Central bank sees 20% lending growth this year

The Jakarta Post, Jakarta

The central bank expects Indonesia's banking sector to be able to provide up to 20 percent more loans this year, as business and investment in the country improves amid recent macroeconomic stability.

The expected increase in the industry's credit figures -- which Bank Indonesia (BI) had previously put at 18 percent -- will also be built on current efforts from the central bank in guiding lenders in the country -- including foreign and joint venture banks -- to disburse more lendings in 2007 to the real sector, BI's deputy governor, Muliaman D. Hadad, said.

In the annual business plans submitted by banks to the central bank, loan growth for this year averaged out at some 20 percent, he said.

Bank Mandiri, Indonesia's largest lender by assets, was expecting an 18 percent rise in loans this year, from last year's 5 percent, to Rp 109.4 trillion.

Bank Central Asia (BCA), the country's second largest lender, wants to improve its loan growth to between 15 and 17 percent, from last year's 12 to 13 percent, while Bank Rakyat Indonesia (BRI), the fourth largest lender, was expecting to at least match its 23 percent loan growth to Rp 84 trillion last year.

Bank lendings grew by only 14 percent to Rp 792.3 trillion (US$88 billion) last year, just slightly better than BI's 13 percent estimate and a severe drop off from loan growths of between 24 and 27 percent in previous years.

Lendings by joint venture banks grew less from the industry, averaging only 10 percent to Rp 40.8 trillion, while that of foreign banks grew by 16 percent to Rp 73.2 trillion, but this pertained mostly to consumer loans.

High inflation and interest rates in 2006, which only recently eased, had slowed consumption and loan demands from business for investment. A large portion of funds in the banking sector -- as much as Rp 235 trillion -- had instead been used to buy up central bank bills, which lenders deemed as a secure investment, but was widely criticized as less-productive.

Muliaman further said the expected growth in bank lendings this year would go hand-in-hand with an estimated growth in investment of between 11 and 14 percent to help support a growth of 5.7 to 6.3 percent in 2007.

Indonesia's economy slowed to 5.5 percent last year from 2005's 5.6 percent.

Muliaman was, however, quick to add that the loan growth estimate for this year was not an absolute target to be achieved.

"The important thing here is that there is now a sense of optimism within the banking industry, which BI will of course continue to strengthen," he was quoted as saying by Antara over the weekend.

Muliaman mentioned consolidation plans from at least 10 banks this year, which may come in the form of adding capital, mergers or acquisitions.

BRI had mentioned plans to acquire five small local banks, which it will then develop into its syariah banking units.
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