Economist: Distribution Remains a Challenge Despite Strong Credit Growth in Q1

The head of the Macroeconomic and Finance Centre at the Institute for Development of Economics and Finance (INDEF), M. Rizal Taufikurahman, views that the equitable distribution of financing remains a challenge despite strong national credit performance in the first quarter of 2026.

Previously, the Coordinating Ministry for Economic Affairs revealed that national credit growth reached 10.42% (year-on-year) up to the first quarter of this year, supported by the corporate, commercial, and consumer segments. However, SME credit experienced a limited contraction of 3.57%, with an NPL of 4.55% in March 2026.

“Credit growth of 10.42% (year-on-year) in the first quarter of 2026 shows that expansion is still solid, but it does not yet reflect the quality of even growth,” he said when contacted by ANTARA in Jakarta on Monday.

Rizal highlighted that the main drivers of credit come from the corporate, commercial, and consumption segments, while SME credit has contracted. This, he noted, is better interpreted as aggregate recovery rather than strengthening inclusive financing.

“Liquidity is indeed relatively loose, but the rise in the non-performing loan ratio makes banks tend to be more selective. Thus, credit growth is likely to remain stable, but not evenly distributed across segments,” he said.

He added that from a structural perspective, this double-digit growth is not merely a base effect, but also does not fully reflect broad real demand.

Expansion is more prevalent in sectors with measurable risks, while SMEs face credit rationing. This, Rizal noted, indicates a gap between economic recovery and financing distribution.

“If this trend continues, banks will become increasingly cautious, and the potential for SME credit contraction could persist throughout 2026,” he stated.

Therefore, according to Rizal, policy strategies must shift from merely encouraging credit volume to a risk mitigation-based approach.

Strengthening guarantee schemes, optimising people’s business credit (KUR), improving debtor data quality, and integrating SMEs into supply chains are key.