Banks shift to consumer credit
The Jakarta Post, Jakarta
Banks will concentrate more of their efforts on consumer lending, due to the huge growth potential and the increased scrutiny of corporate loans, according to top bankers.
"For the next three years, consumer lending will continue to be the main driver of bank loans," said Bank Permata director Elvyn Masassya during a seminar here.
Permata is the country's seventh largest lender in terms of volume.
During the next three years, he added, motorcycle and home mortgages were estimated to grow by 35 percent annually, while credit card and car loans would rise by between 20 percent and 25 percent, respectively.
Bank Rakyat Indonesia (BRI), the fourth largest, shared the same opinion, with vice president Wayan Alit Antara saying that consumer loans would continue to be the "engine of growth" for the foreseeable future.
Indonesia's relatively low amount of individual debt, which collectively stood at 9.5 percent of gross domestic product (GDP), leaves a lot of room for growth.
"However, corporate loans also need to grow because, unlike consumer loans, they have a huge trickle-down effect on the economy," said Antara.
Bank Indonesia data shows that consumer loans had grown by an average of some 40 percent in the past five years, from about Rp 40 trillion in 2000 to Rp 151 trillion last year. The growth has allowed consumer loans to contribute 27.3 percent to the total of outstanding bank lending, as compared to 14.9 percent in 2000.
By comparison, corporate loans grew by about 15 percent per year during the same period.
Elvyn attributed the slower growth of corporate loans, in part, to tougher regulations issued by the central bank, especially on risk management, in a bid to prevent more defaults.
"Corporate loans will, at best, grow by 15 percent per year," he said, adding that it would then encourage them to divert more of their funds to consumer loans, which are perceived to carry lower risks.
"Banks that traditionally focused on corporate lending will be burdened by the requirement and will shift to consumer lending," said Elvyn.
Sigit Pramono, president director of Bank Negara Indonesia (BNI), also revealed that there was a tendency for banks to try and reduce their dependence on corporate loans amid the growing attractiveness of consumer loans.
BNI is the nation's third largest bank, and lends 41 percent of its loans to corporations.
Sigit said that consumer loans had become the main attraction of the sector, thanks to the market potential and the lower risk relative to corporate loans.
However, he said that even though consumer loans carried a lower risk, the risk could be lowered further by the formation of the much-anticipated credit bureau.
"To be honest, there have been a number of consumers who had bad credit at one bank and still received a new loan approval from another bank," said Sigit. "This is very dangerous to banks, but made possible because, currently, nobody can check the credit history of an individual." (002)