Credit Disbursement Decelerates on Sluggish Economy

TEMPO.CO, Jakarta – Bank credit disbursement is expected to decelerate in the first quarter this year, triggered by low purchasing power and sluggish business and industry activities.

The Financial Services Authority (OJK) noted that commercial bank lending from the beginning of 2015 until February reached Rp3.66 quadrillion, a decline from last year's Rp3.67 quadrillion.

State banks are experiencing the same thing, with lending rates declining from Rp1.32 quadrillion by the end of last year to Rp1.31 quadrillion in February 2015.

Credit slowdown is also evident in the 2015 first quarter banking survey released by Bank Indonesia (BI), particularly in consumer credit.

BI deputy governor Halim Alamsyah said that in the first quarter and the second, credit growth will remain below expectations. Therefore, the central bank is working with the OJK to encourage credit expansion.

One way to do that, Halim said, is by giving banks the opportunity to issue bonds so that their lending capacity will intensify.

"High lending capacity will lower the cost of funds and encourage loan disbursement to SMEs," he said.

Decelerating credit growth in the first quarter was triggered by an economic slowdown, high interest loans, and a sluggish micro-credit industry. "Today, the banking industry's credit risk has also increased," said Bank Danamon's chief financial officer Vera Eve Lim.

Bank Danamon recorded a lending decline of 2.37 percent to Rp135.7 trillion in February compared to December 2014's Rp139 trillion.

RR