Promising Start for Loan Growth in 2017

Bank Indonesia Governor Agus Martowardojo, center. and Deputy Governors Perry Warjiyo, left, and Erwin Rijanto at a press conference on Thursday (18/05), announcing the central bank's decision to keep its benchmark rate steady at 4.75 percent (Antara Photo/Muhammad Adimaja)

By : Tabita Diela | on 12:38 PM May 19, 2017
Category : Business, Banking/Finance

Jakarta. Lending activities showed a promising start for local banks in the first four months of this year, bolstering chances for further economic recovery for the rest of the year.

Lending from commercial banks grew by 9.5 percent in April from a year earlier, accelerating from March's 9.2 percent and February's 8.6 percent, Bank Indonesia, the country's central bank, said on Thursday (19/05).

Data from Indonesia's Financial Services Authority (OJK) showed outstanding loans at Indonesian commercial lenders had amounted to Rp 4,308 trillion ($323 billion) in February.

"Credit growth looks promising, showing a consistent recovery since the beginning of the year," Dian Ayu Yustina, an economist at Bank Danamon Indonesia, said in a note.

"A rebound was seen especially in foreign currency loans, as exports have improved quite substantially this year," Dian said.

Loan growth was seen mostly in sectors related to infrastructure, including agriculture, utility and construction.

Previously, Finance Minister Sri Mulyani Indrawati said loan growth is likely to accelerate by as much as 11 percent this year on the back of healthy performances by banks.

Bank Indonesia meanwhile expects loan growth to reach around 10 percent to 12 percent this year thanks to rising economic growth and the impact of monetary policy easing.

Bank Indonesia Governor Agus Martowadojo said local lenders have struggled with bad loans and have been more cautious in giving out new loans, limiting the effectiveness of the central bank's policy easing, which included a total rate cut of 150 basis points last year.

The central bank has maintained its benchmark interest rate steady at 4.75 percent since October last year, including at Thursday's policy meeting.

Non-performing loans (NPLs) stood at 3 percent (gross) or 1.3 percent (net) by the end of March, both still below the 5 percent threshold that will be deemed as alarming by the central bank.

"Loans, especially corporate ones, have started to grow but there's still slowdown on the commercial side. Normally, when there's a slowdown, the NPL would be on the rise," Bank Indonesia Deputy Governor Erwin Riyanto told reporters.

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