Consumers feel the pinch of rates hikes
Consumers feel the pinch of rates hikes
The Jakarta Post, Jakarta
Siti Mulyana, a civil servant, recently bought her 22-year-old
son a Yamaha Vega-R 110 cc motorcycle on credit. For that, she
had to pay Rp 1.5 million in down payments and 29 payments of Rp
400,000 monthly installments to a finance company through Bank
Rakyat Indonesia (BRI).
"The interest rate is about 20 percent. The original price of
the bike was Rp 10.6 million. But since I bought on credit, it
will accumulate to about Rp 13 million," the 45-year-old woman
said.
Everything went well for her until the recent downturn in the
rupiah, which forced the central bank to raise its benchmark
interest rate by 0.75 percent.
While the move has so far prevented the rupiah from falling
further, it is bad news for Siti and millions of others in this
consumption-driven economy.
"If the finance company raises the rate, it'll be hard for me
to pay, as other prices of goods have also increased. I might
even have to sell (the bike) to others who can afford to continue
the credit," she said.
Bank International Indonesia (BII) confirmed the recent
interest rates hike from Bank Indonesia would eventually force
banks here to pass on the costs to customers of consumer loans.
"We will have to adjust the rates for loans of car,
motorcycle, and mortgage loans by a range of between 1 to 2
percent," said Rudy N. Hamdani, BII's director for consumer
banking.
Currently, the bank's average interest rates for car and
motorbike loans stood at 6.5 percent, while mortgage were at 12.9
percent.
Rudy, however, said he was confident the move would not result
in a rise of bad loans for the bank.
"Our borrowers have been selected through a number of
processes. I do not think higher interest rates will mean higher
non-performing loans," Rudy told The Jakarta Post.
BII's first-half report said that, of the Rp 6.6 trillion it
has issued in consumer loans, 32.4 percent were mortgages, 25.8
percent were for motorcycle and 19.8 percent for cars.
Meanwhile, Bank Central Indonesia (BCA) president director
Djohan E. Setijoso said the bank would soon raise its interest
rate for loans by about 1 percent.
Setijoso believed the higher rates would not disrupt the
bank's lending expansion growth at this point.
"We believe the loans will grow at around the same level we
posted in the last six months," he said recently.
As of June, BCA consumer loans stood at 7.5 trillion,
consisting of Rp 3.6 trillion in vehicle loans, Rp 2.8 trillion
of mortgages and Rp 987 billion in credit cards.
Dennis Firmansjah, secretary general of the Indonesian
Financial Services Association -- a grouping of finance companies
-- said most were forced to raise their interest rate because
their funding sources were predominantly from domestic banks.
"Some of our members have made negotiations with their
counterpart banks and have reached an agreement to up the rates
by between 1 percent to 2 percent this week, depending on
respective company's ability," he told the Post.
He explained that before the hike, interest rates for car
credit stood at 17 percent and for motorcycles at about 26
percent.
Dennis predicted that any downturn in credit expansion would
not last.
"When the Idul Fitri, Christmas and New Year celebrations
come, consumer credit will again be robust," he said. (006)
The Jakarta Post, Jakarta
Siti Mulyana, a civil servant, recently bought her 22-year-old
son a Yamaha Vega-R 110 cc motorcycle on credit. For that, she
had to pay Rp 1.5 million in down payments and 29 payments of Rp
400,000 monthly installments to a finance company through Bank
Rakyat Indonesia (BRI).
"The interest rate is about 20 percent. The original price of
the bike was Rp 10.6 million. But since I bought on credit, it
will accumulate to about Rp 13 million," the 45-year-old woman
said.
Everything went well for her until the recent downturn in the
rupiah, which forced the central bank to raise its benchmark
interest rate by 0.75 percent.
While the move has so far prevented the rupiah from falling
further, it is bad news for Siti and millions of others in this
consumption-driven economy.
"If the finance company raises the rate, it'll be hard for me
to pay, as other prices of goods have also increased. I might
even have to sell (the bike) to others who can afford to continue
the credit," she said.
Bank International Indonesia (BII) confirmed the recent
interest rates hike from Bank Indonesia would eventually force
banks here to pass on the costs to customers of consumer loans.
"We will have to adjust the rates for loans of car,
motorcycle, and mortgage loans by a range of between 1 to 2
percent," said Rudy N. Hamdani, BII's director for consumer
banking.
Currently, the bank's average interest rates for car and
motorbike loans stood at 6.5 percent, while mortgage were at 12.9
percent.
Rudy, however, said he was confident the move would not result
in a rise of bad loans for the bank.
"Our borrowers have been selected through a number of
processes. I do not think higher interest rates will mean higher
non-performing loans," Rudy told The Jakarta Post.
BII's first-half report said that, of the Rp 6.6 trillion it
has issued in consumer loans, 32.4 percent were mortgages, 25.8
percent were for motorcycle and 19.8 percent for cars.
Meanwhile, Bank Central Indonesia (BCA) president director
Djohan E. Setijoso said the bank would soon raise its interest
rate for loans by about 1 percent.
Setijoso believed the higher rates would not disrupt the
bank's lending expansion growth at this point.
"We believe the loans will grow at around the same level we
posted in the last six months," he said recently.
As of June, BCA consumer loans stood at 7.5 trillion,
consisting of Rp 3.6 trillion in vehicle loans, Rp 2.8 trillion
of mortgages and Rp 987 billion in credit cards.
Dennis Firmansjah, secretary general of the Indonesian
Financial Services Association -- a grouping of finance companies
-- said most were forced to raise their interest rate because
their funding sources were predominantly from domestic banks.
"Some of our members have made negotiations with their
counterpart banks and have reached an agreement to up the rates
by between 1 percent to 2 percent this week, depending on
respective company's ability," he told the Post.
He explained that before the hike, interest rates for car
credit stood at 17 percent and for motorcycles at about 26
percent.
Dennis predicted that any downturn in credit expansion would
not last.
"When the Idul Fitri, Christmas and New Year celebrations
come, consumer credit will again be robust," he said. (006)