Domestic banks will rely on consumers to drive lending growth again this year, as corporate demand is expected to remain stagnant because of fears about the free-trade agreement with China and the political risk from the Bank Century bailout investigation, analysts said.
While businesses are adopting a wait-and-see stance, lenders are lowering interest rates on loans for consumer products such as motorbikes, cars and electrical appliances, and lowering rates on home mortgages and credit cards.
At the end of November, consumer lending had risen 17.3 percent in 2009 compared with 2008, while lending to the corporate sector had contracted 3.1 percent, according to Bank Indonesia.
“With the implementation of the Asean-China FTA and the continuing fallout over the Bank Century case, business players will tend to extend their wait-and-see positions,” before spending money to expand operations, Henry Pranoto, a banking analyst at PT Andalan Artha Advisindo Sekuritas, said on Thursday. Therefore, most lending growth would come from consumer credit and micro-credit segments, he said.
Analysts worry that the economy will suffer if this trend continues, because consumer loans don’t carry the same knock-on effect in stimulating the economy as corporate lending.
Djimanto, the secretary general of the Indonesian Employers Association (Apindo), said businesses were waiting to see how much the government would ease procedures involving infrastructure investment during its first-100-days program before making any major investment or borrowing decisions.
“We are still waiting to see the results of the government’s efforts to realize its 100-days program. If it is proven to ease investment, business players will surely expand their operations and seek external financing,” Djimanto said.
Jahja Setiaatmadja, vice president director of PT Bank Central Asia, said the bank was having difficulties encouraging businesses to take up loans that had already been approved.
At the end of November, total non-disbursed approved credit had climbed 20 percent to Rp 297 trillion ($32.37 billion), compared with Rp 247 trillion at the end of 2008, according to Band Indonesia data.
Hoping to achieve 20 percent lending growth this year, Bank Indonesia is preparing incentives to spur lending, including permitting banks to lower their statutory reserves according to the amount of loans they disburse.
Overall lending grew just 10.7 percent last year, below the central bank’s target of 15 percent, as companies were reluctant to take on further debt and many lenders were wary of adding risk.
A Bank Indonesia survey found that lenders would lower consumer loans to a range of 9.8 percent to 19.6 percent this year, from 10.2 percent to 22.8 percent last year.