meanwhile, deepening the understanding on the financial literacy can improve society’s habit to save and invest which ultimately can improve welfare.

Against these background, the OJK continues to encourage financial service industry stakeholders to actively provide broader and deeper financial literacy

education. The Bank supports the financial literacy program in aims to improve public knowledge and customers regarding the good financial management through Smart Saving dan various financial literacy program.

The financial literacy program by Company is implemented with reference to Financial Services Authority Circular Letter No. 1/SEOJK.07/2014 dated February 14th, 2014 on Education for Financial Literacy Improvement to Customers and/or Public and support for the National Saving Movement based on the Government Regulation No. 82 Year 2016 on the National Strategy of Financial Inclusion (SNKI).



The Company also provides SimPel product or Student Saving for students with the ease of opening account and transactions requirements. SimPel is designed for improving the education and financial inclusion as well as to encourage awareness of saving among school-age children.

261.36

306.43

214.17

2015 2016 2017

ASSET

192.00

230.26

160.19

2015 2016 2017

THIRD PARTY FUND

FINANCIAL PERFORMANCE

Financial Literacy Education through the Program of Students Understand the Indonesia Archipelago In August 2018, the Company facilitated 23 students from Bengkulu Province to participate in the Students Understand the Indonesia Archipelago (SMN) program, which is a student exchange program initiated by the Ministry of SOEs. A series of SMN activities held for them included 12 days of activities in Mamuju and the capital city of Jakarta.

One of courses of the SMN program was a visit to the BTN Bank Office in Jakarta and gained knowledge about banking products, the history of Bank BTN and the role of Bank BTN in supporting the government, especially in the Million Houses Program. After that, each student gets a “Champion” savings, a special savings product special for students from Bank BTN.

OJK Goes to School ProgramThe Company supports the monthly activities of financial inclusion held by the Financial Services Authority “OJK Goes To School: SimPel/SimPel iB Week” on 22-26 October 2018 in several schools in Jabodetabek .

One of the activities held at SD 05 Pagi West Jakarta was attended by Director of PT Bank Tabungan Negara (Persero) Tbk., Budi Satria ,accompanied the Director of Financial Literacy and Education of the Financial Services Authority, Horas V. M. Tarihoran. Here, the Company introduces SimPel savings and instills the importance of saving habits since the early age.






CONTRIBUTION FOR THE IMPROVEMENT OF LIFE QUALITY OF THE COMMUNITY

CSR Program 158Realisation of CSR Fund Disbursement 161CSR Highlight 163Partnership and Community Development Program 164The Structure of PKBL Organisation 2018 166Partnership Program 167Community Development Program 168





Good business performance should be balanced with corporate participation in developing the community and environmental preservation,

so that the three pillars of sustainable development Profit-Planet-People can develop harmoniously. In addition, as a State-Owned Enterprise, the Company carries the mandate as an agent of development by providing financing products and implementing Social and Environmental Responsibility (TJSL).[GRI 103-1]

The Company applies two approaches in implementing the TJSL, namely through the Corporate Social Responsibility (CSR) Program and the implementation of the Partnership and Community Development Program. Both are managed in accordance with the laws and regulations on the Company and BUMN.

Provisions for implementing CSR and PKBL have been stipulated in the Directors’ Regulation No. 6/PD/CSD/2018 concerning the Partnership Program, Community Development Program, and Corporate Social Responsibility Program. [GRI 103-2, 413-1]

CSR PROGRAM

The Company’s CSR Policy The CSR Program is the Bank’s commitment to participate in the sustainable economic development in aims to improve the quality of life and environment, that yield benefits not only for the Company, but also for the surrounding communities as well as the society in general.



The implementation of social and environmental responsibility or CSR is the Company’s important and direct contribution to the Global Development Goals, which goes in line with the implementation of sustainable finance.

c. CSR aims to improve the life quality, namely the condition of meeting basic human or community needs for a decent life.

d. CSR activities are aimed at stakeholders (stakeholders), namely all parties affected by and/or influence the performance of the Bank both directly and indirectly, the community surrounding the Bank Office and the wider community.

Rp5,180.09 MillionTotal Distribution of

CSR Programme in 2018

Rp21,782.2 Million

Total DistributionPKBL Program in 2018

Rp37,274.07 Million

Total Revolving Loan Distribution of Partnership

Program in 2018

Rp59,056.27 MillionTotal Distribution of the 2018

Community Development Program

The Company’s CSR program is implemented based on the Law No. 40 of 2007 concerning Limited Liability Companies as well as Law No.1 of 2013. The meaning of the implementation of CSR for the Company is as follows:a. CSR is the Bank’s commitment in the form of a

written statement and allocation of Bank resources.b. CSR contributes to the sustainable development,

namely development that meets the needs of the present generation without taking expense at the ability of future generations to meet their needs.

CSR Vision CSR Mission

“Caring about the interests of society and the environment by contributing to the economic development and community empowerment continuously, especially at the residential area which is the core business of BTN Bank. “

1. Improve the welfare of society and the environment.2. Develop the Bank’s values and culture.3. Build a positive corporate image in the public’s eye. 4. Increase cooperation and mutual respect with the surrounding

community and environment where the Bank’s Offices operate.


BTN Harmony Environment Program is the umbrella of CSR implementation program in the Company. The Company integrates the interests to improve the quality of life of the community with the Company’s business interests in a synergistic form. The objective is so that the Company and the community will gain benefit from the long-term programs. Company’s CSR implementation involves the following process:1. The target of CSR activities is individuals including

but not limited to a group of community members and organizers of CSR activities.

2. The Work Unit responsible for CSR activities is the Corporate Secretary Division. The CSR activities are the implementation of administration, coordination with relevant parties, and reporting on the results of activities.

3. The Company’s CSR budget is stipulated in the company’s budget work plan by taking propriety and fairness aspects into account.

