Multifinance industry sees brighter prospects

P.C. Naommy, The Jakarta Post, Jakarta

The Indonesian Financial Services Association (APPI) projected net investment by the country's multifinance industry this year to grow by 20 percent to Rp 60 trillion (US$7.14 billion) from around Rp 50 trillion last year despite rising political tension runup to the general and presidential elections.

The APPI said that the current declining trend in domestic interest rates would have a positive impact on its members.

"I am optimistic that the decline in interest rates will have a positive effect on the multifinance industry since industrial players will see it as a good opporunity to make new investments," said Hosea, the secretary-general of APPI, during a meeting with the press on Thursday.

As the umbrella organization for about 102 multifinance companies with core businesses in leasing, factoring, consumer finance and credit cards, the association plays an important role in improving capital flows and helping accelerate the country's economic recovery.

"We have maintained this business for a long time, we have the experience and we have qualified people to manage the business," said Hosea.

He also said that in addition to collaborating with banks, the multifinance industry would also issue new bonds to finance its lending activities.

Last year, multifinance companies issued around Rp 14 trillion worth of bonds. The value of the bonds to be issued this year would be about the same.

According to Hosea, the APPI has noticed paradigm shifts in the workings of the multifinance industry as between the period before and after the period after the late 1990s economic crisis.

"Before the crisis, most of the multifinance companies made mistakes in their practices," said Hosea, adding that during that time most of the multifinance companies would borrow money from banks before they even had clients seeking loans.

According to Hosea, the former practices had adverse consequences as many of the multifinance companies became saddled by enormous debts.

The paradigm started to change after the crisis, when the companies identified their potential clients first before borrowing the funds. "This allows us to better control the flow of money," said Hosea.