Slow Credit Growth Expected to Continue in 2016

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  • TEMPO.CO, Jakarta - The slowdown in bank credit is expected to last into the next year following weak economic growth. Raden Pardede, c-founder of the Creco Institute, said that credit growth is likely to fall from an average of 20 percent to just 15-17 percent per year.

    "Until April, lending rate only grew by one percent. There is a chance that the actual growth rate is lower than that," he told Tempo yesterday.

    According to the Financial Services Authority (OJK), commercial bank's third-party loan in April 2015 only amounted to Rp3,745 trillion. The slowdown was mainly in rupiah-denominated loans, which only rose by 10.3 percent. Meanwhile, loans in foreign currency rose 10.6 percent.

    The distribution of third-party funding from commercial banks only grew 11 percent to Rp1,331 trillion. Regional development banks recorded a better achievement with a 12.8 loan growth to Rp307 trillion. Meanwhile, mixed banks recorded a credit disbursement decline of 4.4 percent to Rp194.1 trillion

    Raden said government spending this year could give a slight push to credit growth until the end of the year. However it will not have much effect. The public's trust is also declining as there is yet to be some kind of materialization in state capex spending despite the taxes they paid.

    Raden estimates that the public will opt to wait until the government spends their tax money on something they actually need. Once they see some sort of an actual use, the demand for credit could increase.

    "If [the government] want credit to grow, they must first obtain the public's trust," he said.