Banks urged to lower lending rates
Tuesday, October 31st, 2006

Andi Haswidi, The Jakarta Post, Jakarta

The Association of Indonesian Retailers (Aprindo) has urged the country’s banks to lower their lending rates in line with the central bank’s benchmark rate so as to enable them to expand their businesses.

“We believe that the banking sector has not been supportive of business in general. When the BI rate goes up, the banks instantly increase their rates.

“But when the BI rate decreases, they never follow as quickly as we would expect,” Aprindo director Handaka Santosa told The Jakarta Post on Monday.

The central bank has gradually cut its rate by 2 percent since May on the back of easing inflation and a stable rupiah. It expects the rate to fall below 10 percent by early next year.

However, most banks have yet to lower their lending rates, which currently stand at around 16-17 percent.

Handaka said the situation had resulted in many retailers not being able to take full advantage of the increase in demand over Idul Fitri.

“With the current average lending rate of 16 percent, many retailers could not afford to take out loans to increase their stock in the run-up to this year’s Idul Fitri, when demand usually reaches its peak.”

According to Handaka, with the central bank’s rate currently standing at 10.75, the banks should be able to lower their lending rates to an average of between 14 and 14.5 percent.

He said that full sales figures for the Idul FItri celebration would be available within the next two weeks.
Bank Central Asia (BCA) president director D.E. Setijoso said earlier this month that total lending in connection with the holiday had been lower than last year.

“I cannot give you the exact figures yet but let’s say that if the usual trend in loan growth due to the
holiday is at 100, then this year we only came in at around 70 to 80. So, there was a 20 to 30 percent decrease compared to last year’s lending,” Setijoso said.

Overall, however, Handaka remained optimistic about this year’s takings.

“Because of increases in the prices of goods, we saw a 12 to 17 percent increase in sales value in the third quarter of the year,” he said.

The retailers association has said it expects total retail sector revenue to increase by 20 percent this year to Rp 50 trillion compared with Rp 42 trillion last year.
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