Bank credit sluggish, affected by slow economy

JAKARTA. The efforts to boost economic growth are unlikely to have significant results. The credit of banking sector, which is expected to drive domestic economy, even becomes more sluggish.

Government actually has released various policies to relax the regulations on credit allocation. However, the credit allocation is still stagnant, or even becomes slower.

As of August 2016, banking credit only grew by 6.65% to IDR4,177.31 trillion. The result has led Financial Service Authority (FSA) to reduce the target of credit growth for this year.

Chairman of FSA Commissioners Board Muliaman D. Hadad said that banks are unlikely to meet a 11%-12% of credit growth target set under bank business plan (RBB). “The credit realization is below the target. We revised the target to the range of 6%-7%”, Muliaman said.

The projection is nearing the prediction of BI (the Central Bank) that the credit growth will stand at around 7%-9%, or lower than 10.4% growth in the last year.

According to Muliaman, the slow credit allocation was caused by three factors, namely the sluggish economic growth, early loan repayment, and the increases in reserves to maintain the ratio of non-performing loan (NPL). To date, the bank’s NPL ratio is ranging at 3.2%.

Executive Director of Monetary and Economic Policies Department at BI Juda Agung said that the demands for credits are low due to the slow economic growth. This has led corporates to hold the credit application. BI estimates that as per September 2016 credit will become slower at the level of 6%. “”It will be lower than the growth in August 2016”, Juda said.

Juda predicted that the credit demands will start increasing in November-December, on the grounds that the banks will pursue the target of credit allocation. BI projected the real credit growth will be at around 8% during the period.

President Director of Bank Central Asia (BCA) Jahja Setiaatmadja said that the sluggish credit was caused by the low purchasing power and the early loan repayment. BCA predict to book only 6% credit growth in this year. As of August 2016, BCA recorded a 6.38% credit growth.

Meanwhile, President Director of Bank Pan Indonesia (Panin) Herwidayatmo said that credit allocation for all business segments becomes sluggish so that the bank credit grew slowly.

The sluggish demand for credit has led Bank Mandiri to consider reducing the target of credit growth in this year from 13%-14% initial prediction to only 10%-11%. “But our credits still grow by two digits”, said Corporate Secretary of Bank Mandiri Rohan Hafas.

(Muhammad Farid/Translator)