Multifinance industry sees brighter prospects

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.