4. The CSR program is focused on giving donations that are charitable and social in the scheme of giving cash or goods to recipients outside the PKBL.

Recipients of donations are people who are in the vicinity of the Company’s operational areas, committee activities for educational organizations, non-governmental organizations (NGOs) or agencies engaged in charity and social fields.

5. The CSR activities include programmed activities or incidental activities.

6. The programmed CSR activities include: a. Social field, namely activities that have impacts

on the improvement of socio-cultural life, religious, and social welfare, comprising: 1) Education, including the service

improvement, facilities and educational infrastructure;

2) Health, including the improvement of nutrition and health as well as health infrastructure;

3) Arts and culture, including the preservation of arts and culture and the improvement of art and cultural infrastructure;

4) Sports, including improving sports performance and infrastructure; and

5) Religion, including improving religious infrastructure.

b. Environment field, namely activities that have impacts on the improvement of the comfort and environment sustainability, including; environmental management, waste management, critical land management, reforestation, land reclamation, clean water and irrigation infrastructure, polution, water and land pollution control, noise, water and sanitation, residential area (drainage and floods management, as well as energy saving and the use of alternative energy.

c. Economics field, namely activities that have an impact on expanding employment opportunities and business opportunities, increasing income and reducing poverty in the community. These fields include the development of cooperatives, microfinance institutions, small micro businesses, small micro industries, entrepreneurial technology, markets and marketing, economic infrastructure, food crop agriculture, plantations, fisheries, livestock and food security.

7. The incidental CSR activities includes activities to alleviate the burden of the community due to disasters or certain economic conditions, among others, relief for victims of earthquakes or other natural disasters and assistance to relieve the burden of the community due to the increase in basic commodities price.

8. CSR activities field to support the implementation of Sustainable Finance include: a. Distribution of funding to feasible micro

businesses but do not have access for funding from the Financial Services Institution (LJK) which is directed towards sustainable business development;

b. Training for prospective customers regarding sustainable business.

c. Campaign for sustainable production and consumption pattern; and

d. Subsidies of insurance premium for farmers, fishermen, and poor and/or low income communities who are vulnerable to disasters.

9. The implementation of CSR activities monitoring is done by: a. Recording as well as carefully bookeeping

of each distribution of assistance and CSR activities; or




b. Report periodically to the regulator in accordance with applicable regulations and monitor the development of CSR activities that have been carried out.

10. The Evaluation of CSR Activities a. Periodically review the CSR activities; and/orb. Provide recommendation regarding the

effective strategy of CSR implementation in order to meet the vision and mission of the Bank.

11. Reporting on CSR activities a. Reporting on the implementation of CSR

activities in the Bank’s Annual Report to the GMS in accordance with the applicable regulation.

b. If the implementation of CSR uses the budget of Community Development program, then the use of budget must be reported in accordance with the applicable Regulation of Ministry of State Owned Enterprises.

REALISATION OF CSR FUND DISBURSEMENT In 2018, the Company realized social donations through the CSR Program amounting to Rp5,180.09 million, increased by 0.62% compared to the realization of donations in 2017 amounting to Rp5,148.0 million. Based on its activities, the largest portion of the disbursement of donations was allocated for the religious sector. This disbursement reached 94.18% of the budget in 2018 amounting to Rp5,500 million. [GRI 103-3]

REALIZATION OF CSR PROGRAM FUND (RP MILLION)

4,371

5,1805,148

2016 2017 2018


REALIZATION OF CSR PROGRAM DONATION BY ACTIVITIES (%)

Economy

0%

30%28%

2%

3%

20%4%

13%

SportHealth

Art and Culture ReligiousEducation Nature Conservation Facilities and Infrastructure

PERCENTAGE OF CSR FUND DISBURSEMENT [GRI 413-1]

6%

4%

9%

23%

8%

Regional Office 1Regional Office 3Regional Office 5


Regional Office 1 Regional Office 2 Regional Office 3 Regional Office 4 Regional Office 5 Regional Office 6

· West Java · DKI Jakarta· Banten

· East Java· Bali· West Nusa

Tenggara· East Nusa Tenggara

· Nanggroe Aceh Darussalam

· North Sumatera· West Sumatera· Riau· Jambi· South Sumatera· Bengkulu· Lampung· Bangka Belitung· Riau Islands

· West Kalimantan· Central Kalimantan· South Kalimantan· East Kalimantan· North Kalimantan· North Sulawesi· Central Sulawesi· South Sulawesi· Southeast Sulawesi· Gorontalo· West Sulawesi· Maluku· North Maluku· Papua· West Papua

· Central Java· Special Region of

Yogyakarta




CSR HIGHLIGHT The Company distributes CSR funds of around Rp1.5 billion which was used for social activities during the holy month of Ramadan. The CSR fund was used to provide assistance for orphans, repair religious facilities and food packages to the community prior to the celebration of Eid al-Fitr 1439 H.

As part of the SOE for State social activities BTN provided assistance to the flood victims in Alasmalang village, Singojuruh Subdistrict, Banyuwangi Regency. Disaster relief worth Rp100 million was given to the community in the form of food and goods needed by the community.

The company supports the activities of SOEs for State which were carried out in the Larantuka and Kupang regions in the electrification program together with State Electricity Company (PLN). Direct assistance to the community in the form of electrification was distributed to 305 houses, along with the construction of 10 houses for integration fighters of former East Timor and a number of other physical constructions.

The company handed over Rp100 million of training fund as a token of appreciation to Indonesian rock-climbing athletes for their achievements in the World International Federation of Sport Climbing (IFSC) championships in Tai’an, China and preparations to compete at the 2018 Asian Games.

The Company donated ‘Smart Car’ for the Trenggalek District Government to accomplish the ‘Smart Indonesia’ program initiated by the government.


PARTNERSHIP AND COMMUNITY DEVELOPMENT PROGRAM

The Partnership and Community Development Program or PKBL basically refers to Law No.19 of 2003 on State Owned Enterprises and Minister of SOEs Regulation No. PER-09/MBU/12/2016 dated December 16, 2016 on State-Owned Enterprises Partnership and Community Development Program.

