Mon, 14 May 2007
JAKARTA (JP): On the surface, Indonesia's banking sector appears to be on the right track, with first-quarter results in lendings, assets and profitability all having improved from last year.

Yet a closer look at the figures reveals several troubling facts that could offset its achievement. The most important of these is the still significant amount of undisbursed loans and funds placed in central bank bills.

This only adds to the widely criticized practice of lenders placing their excess funds in money market instruments. According to data from Bank Indonesia, as of March undisbursed loans in the domestic banking industry amounted to Rp 167.4 trillion (US$18.6 billion).

Although this is down from the beginning of the year, it is about the same level as December last year, and still represents a 15 percent rise from the first three months of 2006.

Undisbursed loans account for 20 percent of the industry's total outstanding credit, only a slight improvement from 21 percent last year.

Banks also have continued to place their funds from savings and deposits -- which have grown 15 percent to Rp 1,291.4 trillion -- in central bank bills, which have increased to Rp 211.2 trillion.

Another Rp 267.9 trillion has been placed in government bonds.

The issue of undisbursed loans is again in the spotlight, with Finance Minister Sri Mulyani Indrawati questioning why only Rp 43 billion of Rp 25.6 trillion in loans recently committed to the agricultural sector have been disbursed.

State Minister for Cooperatives and Small and MediumEnterprises Suryadharma Ali, during a recent banking seminar, pointed to the complicated lending procedures and requirements, which he said resulting in few committed loans to small businesses being realized.(Urip Hudiono)



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