Bank Indonesia to set up credit information bureau

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.