PKBL is a Company’s forum to conduct community development and empowerment programs, and improve the quality of life of communities outside CSR program activities. PKBL Program is conducted simultaneously through two main activities, i.e. Partnership Program and Community Development Program.

The Company has specifically prepared its own report to report on the performance of the PKBL, which is an integral part of the Company’s Annual Report. The PKBL performance report is in accordance with the Minister of SOEs Regulation No. PER-02/MBU/7 2017 dated July 5, 2017, on the Second Amendment to the Ministry of State-Owned Enterprises Regulation No. PER-09/MBU/04/2015 on the Partnership and Community Development Program of the State-Owned Enterprises.

Basic Implementation of PKBL The Partnership and Community Development Program (“PKBL”) of PT Bank Tabungan Negara (Persero) Tbk (“BTN”) was formed in accordance with the Republic of Indonesia Minister of Finance Decree Number. 1232/KMK.013/1989 dated 11 November 1989 which was later reviewed with The Republic of Indonesia Minister of Finance Letter Number. 306/KMK.013/1991 dated March 20, 1991 jo No. 368/KMK.013/1991 dated April 19, 1991 which was reviewed by the Republic of Indonesia Minister of Finance the decree Number. 316/KMK.016/1994 dated June 27, 1994 concerning Guidelines for the Development of Small Businesses and Cooperatives through the use of funds from the profits of State-Owned Enterprises (BUMN). The regulation was subsequently updated with the Decree of the BUMN Minister No. KEP-236/MBU/2003 dated June 17, 2003 concerning the Partnership Program of State-Owned Enterprises with Small Businesses and Community Development Programs and the Minister of BUMN Circular Letter Number. SE-433/MBU/2003 dated September 16, 2003 concerning

Implementation Guidelines for BUMN Partnership Programs with Small Businesses and Community Development Programs. The activities regulated in the above decision letters are in accordance with the Government’s policy regarding the obligation of SOEs to carry out social duties of fostering small businesses and cooperatives as an additional tax besides the SOE main business operations.

The Company, PKBL regulations have undergone several changes, in 2014 BTN PKBL policy was referring to the State Minister for State-Owned Enterprises (BUMN) Regulations Number. PER-05/MBU/2007 dated April 27, 2007 concerning the Partnership Program of State-Owned Enterprises with Small Businesses and the Community Development Program, which was last amended by State-Owned Enterprises Regulation No. PER-08/MBU/2013 dated September 10, 2013. Based on the Ministry of SOE Regulation, the funding source of the Partnership and Community Development Program (BL Program) comes from the company’s budget (BUMN Trustee) which is calculated as a fee, each maximum of 2% of net income the previous year. Based on Minister of State-Owned Enterprises Regulation Number. PER-07/MBU/05/2015 date 22 May 2015 concerning the State-Owned Enterprises Partnership Program with small businesses and community development programs, stated that the previous regulation, namely the State Minister of State Regulation Number. PER-05/MBU/2007 dated April 27, 2007, SOE Minister Regulation Number. PER-20/MBU/2012 dated December 27, 2012, Regulation of the Minister of BUMN Number. PER-05-MBU/2013 dated May 1, 2013, SOE Minister Regulation Number. PER-07-MBU/2013 dated June 27, 2013, SOE Minister Regulation Number. PER-08-MBU/2013 dated September 10, 2013 and the Letter of Deputy for BUMN Restructuring and Strategic Planning Number. S-92/DS.MBU/2013 dated April 3, 2013 was revoked and declared not applicable.

Minister of State-Owned Enterprises Regulation Number. PER-07/MBU/05/2015 dated May 22, 2015 was revoked and replaced by the Minister of State-Owned Enterprises Regulation Number. PER-09/MBU/07/2015 dated July 3, 2015 concerning the State-Owned Enterprises’ Partnership Program and Community Development Program.




In 2016, the PKBL Regulation was again amended by Minister Of SOE Regulation Number. PER-03/MBU/12/2016 dated December 16, 2016 concerning Amendment of Regulation of the State Minister for State-Owned Enterprises No. PER-09/MBU/07/2015 and is valid since the financial year of 2016. In the latest SOE Ministerial Regulation, among others, regulates the sources of the Partnership Program and Community Development Program funds originating from the provision of net income and/or budget which are calculated as costs and expenses PKBL’s operations are a burden to the BUMN Trustees.

In 2017, the PKBL Regulation was again amended by Minister of SEO Regulation Number. PER-02/MBU/7/2017 dated 5 July 2017 concerning the second Amendment to the Regulation of the State Minister for State-Owned Enterprises Number. PER-09/MBU/07/2015 and is valid since the financial year 2017. In the last BUMN Ministerial Regulation, among others, regulates the maximum change in the number of loans of fostered partners, large administrative services, minimum period of running business, parties allowed in channeling partnership programs and distribution of partnership program funds by Special SOEs.

Main Activities

The main activities of the Company’s PKBL are lending and distribution of guidance funds through the Partnership Program and the provision of assistance through the Community Development Program. PARTNERSHIP PROGRAM (PK)The Partnership Program is aimed at fostered partners who have small-scale businesses for productive investment and/or working capital needs. The requirements that must be met by the trained partners to access the Partnership Program funds are as follows:• Meet the criteria to be categorized as Small

Business.• In the form of an individual business, a business

entity that is not a legal entity, or a business entity incorporated as a cooperative.

• Has carried out business activities for at least 6 (six) months except for small businesses formed or established as BTN program implementations.

• Has the potential and business prospects to be developed and has a business license or business certificate from the authorities.

• Providing or owning a share of 25% (twenty five percent) of the funding needs needed for both grant and loan assistance.

• Priority is aimed at Small Businesses that do not have banking access capabilities (non-bankable).

