Bank Credit Surges, Unexpected Sector Becomes Main Engine

Bank lending growth returned to double digits in May 2026, reaching 10.8% year-on-year (yoy) with total outstanding loans of Rp8,759.0 trillion, according to Bank Indonesia’s money supply report released on Tuesday (23/6/2026). This marks the highest growth since August 2024, rebounding from the single-digit rates seen in recent months. The acceleration was primarily driven by investment credit, which surged 20.5% yoy, compared to 7.9% growth in working capital loans and a slower 5.8% increase in consumer credit. This composition indicates that business expansion and productive asset development, rather than household consumption, are the main forces behind the lending boost. Within investment credit, the construction sector posted the most significant leap, soaring 65.1% yoy to an outstanding value of Rp292.6 trillion, up from Rp177.3 trillion a year earlier. Working capital loans for construction also grew strongly at 26.6% yoy, reaching Rp290.7 trillion. Unlike the infrastructure boom under the previous administration, which was dominated by large-scale toll road projects, the current surge is attributed to more decentralised development. A key driver is the government’s Merah Putih Village Cooperative (KDKMP) programme, which requires the construction of outlets, warehouses, and supporting facilities across numerous regions. A Finance Minister Regulation (PMK No. 15/2026) effective from 1 April 2026 facilitates the use of general allocation funds and village funds to accelerate the physical development of these cooperatives. By 16 May 2026, 9,294 such cooperatives had been built, with 1,061 already commencing simultaneous operations.