Bank lending on the rise,
another sign of recovery

Rupiah lending has continued to grow up to the end of April, following a rising trend in the previous two months after slumping in January when the impact of the global credit crunch was still hitting home.

Total rupiah lending outstanding rose by over Rp 14 trillion (about US$1.32 billion) in April from March to reach Rp 1,074.6 trillion (US$166.87 billion), central bank data shows.

This follows positive trends in the previous two months when outstanding rupiah lending increased by around Rp 8 trillion in February and Rp 18 trillion in March.

Bank Danamon economist Helmi Arman said on Friday the figures were encouraging, in particular when taking into account that loans outstanding declined in January from December, meaning that the amount of loans redeemed in the period outpaced that of new loans.

Rupiah loan outstanding reached Rp 1,033.38 trillion in January, close to Rp 21 trillion lower than Rp 1,054.29 trillion recorded at the end of last December.

“It shows that the economy is not slowing down so much. Recent data — cars, retail and cement sales — shows an increasing trend,” Helmi said.

He said if banks’ profits continued to rise, it would trigger them to channel loans faster, which would eventually spur growth.

In May, domestic motorcycle sales rose 19 percent from the previous month to 457,650 units, PT Astra International said in a statement Friday, citing data from Indonesia’s motorcycle association.
Indonesia’s economy in the first quarter grew by 4.4 percent from a year earlier. It was only beaten in growth by China and India in Asia, while other developed countries suffered deep contractions.

The government and Bank Indonesia (BI) have implemented fiscal and monetary stimulus programs to cushion the economy from the impacts of the global downturn.

BI brought down its benchmark interest rate from 9.25 percent in December to 7 percent in June, although banks have followed suit more slowly in cutting their lending rates. State lenders Bank Mandiri and Bank Rakyat Indonesia, as well as private-owned Bank Central Asia, are among the banks that have cut their lending rates recently.

The central bank targets lending to grow by 15.5 percent this year to support the economy growing by between 4 and 5 percent. The lending target is much smaller than the 30 percent lending growth booked last year, which helped drive the economy to expand by 6.1 percent.

Meanwhile, total loans, both dollar and rupiah, reached Rp 1,297.64 trillion in April, a combination of Rp 1,074.6 trillion of rupiah-denominated loans and Rp 223.04 trillion of dollar-denominated loans.

Helmi said dollar-denominated loans in April were smaller than Rp 244.74 trillion in March, as the rupiah strengthened against the dollar.

The rupiah was traded at 10,400 per dollar as of 4:18 p.m. in Jakarta, Bloomberg reported.

During the January-April period, banks mostly channeled loans to the trade, restaurant and hotel sectors, amounting to Rp 264.56 trillion. The second largest debtors were from the manufacturing sector, which absorbed Rp 254.39 trillion.

The manufacturing sector, which has been the most hit by negative impacts from the global banking crisis and downturn, included the largest non-performing debtors, unable to repay debts of Rp 19.31 trillion.


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