Maximum Loan AmountThe maximum loan amount is IDR200,000,000 (two hundred million rupiah).

Loan FormLoans to fostered partners are given in the following forms:a. Loans to finance working capital and/or purchase

of fixed assets in order to increase production and sales.

b. Additional loans to finance short-term needs in order to fulfill orders from business partners of Foster Partners.

Time PeriodThe term of the partnership program loan is a maximum of 5 (five) years by considering the usage plan and the limits of assets or turnover owned by the fostered partners.

Loan DistributionLoans are given directly to fostered partners either individually or in groups. Administrative Services (Loan Interest) From January 2017 to June 2017, the amount of the loan administration services of the Partnership Program is set once at the time of lending, amounting to 6% (six percent) per year from the initial loan balance in accordance with SOE Minister Regulation Number PER-09/MBU/07/2015

From July 2017 to December 2018, the amount of the partnership program loan administration services is set once at the time of lending, amounting to 3% (three percent) per year from the initial loan balance in accordance with SOE Minister Regulation Number. PER-02/MBU/7/2017.

Funds for the Partnership Program to Foster Partners are channeled in the form of:a. Loans to finance working capital and/or purchase

of fixed assets in order to increase production and sales;


b. Special loans to finance needs that are short-term in order to fulfill orders from business partners of trained partners;

c. Guidance burden:1) To finance education, training, research, apprenticeship, marketing, promotion, which involves improving

the quality of human resources and the ability to manage their business;2) Guidance expenses are grant and the maximum amount is 20% (twenty percent) of the Partnership Program

funds distributed in the current year; and3) Guidance expenses can only be given to or for the benefit of the Development Partner.

COMMUNITY DEVELOPMENT PROGRAM

The Community Development Program, hereinafter referred to as the BL Program, is an empowerment program for the social conditions of the BUMN in the business area of the BUMN through the utilization of BUMN funds.

The Community Development Program is distributed in the form of:a. Assistance to victims of natural disasters;b. Educational assistance, can be in the form of training, infrastructure and educational facilities;c. Health improvement assistance;d. Assistance in developing infrastructure and/or public facilities;e. Aid for religious facilities;f. Nature conservation assistance;g. Community social assistance in the context of poverty alleviation, including for:

1) Electrification in areas that have not yet been electrified;2) Provision of clean water facilities;3) Provision of toilet facilities for washing toilets;4) Educational assistance, training, apprenticeship, promotion and other forms of assistance related to

efforts to increase the economic independence of small businesses in addition to the Partnership Program Development Partners;

5) Home improvement for the poor;6) Nursery assistance for agriculture, livestock and fisheries; or7) Business equipment assistance.

PKBL Vision PKBL Mission

To care for the interests of society and the environment by contributing to the sustainable economic development and community empowerment, especially in the housing/residential area, which is the Company’s core business.

1. To improve the welfare of society and environment 2. To develop the Bank’s value and culture3. To establish a positive Bank’s image in the public eye4. To enhance the cooperation and mutual respect with

the communities and the environment where the Bank Offices operate.




THE STRUCTURE OF PKBL ORGANISATION 2018

CORPORATESECRETARY

ADMINISTRATION& PROTOCOL

INVESTORRELATIONS

CORPORATEPROMOTION &

MEDIA RELATION

MARKETINGCOMMUNICATION

COORDINATOR

INVESTORCOMMUNICATION

CAPITAL MARKETSUPPORT

RESEARCH &VALUATION

WEB CONTENTCOORDINATOR

COMMUNITYDEVELOPMENT

PROGRAM

BUDGETING &ADMINISTRATION

PROTOCOL

CORPORATECOMMUNICATION


PARTNERSHIP PROGRAMThe Partnership Program is an economic empowerment program aimed at improving the capacity of small businesses of the Company’s guided partners in order to become independent while also contributing to improve the welfare of the communities around the operational area. Meanwhile, the Community Development Program is focused on improving the quality of life and empowering the social conditions of the community. [GRI 103-2]

The Company’s partnership program is targeted at partners who have small-scale businesses for investment and/or working capital that are productive, that distributed based on area and sector. Throughout 2018, the Company has provided Rp37,274.07 million loan assistance for the partnership program, which was distributed to 760 partners. This disbursement reached 73.36% of the 2018 meningkat dari tahun sebelumnya sebesar 11,17%. [GRI 103-3]

The performance of the partnership program is assessed based on two indicators, i.e. the effectiveness of fund disbursement and the collectibility of the partnership program refund. In 2017, the effectiveness of fund disbursement reached 73.36%, up from 11.17% in the previous year. The collectability rate is 63.65%, increased from the previous year, which was 32,71%. [GRI 103-3]

Trading Agriculture Fishery

Industry Plantation Creative Industry

Services Farm CB

37.05%

4.3%

22.10%

10.06%

2.86%

19.91%

3.10%0.21%

NUMBER OF PARTNERS(BUSINESS ACTIVITIES)

REALIZATION OF THE PARTNERSHIP PROGRAM FUND DISBURSEMENT (MILLION)

43 1,780

760 32,274

169 6,201

2016 20162017 20172018 2018

PK FUND DISBURSEMENT REALIZATION BY AREA (%)

PK FUND DISBURSEMENT REALIZATION BY SECTOR (%)

0.40%

Sumatera East Java Kalimantan

DKI Jakarta Bali Sulawesi

DI Yogyakarta

West Java

Central Java

East Nusa Tenggara

West Nusa Tenggara

Maluku

Papua

0.56%

0.49%12.95%

4.97%

2.63%

2.68%

21.46%

12.49%

22.62%

1.78%

11.45%

5.70%

0.22%




Highlight of Partnership Program Guiding Farmers Guiding Craftsmen

Since 2016 BTN has assisted the development of 20 citrus farmers in Bangli District, not only helping the capital aspect but also encouraging farmers to innovate by processing the oranges they produced beside of selling fresh oranges.

