Lending growth outpaces 22% forecast by Indonesian banks    
Industry News

By : Cesar Tordesillas, Asian Banking & Finance

Loans by Indonesian commercial banks this year have grown 23 percent to $190 billion from the same period a year ago.

According to Bank Indonesia, the growth came in above their central bank’s full-year target of 22 percent. It measured 19.4 percent on a year-to-date basis.

“Toward the end of year, bank loan disbursements continued to show improvement,” BI spokesman Difi A Johansyah said.

Banks have loaned aggressively this year to meet growing demand for financing by corporations and individuals in Indonesia’s surging economy, says a Jakarta Globe report.

However, economists said lending must grow at a higher rate to achieve the 7 percent goal for economic growth in 2014.

Faisal Basri, an economist from University of Indonesia, noted that banks’ lending contribution to the country’s gross domestic product was still low compared to other nation’s.

“Our banks’ loan-to-gross domestic product ratio currently stands at around 35 percent. That means real sector performance is weak,” Faisal said.

He said the loan-to-GDP ratio in countries such as Vietnam, Thailand and Malaysia already surpasses 100 percent, while in China the ratio is 140 percent.

BI has taken steps to encourage banks to raising their lending. The central bank recently issued a policy that requires banks to have a loan-to-deposit ratio of between 78 and 100 percent starting from March 1.

If not, banks would have to set aside a higher minimum reserve requirements.

Bank Indonesia also plans to encourage more competition in the sector by requiring banks to publicly report their lending rates, allowing banks to become more efficient.

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