Mandiri may not meet loan target for corporate sector

Mandiri may not meet loan target for corporate sector

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned Bank Mandiri, the country's largest bank, said on
Tuesday that it might miss this year's lending target for the
corporate sector, because the overall business climate remained
unfavorable.

"It's not an easy task to channel loans to the real sector
these days... It's still difficult. Mandiri is unlikely to meet
its lending target for this year," said Mandiri president E.C.W.
Neloe.

He said that as in the first semester of this year, the bank
only managed to channel less than Rp 2 trillion (US$238 million)
in fresh loans to the corporate sector, compared to the initial
plan of Rp 8 trillion for the full year.

Neloe said the lower lending was due to two reasons.

First, some companies were still reluctant to expand their
businesses because of the poor investment climate and the lack of
incentives from the government to support their operations.

"Local investors are facing the same problems as foreigners,"
said Neloe.

Second, banks still considered lending to the corporate sector
a risky business because of the slow debt restructuring progress.

Mandiri lending director Sholeh Tasripan said the bank had
listed several sectors that were considered risky, including the
textile, forestry and footwear sectors.

Sholeh said that these sectors -- long known as the country's
foreign exchange earners -- were risky because their products'
competitiveness in the international market had declined.

As of June this year, Mandiri's outstanding loans reached Rp
66.8 trillion, most of which was channeled to the agricultural,
trade and chemical sectors.

Bank Indonesia Governor Burhanuddin Abdullah said last week
that bank lending must grow by between 20 percent and 22 percent
next year to allow the country to reach economic growth of
between 4 percent and 4.5 percent.

During the past couple of years, the economy has been growing
at a meager rate of around 3.5 percent. The government has been
under pressure to push growth to proved more jobs for the 40
million unemployed people.

The central bank has aggressively lowered its benchmark
interest rate to encourage banks to cut their lending rates and
make their loans more affordable for the corporate sector -- the
pillar of the real sector economy.

However, banks are still being criticized for their impotence
in reviving loans to the real sector, and are apparently turning
a deaf ear to the central bank's call to lower their rates. The
lending rate remains high at an average 17 percent to 18 percent,
with the real sector still finding it difficult to receive
financing from banks.