For this reason, BTN has been collaborating with PT Permodalan Nasional Madani (Persero), and engaging experts in the field of food processing, conducting training on “Practicing the Making of Orange Pie” as a diversification of farmers’ income. The training which was attended by 20 guided partners was carried out on May 8, 2018, with the aim that farmers are able to develop value-added products with oranges as their core product.

Capacity building for MSMEs is also carried out by BTN in collaboration with PT Permodalan Nasional Madani (PNM) toadvancing Micro and Small Enterprises (MSEs) by conducting training and mentoring of brass-cast craftsmen.

In August 2018, BTn and PNM held capacity building activities in Bejijong, Trowulan, and Mojokerto for the BTN’s partner.

COMMUNITY DEVELOPMENT PROGRAMThe Company’s Community Development Program (BL) is a community empowerment program that has the main objective to help improve the welfare of the community, especially the communities surrounding the Company’s operational areas.

The Community Development Funds are channeled through various assistance activities, including education and training, public infrastructure and facilities, religious and worship facilities, and community health and social development for poverty alleviation.

Realisation of Fund Disbursement of Community Development Program In 2017, the realization of the distribution of Community Development Program assistance reached Rp21,782.2 million, increased by 8.78% of the realization of Rp20,023 billion in 2017 which was channeled to the community in 34 provinces through the six working areas of the Company. This disbursement reached 99.01% of the budget in 2018 of Rp22,000 million. [GRI 103-3].

THE COMMUNITY DEVELOPEMENT FUND DISBURSEMENT (RP MILLION)

13.153

20.033

21.782

2016 2017 2018


PERCENTAGE OF COMMUNITY DEVELOPMENT FUND DISBURSEMENT [GRI 413-1]



7%

10%

28%

17%

17%

21%

REALIZATION BY ACTIVITIES (%)

Natural DisasterHealthReligious facilities

Education/Training Public Facilities and Infrastructure Nature conservation

The Social Community Assistance for poverty alleviation

9%

28%

2%

21%

8%

0%

32%

* Community social assistance in the context of poverty alleviation includes: 1. Electrification in areas that have not been electrified.2. Clean water facilities 3. Facilities of Mandi Cuci Kakus (MCK) 4. Education, training, apprenticeship, promotion and other forms of assistance related to efforts to increase the economic independence of Small Businesses in

addition to the Partnership Program5. House repairment for the poor people.6. Assistance for nursery establishment for agriculture, livestock, and fisheries; or7. Assistance for business equipment

Highlights of Community Development ProgramsNATURAL DISASTERS Area of Activities

Symbolic handover of assistance for banjir bandang victim in Banyuwangi By the President Director of Bank BTN witnessed by the Minister of BUMN

Construction of 700 housing units of Earthquake-resistance Houses for Victims of Lombok earthquake in synergy with SOEs




PENDIDIKAN/PELATIHAN Area of Activities

Dirut Bank BTN, Maryono memberikan pembelajaran kepada siswa SDN 32 Kota Bengkulu saat meresmikan penggunaan TBS di SDN 32 tersebut

Mr. Somsub Srisuwan craftman from Thailand sharing skills to make pottery to the craftsmen of Balkondes Karanganyar Magelang

KESEHATAN Area of Activities

Free medical treatments for the residents of the city of Bengkulu

SARANA DAN PRASARANA UMUM Area of Activities

BTN’s Village Economic Center (Balkondes) is a forum where the Bank helps improve the economy of residents in Karanganyar Village, Borobudur - Magelang as one of Borobudur’s tourist villages with proven record as a successful area in pottery industry. It was for this reason that BTN Boarding School in Karanganyar is named “Pottery Academy”.


SARANA IBADAH Area of Activities

Groundbreaking of a Musholla at SMP Negeri 25 Kampung Melayu

PELESTARIAN ALAM Area of Activities

Planting Tree Seeds in Walini

BANTUAN SOSIAL KEMASYARAKATAN DALAM RANGKA PENGENTASAN KEMISKINAN, termasuk untuk :

Area of Activities

Electrification program in areas where electricity was not available.

The Company symbolically gave Electrification Assistance to 6 Villages in Tanjung Bunga District in Larantuka.

Education, training, apprenticeship, promotion and other assistance related to the effort of increasing the economic independence of Small Businesses in addition to the Partnership Program

In order to provide education for workers in the field of welding skills, as an embodiment of the program of “BUMN Hadir untuk Negeri”, aimed at producing workers who have expertise and skills, the Company will held Welding Training and Certification (Vocation Welder) for Batch 4 to 10 are planned for February until October 2018,




BANTUAN SOSIAL KEMASYARAKATAN DALAM RANGKA PENGENTASAN KEMISKINAN, termasuk untuk :

Area of Activities

Home improvement for the needy who were 10 who veterans of East Timor Integration conflict.

Assistance for nurseries in agriculture, livestock and fisheries

There were also social actions taken during the BTN Tour de Borobudur XVII event, One example each participant was given Rp1000 T for every 1 kilometer (km) they made. The estimated social fund distributed reached hundreds of millions of rupiah.

Besides social assistance, the Company also made a different type of contribution to the environment. Coinciding with this cycling event, the Company spread 10,000 fish seeds and planted 1,000 fruit tree seeds in the Jatibarang reservoir area as one of Semarang’s tourist spots.

Donated business apparatus

The Company participated in Farmer Entrepreneurship Service Activities and Digitization of Agricultural Systems in the Regency of Indramayu.


HIGHLIGHT CSREKONOMI Area of Activities

The Company’s President, Budi Satria symbolically handed over the implementation of Bank BTN’s Cheap Market at the Bengkulu City Sport Center.

SENI DAN BUDAYA Area of Activities

The implementation and Preservation of Karanganyar Regional Culture in Earthquake Festival Activities in 2018.

