Bank Indonesia to set up credit information bureau

Tony Hotland, Jakarta

Bank Indonesia (BI) is developing a credit information bureau to help the country's commercial banks obtain more comprehensive information about debtors and increase lending to the business sector.

Director of bank licensing and information at BI, Siti Fadjrijah announced on Wednesday that the bureau would be beneficial for both large and small banks, as well as small and medium enterprises (SMEs), which often face difficulties in obtaining loans, partly due to the lack of information about them.

"The banking sector is facing problems in analyzing the credit risks due to limited information about the history of a debtor," Siti explained during a seminar on Wednesday.

The country's banks have been reluctant to push lending to the corporate sector despite the significant reduction in domestic interest rates. This is mainly due to the lingering risk in the corporate sector. Banks are now more cautious about lending to companies as the central bank also raised the minimum lending criterion following the collapse of many banks during the late 1990s financial crisis.

Currently, the banking sector loan-to-deposit ratio (LDR) level stands at between 40 percent and 50 percent, far from the normal 80 percent to 90 percent, seen during the pre-crisis period. More lending to the corporate sector is essential to accelerate economic growth.

Siti said that the bureau would provide information about all kinds of debtors and their products, all types of loans, retail and corporate debtors, as well as provide much quicker responses to inquiries.

"Basically, it receives, organizes, stores, manages, exchanges and distributes information about debtors and other things related to credit provision among banks.

"We expect the bureau to better our current limited debtor information system (SID) in order to push credit distribution, which, at some point, is caused by the limited data about debtors," she added.

She cited several benefits from the establishment of the bureau, such as to minimize non-performing loans and cut operational costs and time for the bankers, while at the same time improving access to credit and to enabling lower collateral requirements for debtors.

Siti added that a working group -- consisting of 11 banks, one financial institution, representatives from the Ministry of Cooperatives and Small/Medium Enterprises, the Association of Credit Cards, and banking observers -- had completed the blueprint, a code of conduct and regulations for the bureau.

Similar bureaus are common in other countries, such as Thailand, Singapore, Malaysia, Australia, the United States and the United Kingdom.

Furthermore, she said the bureau would not interfere in determining whether to give a certain person or company credit or not as the decision fully lied in the hands of the banks' managers.