* BRI targets 18% profit growth in 2021

* Non-performing loans seen at around 3% this year

* Plans to make unit BRI Agro a fully digital bank within 2 years

JAKARTA, April 28 (Reuters) - Indonesia's biggest lender by assets, Bank Rakyat Indonesia (BRI), is targetting up to an 18% jump in profits in 2021 as an economic recovery from the COVID-19 pandemic bolsters demand for loans, its chief executive told Reuters.

The bank, which manages a portfolio dominated by lending to micro, small and medium enterprises, saw profits drop 45.8% last year to 18.66 trillion rupiah ($1.29 billion) as consumption and investment slumped in Southeast Asia's largest economy.

BRI restructured a fifth of its loans last year held by 2.8 million customers, but kept the non-performing loan (NPL) ratio at just below 3%, versus 2.80% in 2019, while hiking provisions.

This year, BRI is targeting net income of 20 trillion to 22 trillion rupiah, President Director Sunarso said in an interview on Tuesday, with 7% annual loan growth and NPL levels at 3%.

BRI's loans grew 4% last year, down from 2019's 8.44%.

Sunarso, who uses one name, said meeting the profit target would still take "extraordinary efforts" given weak loan demand.

"Our strategy is BRI will focus on segments of credit that have the potential to grow, which is the micro segments including in agriculture, food, medical equipment and medicine," he said.

Indonesia's economy contracted for the first time in over two decades last year, by 2.07%, but the government expects 5% growth this year supported by a mass vaccination drive and fiscal and monetary stimulus.

Sunarso said some small business customers had lost most of their income during the pandemic.

The government has budgeted more than $80 billion for pandemic relief, while the central bank has cut rates by 150 basis points and injected over $55 billion liquidity into the banking system to support the economy.

Bank Indonesia's quantitative easing had prevented a liquidity crunch, but loan demand remained tepid, Sunarso said.

BRI, a state bank founded in 1895, has the most extensive branch network in the archipelago of 17,000 islands, making it best placed to promote government programmes such as subsidised loans and grants, Sunarso said.

BRI's strategy to emerge from the pandemic-induced slump includes promoting digital banking amid a boom in online payments during lockdowns, Sunarso said, adding that BRI will convert its unit BRI Agro into a digital bank within two years. ($1 = 14,480.0000 rupiah) (Reporting by Tabita Diela; Editing by Gayatri Suroyo and Ed Davies)