OLAHRAGA Area of Activities

Rock Climbing National Team. A the team was about to compete in the 2018 Asian Games during preparation, they were given support by the Company. This state-owned Bank donated IDR100 million.

The event of signing of support in the form of coaching money symbolically took place at the GOR Sumantri Brodjonegoro, Rock Climbing venue, Kuningan, South Jakarta).

This guidance assistance was given for the Indonesian Rock Climbing achievements who showed great achievements in the 2018 IFSC World Cup international championship series. In the event, which is a series of trials prior to the 2018 Asian Games, held in Russia (April 21-22), Chongqing (May 5-6) and Tai’an, (May 12-13), the Indonesian national team earned 1 gold, 3 silver and 3 bronze medals.




PENDIDIKAN Area of Activities

Training for OG Trainers on Creative Homes.

KESEHATAN Area of Activities

Free medical treatment for residents of the city of Bengkulu.

SARANA DAN PRASARANA Area of Activities

Provision of Educational Facilities and Infrastructure Support for MI Ma’arif Karanganyar Borobudur by ICW Group and the Company.

PELESTARIAN ALAM Area of Activities

The Company also contributed to the environment by planting trees around Bank BTN Karanganyar Housing that was held to commemorate of the International Council Women’s Visit on October 18-19, 2018.


SUPPORTING INFORMATION

GRI Standards Index 178Attachment II POJK 51/2017 Index 181Independent Assurance Statement 184




GRI STANDARDS INDEX2018 Sustainability Report of Bank BTN is compiled ‘in accordance’ with GRI Standards Guidelines with ‘core’ option. This report also refers to information as disclosed for public in 2018 Annual Report of Bank BTN. [GRI 102-54, 102-55]

General Standard Disclosure (based on 2016 GRI Standards)

Disclosure of Information Page

ORGANIZATIONAL PROFILE

GRI 102-1 Name of organization 32

GRI 102-2 Primary brands, products, and services 51

GRI 102-3 Location of headquarters 52-54, 188

GRI 102-4 Number of countries of operations 52-54

GRI 102-5 Nature of ownership and legal form 55

GRI 102-6 Markets served 52-54

GRI 102-7 Organization scale 15

GRI 102-8 Information regarding employees and other workers 119

GRI 102-9 Organization’s supply chain 76

GRI 102-10 Significant changes throughout the reporting period 33

GRI 102-11 Precautionary principle 67, 70, 103

GRI 102-12 External initiatives 34

GRI 102-13 Memberships or associations 78

STRATEGY

GRI 102-14 Statement from the senior decision-maker 19-21

GRI 102-15 Key Impact, risks, and opportunities 15

ETHICS AND INTEGRITY

GRI 102-16 Values, principles, standards and norms of behavior 46, 71, 73

GRI 102-17 Mechanisms for advice and concerns regarding ethics 75

GOVERNANCE

GRI 102-18 Governance structure 48-49

STAKEHOLDER ENGAGEMENT

GRI 102-40 List of stakeholder groups 77-78

GRI 102-41 Collective Bargaining Agreements 114

GRI 102-42 Identifying and selecting stakeholders 77

GRI 102-43 Approach for stakeholder engagement 77-78

GRI 102-44 Key topics and concerns 77-78

REPORTING PRACTICES

GRI 102-45 Entities included in the organization’s consolidated financial statements 25

GRI 102-46 Process to determine the report content and topics boundaries 25

GRI 102-47 List of material topics 26-27

GRI 102-48 Restatement of information 25

GRI 102-49 Changes in reporting 25

GRI 102-50 Reporting period 24

GRI 102-51 Date of most recent previous report 24

GRI 102-52 Reporting cycle 24




Disclosure of Information Page

GRI 102-53 Contact point for questions regarding the report 27

GRI 102-54 Claims of reporting In accordance with the GRI Standards 25

GRI 102-55 GRI Content Index 180

GRI 102-56 External assurance for the report 186

Specific Standard Disclosures (based on the 2016 GRI Standards)

Disclosure of Informartion Page

ECONOMIC CATEGORY

Economic Performance

GRI 103-1 Description of Material Topics and Boundaries 82

GRI 103-2 Management Approach and its Components 83

GRI 103-3 Management Approach Evaluation 99

GRI 201-1 Direct economic value generated and distributed 98

Indirect Economic Impact




GRI 203-2 Significant indirect economic impacts 158

Anti Corruption




GRI 205-2 Communication and training regarding Anti-Corruption 76

ENVIRONMENTAL CATEGORY

Material




GRI 301-1 Utilization of Materials 104

Energy




GRI 302-2 Energy consumption within the organization 105

GRI 302-3 Energy Intensity 105

GRI 302-4 Reduction of energy consumption 105

Water




GRI 303-1 Water withdrawal by source 105

Emission




Disclosure of Informartion Page


GRI 305-2 Indirect GHG emissions (scope 2) 105

SOCIAL CATEGORY

Employment




GRI 401-1 Number and rates of new employee hires and employee turnover 116

Occupational Health and Safety




GRI 403-2 Type of injury and rates of injury 118

Training and Education


GRI 103-2 Management Approach and its Components 110, 112,113


GRI 404-1 Average hours of training Rata-rata jam pelatihan per tahun per karyawan adalah

XXX jam

GRI 404-2 Programs for skills management and lifelong learning 113

Diversity and Equal Opportunity



GRI 103-3 Management Approach Evaluation 112, 114

GRI 405-1 Composition and diversity of governance organs 119

GRI 405-2 Ratio of basic salary and remuneration of female to male 115

Local Community


GRI 103-2 Management Approach and its Components 158, 167

GRI 103-3 Management Approach Evaluation 161, 167

GRI 413-1 Local community engagement 158

Marketing and Branding




GRI 417-2 Incidents of non-compliance regarding product and service information and branding Sepanjang tahun 2018 tidak terjadi insiden

ketidakpatuhan terkait informasi dan pelabelan

produk dan jasa




ATTACHMENT II POJK 51/2017 INDEXRegulation of the Financial Services Authority Number 51/POJK.03/2017 regarding the Implementation of Sustainable Finance for Financial Institutions, Issuers, and Public Companies

APPENDIX II

No Sustainability Report contains information regarding Page

1 Sustainability Strategy Description

2 Performance Overview of the Sustainability Aspect

a. Economic aspect

1) Quantity of production or services sold; 98

2) Income or sales; 98

3) Net profit or loss; 96

4) Environmentally friendly products; and 130-151

5) Involvement of local parties related to the business process of Sustainable Finance. 8

b. Environmental aspect

1) Energy consumption (among others electricity and water) 105

2) Reduction of emissions generated 105

3) Reduction of waste and effluent 105

4) Biodiversity preservation. tidak dilaporkan

c. Description of the positive and negative impacts generated through the implementation of Sustainable Finance for the community and the environment.

