Legal Risks for Loans Must Be Lowered
Thursday, 18 January, 2007 | 15:18 WIB

Tempo Interactive, Jakarta: The increase of banking loan disbursement to the real sector must be supported by a decrease of the law risk perception that is considered as high.

The reason is that the potential for debtors to fail to repay was still high.

Hikmahanto Juwana, a legal expert from the University of Indonesia, said that the management of state-owned banks were worried if their debtors failed to pay.

“They are afraid of being indicted,” he said in a seminar entitled “Indonesian Economics 10 Years After the Crisis” yesterday (01/17) in Jakarta.

In his opinion, even if Bank Indonesia eased loan regulations, the legal risk perception will still be “frightening”.

That is why credit disbursement to real sector will still remain stagnant.

“Without paying attention to corruption eradication, legal risk perception must be lowered,” said this Dean of the Faculty of Law of University of Indonesia.

Hartadi A. Sarwono, Deputy Governor of Bank Indonesia, acknowledged that state-owned banks' prudence was affected by the high legal risk factor should there be failure topay.

“This is the government's job,” he said.

As the banking authority, in his opinion, Bank Indonesia has issued policies that supported bank intermediation to the real sector.

However, he said, without any support from another agencies, regulations will not be enough.

Hartadi went on to say that decreases in the BI Rate will not automatically boost loan disbursement to the real sector.

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