Banks to provide more loans for eastern Indonesia
The Jakarta Post, Jakarta
Top bankers have vowed to give full authority to their local branch offices to extend loans to businesses in the eastern part of Indonesia in a move that should help promote economic growth in the region, according to a minister.
The agreement was announced Tuesday by State Minister for the Acceleration of Development in Eastern Indonesia Manuel Kaisiepo on the sidelines of an investment forum in Makassar, South Sulawesi.
Six ministers, led by Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti, as well as Bank Indonesia Governor Sjahril Sabirin, dozens of top bankers, provincial governors, regents and more than 500 businessmen attended the forum.
"Local banks have been given the authority to provide loans," Manuel was quoted as saying by detik.com, adding that previously such loans could not be extended without the approval of bank head offices.
Manuel said that to ensure the sustainability of the deal, a team would be assigned to review the progress of the agreement every three months.
"What's important from this deal is that there is a consensus on the part of the stakeholders (banks, businessmen, government officials) to make things easier for the efforts to accelerate development in eastern Indonesia," he added.
The eastern part of the country is widely regarded as lagging far behind in economic development compared to the western part of Indonesia, particularly Java. The government in the past paid less attention to this particular region, thus discouraging banks from channeling funds into the area.
But there have been changes recently following the introduction of the local autonomy policy in 1999, and the threat that certain provinces could secede from the country.
According to Sjahril, banks are now more willing to channel funds into the provinces that make up the region.
He said that there had been signs that more money was flowing from the western part of Indonesia to the eastern part via the banks.
Bank Indonesia revealed that total bank loans to the eastern region had been on the rise with outstanding credit as of June reaching Rp 27 trillion (around US$3 billion), or an increase of 8 percent compared to the end of last year.
In terms of loan to deposit ratio (LDR), the banks operating in the eastern part of the country had a higher ratio compared to their peers in the western part of the country. A higher LDR means that banks are channeling a greater amount of money compared to the size of deposits.
In the east, the LDR had grown to 44 percent in June from 42 percent in March, while in the west the LDR only grew to 39 percent from 38 percent.
Elsewhere, South Sulawesi governor Fadel Muhammad expressed optimism that the deal would generate a lot of economic activity in the area, which would in turn create higher economic growth.
"Not just banks, state institutions have also agreed to speed up the process of development in the area. This is good for business," Fadel said.