Belum dilaporkan; RAKB diterapkan pada tahun 2019

3 Brief profile

a. Vision, mission, and sustainable values 46

b. Name, address, telephone number, fax number, e-mail address, and website of Financial Services Institution, Issuer, and Public Company, as well as branch offices and/or representatives offices

52, 54, 188

c. Business scale 15

1) Total assets or asset capitalization, and total liabilities 85

2) Number of employees 119

3) Share ownership percentage 55

4) Operational area. 52-54

d. Brief description of the products, services, and business activities performed; 51

e. Membership in associations; 78

f. Significant changes, including related to branch closure or opening, and ownership structure. 33



4 Explanation of the Board of Directors containing:

a. Policies to address to challenges in meeting sustainability strategies, at least include:

1) Description of the value of sustainability for the Company; 19-21

2) Description of the Company’s response to issues related to the implementation of Sustainable Finance;

7

3) Description of the commitment of the head of the Financial Service Institution, Issuer, and Public Company in achieving the implementation of Sustainable Finance;

19-21

4) Performance achievement of the implementation of Sustainable Finance; and Belum dilaporkan, RAKB diterapkan pada 2019

5) Challenges in achieving performance in implementing Sustainable Finance. Belum dilaporkan, RAKB diterapkan pada 2019

b. Implementation of Sustainable Finance, at least includes:

1) Performance achievement concerning the implementation of Sustainable Finance (Economic, Social and Environmental) when compared to the target; and

Belum dilaporkan, RAKB diterapkan pada 2019

2) Description of achievements and challenges, including event highlights throughout the reporting period (for Financial Service Institutions required to provide the Sustainable Financial Action Plan)


c. Target achievement strategies, at least include:

1) Risk Management for the implementation of Sustainable Finance related to the Economic, Social and Environmental aspects;

7-9

2) Utilization of business opportunities and prospects; and 7-9

3) Description of external economic, social and environmental conditions that have the potential to affect the sustainability of the Financial Service Institutions, Issuers and Public Companies.

7-9

5 Sustainable governance that includes:

a. Description of the duties of the Board of Directors and the Board of Commissioners, employees, officials and/or work units that are responsible for the implementation of Sustainable Finance.

48-49

b. Description of competency development performed for members of the Board of Directors, members of the Board of Commissioners, employees, officials and/or work units that are responsible for the implementation of Sustainable Finance.

Diuraikan dalam Laporan Tahunan 2018, Bagian Tata

Kelola

c. Description of the procedures of Financial Services Institutions, Issuers and Public Companies in identifying, measuring, monitoring, and controlling risks for the implementation of sustainable finance related to the economic, social and environmental aspects, including the role of the Board of Directors and the Board of Commissioners in managing, conducting periodic reviews, and reviewing the effectiveness of the risk management process of Financial Service Institutions, Issuers and Public Companies.

7-9

d. Description of stakeholders, which includes:

1) Stakeholder engagement based on the assessment results of the management, GMS, decree or others; and

77-78

2) The approach used by Financial Service Institutions, Issuers, and Public Companies in engaging the stakeholders in the implementation of Sustainable Finance, including in the form of dialogue, surveys, and seminars.

77-78

e. Issues faced, developments, and influence regarding the implementation of Sustainable Finance. 77-78





6 Sustainability performance contains at least:

a. Description of activities to develop the sustainability culture within the Financial Service Institutions, Issuers, and Public Companies.

71-76

b. Description of economic performance over the last 3 (three) years, which includes:

1) Comparison of target and production performance, portfolio, financing or investment target, income and profit and loss in the case of a Sustainability Report prepared separately from the Annual Report; and


2) Comparison of target and portfolio performance, financing targets, or investments in financial instruments or projects that are in line with the implementation of Sustainable Finance.


c. Social performance over the last 3 (three) years:

1) Commitments of Financial Service Institutions, Issuers, or Public Companies to provide equal services for products and/or services to consumers.

133

2) Employment, containing at least:

a. Statement of equality of employment opportunities and the presence or absence of forced labor and child labor;

112-114

b. Percentage of employee’s remuneration that remains at the lowest level against the regional minimum wages;

115

c. Decent and safe working environment; and 117-118

d. Employee capabilities training and development. 110, 112-113

3) Society, containing at least:

a. Information regarding activities or operational areas that generate positive and negative impacts on the surrounding communities, including financial literacy and inclusion;

158-167

b. Public complaint mechanism and number of public complaints received and followed-up; and

158-167

c. TJSL that can be linked to support the Sustainable Development Goals, including the types and achievements of the Community Empowerment program activities.

158-167

d. Environmental performance of the Financial Service Institutions, Issuers and Public Companies, containing at least:

1) Environmental costs incurred; 106

2) Description regarding the use of environmentally friendly materials, including the use of recycled material types; and

104

3) Description regarding energy consumption, containing at least:

a. The amounts and intensity of energy used; and 104

b. Efforts and achievements of energy efficiency implemented, including the use of renewable energy sources.

