Bisnis Indonesia - Bisnis.com

JAKARTA: Bank loans in Indonesia have kept growing, mainly driven by investment loans, reversing the slow loan growth trend early during the year.

Bank Indonesia will keep the productive loan growth momentum by asking commercial banks to avoid raising lending rate amid the government’s plan to raise fuel price this year.

Based on Bank Indonesia data on January 2012, loan growth reached 23.7% (year on year), from 24.5% in December 2011.

However, temporary data in February 2012 shows the loan growth rose 25.35 (year on year), to reach IDR2,222.68 trillion.

The high loan growth was mainly caused by loan demands as economic source of funds which tend to increase with the increased economic activity, particularly on investment, and interest rate decline
trends.

The investment loan growth recorded a significant 38.1% hike to IDR493.08 trillion as direct investment increased and the country's economy staying prospective.

Meanwhile, working capital loans and consumer loans slightly slipped compared to last month, reaching 20.2% and 20.3%. In February 2011, working capital loan and consumer loans were recorded at IDR857.85
trillion and IDR588.99 trillion.

Bank Indonesia Governor Darmin Nasution was optimist that loan growth this year  will follow banks' business plan, with a prediction to rise 24%. According to him, the target hasn’t changed despite the fuel price hike plan.

“It’s not the inflation that affect loan. It’s affected by global economic situation, if the global economic move negatively, so will the loan. The target is still 24%,” he said after a meeting with
commission XI of Representatives, yesterday.

However, the central bank will take several measures if there’s a negative movement due to global economic crisis, so will the fuel price hike effect to interest rate.


He commented BI will use several instrument to anticipate interest rate rise by setting the monetary policy. However, Darmin hasn’t disclosed the policy yet.

“BI has instruments to affect banking liquidity and our market can add or reduce it whenever we want. Is it like minimum statutory reserve? It’s possible but not required. We’ll explain it several weeks later,” he said.

Yesterday, Bank Indonesia’s board of governor meeting decided to hold the BI rate at 5.75% since it’s still in line with future inflation. Fuel price hike will probably give temporary effect.

PT Bank Mandiri Tbk head economist, Destry damayanti said the fuel price hike will affect banking expansion. The bank interest rate will also rise as the inflation increase.

“Lending rate will be affected too, now it’s up to the expectation and economic direction, BI will respond with existing instruments so the future effect will not getting worse,” she said.

Undisbursed loan

Meanwhile, Universitas Gajah Mada economist A. Tony Prasetyanto predicted that undisbursed loan will be increased due to Euro zone crisis effect toward Indonesia and government’s plan to raise fuel
price.

He said that banking industry will be hit by undisbursed loan issue with the most logic moderate target was to maintain level to not become higher.

“There will be a clash between negative and positive sentiment. There’s a chance that undisbursed loan will be withdrawn since interest rate deceased, but it’s not enough, we should see the business confidence toward the recent economic condition,” he said.

He said that there were 2 negative sentiments threatening Indonesia right now, euro zone crisis which will probably recover next year.

Furthermore, the global crude oil price hike and the government’s plan to raise fuel price might become other factors.

Tony commented that when fuel price rises, businessmen would raise their product price un-proportionally. The product price hike rate would exceed the fuel price rise.

“If the fuel price rises by 30%, whereas the fuel price is only 10% from production and distribution components, the product price should only rise by 3%. But the business owners often raise their product price up to 30%. This will ultimately give negative effect to its own business,” he said. (T07/msw)