Interest rates likely to drop by 1% next year
Interest rates likely to drop by 1% next year
JAKARTA (JP): Bank deposit interest rates are likely to drop
by one percentage point next year due to a favorable business
climate which will lead to positive cash-flows, a banker
predicts.
Deposit interest rates currently range between 15 and 16
percent.
Winarto said massive business expansion might need to be
curtailed to prevent the economy from overheating and that trend
would reduce demand for credit.
"Local businesses will be wary of this situation and will use
next year as a period of consolidation," he said.
Winarto pointed out that the consolidation period is part of a
cycle which starts when a business is planned and gradually
developed and expanded.
"After they expand, the businesses either have too much money
or are out of money, and so they need to consolidate," he said.
"Consolidation is the end of a cycle and does not necessarily
mean that a business is performing poorly," he added.
The Econit economic research group similarly predicted last
week that 1996 would be "cooling down" year. The group estimated
that this year Indonesia's current account deficit would reach
$6.5 billion and inflation rates would go up to 10 percent.
Loans
Commenting on unsecured loans extended by his bank to small
businesses, Winarto said BNI has so far approved a third of the
applications for unsecured credits and rejected another third
considered unfeasible.
The remaining applications, he said, were still being
assessed.
"Assessing the applications often takes some time because many
of the prospective borrowers are located far away from our bank
branches," he said.
The government announced in August that banks can provide
collateral-free loans of up to Rp 50 million (US$22,000) for
small businesses.
Minister of Finance Mar'ie Muhammad said the lending scheme
would first be applied by state-owned banks and followed by
private banks.
Winarto said yesterday BNI aims to allocate at least 20
percent of its total loans to small businesses but he did not
elaborate.
"We have no loan-disbursement target, but we hope it will be
big because we expect half of our borrowers to be small and
medium-scale entrepreneurs by the year 2000," he said.
So far, he said, applications for collateral-free loans have
reached some Rp 20 billion, mostly from entrepreneurs of small-
scale industries, transportation services and agencies.
Small and medium-scale loans currently account for 40 percent
of BNI's credit portfolio, he said. (kod/pwn)