104

e. Sustainable Financial Products and/or Services development responsibility

1) Innovation and development of Products and/or Services. 133-151

2) Number and percentage of products and services that have been evaluated for customer safety.

100%

3) Positive and negative impacts arising from Products and/or Services and the distribution process, as well as mitigation performed in order to overcome the negative impacts.

Tidak dilaporkan

4) The numbers of products recalled and the reasons. Nihil

5) Customer satisfaction survey. Tidak dilaporkan

7 Written verification from an independent party, if any. 184-185


PT. Moores Rowland Indonesia Jl. Sisingamangaraja No. 26 – Jakarta Selatan 12120 - Indonesia

Tel: +62 21 720 2605 - Fax: +62 21 720 2606 - www.moores-rowland.com

Independent Assurance Statement Report No. 0419/BD/0014/JK

To the management of PT Bank Tabungan Negara, Tbk We were engaged by PT Bank Tabungan Negara, Tbk (‘BTN’) to provide assurance in respect to its Sustainability Report 2018 (‘the Report’). The assurance engagement was carried out by our highly experienced assurance team whose diverse and complementary skills ensure a high level of competence in carrying out their duties. Independence We carried out all assurance undertakings with independence and autonomy having not been involved in the preparation of any key part of the Report. Nor did we provide any services to BTN during 2018 that could conflict with the independence of the assurance engagement. Assurance Standards Our work was carried out in accordance with ISAE3000 ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ issued by the International Auditing and Accounting Standards Board. In addition, the work was also planned and carried out to conform to AA1000AS (2008) ‘AA1000 Assurance Standards (2008)’, issued by AccountAbility. Level of assurance and criteria used By designing our evidence-gathering procedures to obtain a limited level of assurance based on ISAE3000 and a moderate level of assurance engagement as set out in AA1000AS (2008), readers of the report can be confident that all risks or errors have been reduced to a very low level, although not necessarily to zero. Moreover, the Report was also evaluated in accordance with the criteria of AA1000 AccountAbility Principles Standard (2008) of Inclusivity, Materiality and Responsiveness.

Scope of Assurance We provided a Type 2 assurance engagement under AA1000AS (2008). This involved: 1) assessment of BTN’s adherence to the AA1000

AccountAbility Principles Standard (2008); and 2) assessment of the accuracy and quality of the

specified sustainability performance information contained within the Report, in relation to the agreed scope, which consisted of: Partnership program Community stewardship program Human resources development.

Responsibility

BTN is responsible for the preparation of the Report and all information and claims therein, which include established sustainability management targets, performance management, data collection, etc. In performing this engagement, meanwhile, our responsibility to the management of BTN is solely for the purpose of verifying the statements it has made in relation to its sustainability performance, specifically as described in the agreed scope, and expressing our opinion on the conclusions reached. Methodology

In order to assess the veracity of certain assertions and specified data sets included within the report, as well as the systems and processes used to manage and report them, the following methods were employed during the engagement process: Review of report, internal policies, documentation,

management and information systems Interview of relevant staff involved in

sustainability-related management and reporting Following data trails to the initial aggregated

source, to check samples of data to a greater depth.



PT. Moores Rowland Indonesia Jl. Sisingamangaraja No. 26 – Jakarta Selatan 12120 - Indonesia

Tel: +62 21 720 2605 - Fax: +62 21 720 2606 - www.moores-rowland.com

Limitations Our scope of work was limited to a review of the accuracy and reliability of specified data and interviews with data providers, persons in charge of data collection and processing, as well as persons in charge of sustainability performance-related information. Conclusions Conclusions in regard to adherence to the AA1000 AccountAbility Principles of Inclusivity, Materiality and Responsiveness include the following findings: Inclusivity

An assessment was made on whether BTN has included all key stakeholders in developing and achieving an accountable and strategic response to sustainability issues. Demonstration of BTN’s strong commitment to stakeholder inclusivity included the conduct of needs assessment surveys and materiality level survey of the key stakeholder groups. Thus our overall assessment was that BTN has set in place an effective system that enables key stakeholders to participate in the development of the organization's response in the context of sustainability. In order to maintain and strengthen the effectiveness of this inclusivity, however, we recommend that BTN carries out regular monitoring of its systems and procedures and implements improvements where necessary.

Materiality With stakeholders requiring material information on which to base their informed judgments, decisions and actions, an assessment was carried out to determine the extent to which BTN has included such information in the Report. BTN’s strong commitment to meet stakeholder needs in this field was evidenced by the provision of adequately reported and balanced information on key material issues. Nevertheless, as demands for information continue to increase, we recommend that BTN conducts materiality tests on a regular basis for inclusion in future reports.

Responsiveness

It is increasingly important to respond in meeting stakeholder expectations and an assessment was carried out to determine the degree to which BTN demonstrates its accountability in this area. BTN's allocation of resources to stakeholder engagement, the timeliness and accessibility of reported information, and the types of communication mechanisms regularly employed were all indicative of its responsiveness to key stakeholder concerns and expectations. As in other areas, however, vigilance is a key and we recommend that BTN conducts regular monitoring and improves stakeholder engagement procedures where necessary in future reports.

Based on our limited assurance engagement, nothing has come to our attention that causes us to believe the data of the Report has been materially misstated. Jakarta, April 22, 2019

James Kallman Chief Executive Officer Moores Rowland is an international organization specializing in audit, accounting, tax, legal and advisory services. Moores Rowland is a member of Praxity AISBL, the world's largest Alliance of independent and unaffiliated audit and consultancy companies. With more than 33,400 professionals operating in 97 countries across the globe, each sharing the same values and sense of responsibility, Praxity is served by Moores Rowland in Indonesia, one of the leading sustainability assurance providers.


PT Bank Tabungan Negara (Persero) TbkMenara Bank BTNJl. Gajah Mada No. 1 Jakarta 10130T. 021 - 6336 789, 6332 2666F. 021 - 6346 704Email: [email protected] Center: 1500286