Consumer finance firms expecting solid growth

The Jakarta Post, Jakarta

After suffering financial setbacks over the past few years, the country's consumer finance firms expect significant growth in this year on the back of lower lending rates.

The Indonesian Consumer Finance Association (APPI) said that the industry recorded a 20 percent increase in the amount of loans disbursed in the first semester of this year.

"And we believe we'll grow remarkably well this year. The value of our loans will increase to Rp 130 trillion by the end of the year," APPI chairman Wiwie Kurnia said during a press conference Tuesday.

He said that the consumer finance industry was hoping for even higher growth in the second semester, amounting to some 40 percent. In year-on-year terms, this would mean the industry will grow by around 30 percent growth in 2007.

The number of consumer finance companies dropped to 214 last year from 236 in 2005 due a decline in the demand for loans, which dropped sharply as a result of high lending rates.

The value of disbursed loans also fell by 9.4 percent to Rp 92.8 trillion (around US$10 billion) from Rp 102.5 trillion.

Confirming Wiwie's remarks, Infobank magazine director Eko B. Supriyanto said that the finance industry was looking at a "bright future" as the declining Bank Indonesia key interest rate would improve people's purchasing power, which would in turn boost the consumer finance industry.

He predicted that automotive financing, which makes up between 80 and 85 percent of the total consumer finance business, would grow by 50 percent in the second semester of the year.

"Based on an assumption that 450,000 vehicles and 5 million motorcycles will be sold in 2007, the finance industry is looking at a potential automotive financing market worth at least Rp 77 trillion," Eko told reporters following the publication of ratings by the magazine for the local consumer finance industry.

According to the magazine, of the 137 financing companies rated, 45 are "very good", 43 are "good", 29 are "quite good" and 20 are "not good".

The five top consumer finance firms, which have assets worth more than Rp 1 trillion each, are BFI Finance Indonesia, Chandra Sakti Utama Leasing, Summit Oto Finance, Buana Finance and BCA Finance.

According to Wiwie, a total of 216 consumer finance firms are currently registered with the Finance Ministry. However, only 139 are members of APPI, meaning that the rest are inactive. (11)
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