World Bank's IFC may lend $140 million to Danamon

World Bank's IFC may lend $140 million to Danamon

Soraya Permatasari, Bloomberg/Jakarta

International Finance Corp., the World Bank's investment arm, may extend a loan of as much as Rp 1.4 trillion (US$140 million) to PT Bank Danamon to support the Indonesian lender's plan to lend to small-scale businesses.

IFC may decide on the loan amount by early next month, after an evaluation of Danamon, Nia Sarinastiti, an IFC spokeswoman, said in a phone interview.

"There's no decision yet but that figure is the maximum that's being considered," she said.

Danamon, Indonesia's fifth-largest lender by assets and majority controlled by Singapore's Temasek Holdings Pte, plans to use the proceeds to extend loans to small-scale businesses, Irawati Koswara, a spokeswoman at the Jakarta-based bank, said in a phone interview. Danamon has been seeking loans from IFC to expand micro financing, she said.

The lender's chances of obtaining the IFC loans were boosted when Standard & Poor's on Nov. 4 raised Danamon's debt rating by one level to BB-, or three steps below investment grade, citing a reduction in the risk that the bank wouldn't be able to pay debt.

Danamon's profit rose 8.5 percent in the first nine months to Rp 1.9 trillion as consumers borrowed more. Net interest income, or interest revenue from borrowers after interest was paid to depositors, rose to Rp 3.5 trillion from Rp 2.95 trillion a year earlier, the company said on Oct. 27.

Bank Danamon's outstanding loans reached Rp 35.7 trillion at the end of September, from Rp 29.4 trillion at the end of 2004.