HSBC plans low-key lending target

Tony Hotland, The Jakarta Post, Jakarta

London-based Hong Kong and Shanghai Banking Corporation Limited (HSBC) has set a conservative lending target for 2004 amid government pressure on banks to revive their lending role.

The chief executive officer of HSBC in Indonesia Richard McHowat said on Thursday that the bank was only targeting a 10 percent to 15 percent increase in loans over 2003, mainly for corporate borrowers with an export orientation.

"To revive the lending role, we need support from the government in terms of the legal system because it hasn't changed much since the crisis. I think that's what makes many banks reluctant," said McHowat.

He also said that in order to accomplish the target the bank would see whether the corporations seeking loans were credible candidates.

"The companies should make proper audits of their accounts and conduct better corporate governance in order for us to make a credit judgment," he said.

McHowat said the reason the bank's main target was the corporate sector was due to the low rate of individual borrowers in the country.

"Indonesian households don't really borrow and use loans. The average household debt ratio is only 10 percent compared to the GDP, which is the lowest compared to other Asian countries," he said.

Besides that, he added, HSBC wanted to provide international networks for domestic exporters, given the international status of the bank.

The government has frequently urged the country's banks to resume their intermediary role of providing loans. Experts believe that despite the stable macroeconomic figures reported, economic recovery is still low, given the low investment rate and limited credit flow.

HSBC gave loans worth up to US$800 million to about 2,500 companies mainly in the textile, shoe, tobacco, and steel sectors in 2003.

McHowat added that the bank had no expansion plans, such as opening new offices to add to its present 12 branches.

"We intend to improve our current services and products, such as credit cards, mutual funds, and sharia (Islamic) banking. The market for sharia banking is tremendous here, but we've only focused on developing the corporate and institutional sectors," he said.

HSBC, with a total Islamic customer base of around 115,000 worldwide, was the first foreign banks to offer a sharia service in the country in Oct. 2003.