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Rising demand for productive loans boosts August lending
The domestic banking industry saw an increasing demand in working capital and investment loans in August, especially the manufacturing sector, driving up overall loan growth and signaling a pickup in economic activity
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The domestic banking industry saw an increasing demand in working capital and investment loans in August, especially the manufacturing sector, driving up overall loan growth and signaling a pickup in economic activity.
Bank Indonesia's (BI) latest report showed overall loan growth reached 10.8 percent year-on-year (yoy) in August, at Rp 3.91 quadrillion (US$275.2 billion) in outstanding loans, after 9.6 percent growth in July yoy.
'After slowing down since September 2013, the acceleration of loan growth has given a positive signal for the country's economy,' BI said in the report.
Banks have slashed their loan growth target to around 13.4 percent in their revised business plans this year, from the 16.4 percent growth expected previously. The new target is in line with estimates from BI and the Financial Services Authority (OJK) of 11 to 13 percent loan growth.
BI's report showed that the rise of lending mainly occurred in working capital and investment loans, which grew 10.2 percent yoy and 12.9 percent yoy, respectively. Those compare with 8.4 percent and 10.8 percent growth in the previous month.
Lending to the manufacturing sector has mainly contributed to working capital and investment loan growth, while the trade, hotel and restaurant and agriculture, farming, forestry and fishery industries also triggered rises in both types of credit.
In addition to that, the increase in nationwide loan growth was also helped by a 9.5 percent yoy rise in micro-segment and small and medium enterprise (SME) loans to Rp 710.1 trillion in August, from 8.8 percent yoy a month earlier.
Meanwhile, the country saw slightly lower growth in property loans to 13.5 percent yoy in August, from 13.6 percent yoy in July, on lower growth in construction credit.
Bank Negara Indonesia (BNI) president director Achmad Baiquni said the lender had experienced better loan growth in the third quarter than in the first six months this year as the economy was showing signs of picking up.
'We are trying to catch up our loan growth target of around 13 to 14 percent by the end of the year. Our current loan growth is around 11 to 12 percent,' Baiquni said.
Contacted separately, Bank Maybank Indonesia president director Taswin Zakaria said the lender still saw growing credit demand in some segments, especially the business banking for SMEs and retail segments.
'Our single-digit growth is largely down to our re-profiling activity in global banking [corporate] portfolio in order to improve our loan quality. However, our business banking [SME] and retail segments still grew by around 13 to 14 percent,' Taswin said, referring to the bank's overall loan growth of 7 percent in August.
According to Taswin, the bank has conducted re-profiling on its corporate customers since last year so as to focus more on top-tier companies and state-owned enterprises in the future.
Mandiri Institute chief executive director Destry Damayanti recently said domestic loan demand was, despite a weaker economy, still growing in some sectors, such as creative industries with a strong middle-class base that could be optimized.
