Indonesia's investment loans drop as economy slows down
2013-10-15 10:40:00
The banking industry may have to brace for a moment of sluggish disbursement in investment loans with the domestic economy predicted to take a “breather” this year.
According to the latest economic and financial statistics (SEKI) published by Bank Indonesia (BI), the industry has already been showing a slower rate of credit disbursements since July, thanks to macro-prudential measures carried out by the central bank to curb inflation and pursue economic stability.
The statistics show that the most significant slowdown recorded so far was in the investment loans segment. The month-on-month growth stood at 11.4 per cent in June to stand at 697.91 trillion rupiah (US$61.42 billion).
However, it crept to 2.1 per cent in July with outstanding loans reaching 712.92 trillion rupiah and decelerated again to 1.8 per cent in August, when loans amounted to 725.8 trillion rupiah.
The University of Indonesia’s economist, Lana Soelistianingsih, acknowledged that a higher BI rate had driven the investment loans disbursement to a slower pace.
“Banks began to pick up the [higher rate] signal back in June and have since opted to be more cautious in disbursements to maintain risks.”
BI increased its benchmark interest rate by 150 basis points (bps) to 7.25 per cent between May and September and boosted its lending facility rate, up 50 bps to 7.25 per cent during the same period.
As a result, the total outstanding loans only surged 2.1 per cent month-on-month to 3.06 quadrillion rupiah in July, whereas they rose by 2.5 per cent in the previous month. The slower rate continued in August as the loans reached 3.1 quadrillion rupiah, up slightly by 1.5 per cent.
In early October, BI Governor Agus Martowardojo reaffirmed that overall lending would grow by only around 20 per cent in 2013, lower than its previous growth range of 22 per cent and 24 per cent.
The World Bank also noted the credit growth moderation in its latest report, with adjustment in monetary policy happening in East Asia and Pacific countries, including Indonesia.
The statistics also reveal that almost all sectors reported rate deceleration, but some of the sectors that suffered significantly were agriculture, manufacturing, electricity, trade and services.
In terms of bank types, private lenders remained those disbursing investment loans the most, making up almost half the outstanding figure, followed by state-owned banks with 33.9 per cent, foreign and joint venture banks with 11.9 per cent, regional development banks (BPDs) with 3.9 per cent and rural banks (BPRs) with 0.4 per cent.
It turns out, however, that state lenders recorded the greatest deceleration, according to the statistics, from the rate of 37.9 per cent month-on-month in June to 0.9 per cent in July and to 0.8 per cent in August.
State-owned Bank Rakyat Indonesia (BRI) commercial business director Sulaiman Arif Arianto said that even if the bank’s outstanding investment loans figure might slow down, it was still optimistic to post a growth target of 20 to 22 per cent in its overall lending.
“An investment loan is generally a multiyear commitment. So, the funds withdrawal will depend on the client’s needs.”
In August, BRI’s outstanding investment loans grew 2.9 per cent month-on-month to 71 trillion rupiah; while in July, the figure surged three per cent from the previous month. Most of the loans were channelled to the agriculture, trade and industry sectors.
Bank Central Asia (BCA) corporate business director Dhalia Mansor Ariotedjo maintained her optimism that strong domestic demand which is one of the private lender’s primary segments would help BCA’s lending business this year amid economic slowdown.
“We haven’t seen clients postpone or cancel their facilities so far.”