Savings Depleting, Spending Reliant on Loans: Do Indonesians Need a Pay Rise?
Bank Mandiri’s economic team, in its July 2026 daily economic and market review, noted the urgency of strengthening income levels for the Indonesian people at present.
They said that raising income, or wages as it is commonly known, needs to become a priority so that public consumption is better supported by stronger household financial capacity, given that there are currently signs that consumption is being propped up by loans rather than earnings, as savings continue to thin out.
“Policies to preserve disposable income, hold back cost-of-living pressures and encourage job creation are important so that the consumption momentum remains healthier,” the Daily Economic and Market report from Bank Mandiri’s Office of the Chief Economist was quoted as saying on Tuesday (28 July 2026).
Bank Mandiri’s economic team noted that Indonesians’ savings show a thinning trend, as reflected in the Mandiri Saving Index, which stood at 84.8 in June 2026, contracting 5.7% year on year.
Meanwhile, the public spending indicator, seen in the Mandiri Spending Index, still managed to grow 5.9% year on year to 123.
With the savings indicator falling while consumption holds up, the loan index — which covers online or P2P lending, credit cards and paylater from non-bank financing companies — actually rose as much as 24.6% year on year to 157.7.
“This shows that spending is still growing positively even though the savings level is weakening. At the same time, the use of financing is increasing,” the Office of the Chief Economist’s report stated.
According to data from the Financial Services Authority (OJK) and Bank Indonesia, total outstanding online loans, credit cards and non-bank paylater reached Rp160.7 trillion in May 2026. Of that amount, outstanding online loans stood at Rp103.7 trillion, or around 65% of the combined total of the three financing types.
Meanwhile, outstanding credit cards reached Rp43.8 trillion (27%), while paylater disbursed by financing companies amounted to Rp13.2 trillion (8%). The highest growth was shown by paylater (53.6% yoy), followed by P2P lending (25.7%) and credit cards (15.6%).
Based on OJK data, the share of online loans used for consumption purposes rose to 86% in April 2026, from 78% in April 2025 and 68% in April 2024.
Conversely, the share of loans for productive activities continued to fall to just 14%.
“This shift shows that the rise in borrowing is driven more by household consumption needs, while demand for financing for business activities has become more limited,” the Bank Mandiri economic team wrote.
In the report, the team also noted early signs of weakening in the public consumption or spending trend, even though it still grew 5.9% in June 2026.
Based on MSI data, average public spending growth at the start of the third quarter of 2027 was recorded at 5.8% yoy, lower than the second quarter (6.1%) and the first quarter (6.4%).
On the other hand, weakening savings and a rising share of consumption-driven financing indicate that part of consumption is increasingly supported by household leverage.
“Therefore, strengthening income levels needs to be a priority so that future consumption is better supported by stronger household financial capacity,” the report from Bank Mandiri’s economic team concluded.