B

ank lending is expected to grow by 12 to 14 percent next year as lenders anticipate better national economic conditions despite ongoing global challenges, according to the Financial Services Authority (OJK).

The expected growth in bank lending is similar to an earlier prediction issued by Bank Indonesia (BI). '€œOur lending projection [for next year] also hovers around [BI'€™s] range, still in line with the country'€™s economic growth prediction,'€ OJK chairman Muliaman D. Hadad said in Jakarta recently.

The central bank expects the national economy to expand by 5.2 to 5.6 percent next year, which compares to the government'€™s assumption of 5.3 percent.

The expected lending growth next year would mark a marginal increase from this year'€™s projected rate of 11-13 percent. Initially, banks had been expected to increase their lending by 15-17 percent in 2015, but that figure was revised down in light of the slow economy.

Muliaman said the lending growth projection for 2016 was based on the latest assessment conducted by the OJK and banks, which took into account impacts from lackluster domestic demand as well as the slump in global commodity prices.

'€œI think the projection is quite reasonable,'€ he said, adding that the OJK was still assessing all 2016 business plans submitted by lenders.

The OJK expects year-on-year (yoy) loan growth of 12 to 13 percent in the final two months of this year. According to Muliaman, loan growth as of October had reached almost 12 percent yoy, up from 11.1 percent posted by the end of September, to Rp 3.99 quadrillion (US$290 billion).

The 11.1 percent yoy growth rate by the end of September was lower than the 12.5 percent rate in the same period last year. The decline is attributed to the country'€™s weak overall economy, with gross domestic product (GDP) growing at a modest annual rate of 4.7 percent in the third quarter.

The OJK chairman blamed the weak economy for an increase in undisbursed loans, indicating that companies had decided to delay their use of granted credits. He added that '€œbanks actually have a huge capacity of providing loans, so we need to find ways to increase the usage'€.

OJK data show that Rp 1.24 quadrillion out of Rp 3.99 quadrillion in total bank loans as of September was undisbursed, comprising Rp 296.4 trillion of '€œcommitted'€ and Rp 951.3 trillion of '€œuncommitted'€ lending.

The amount of undisbursed loans has increased every month since September last year, when the figure stood at Rp 1.08 quadrillion, the data show.

Bank Central Asia (BCA) president director Jahja Setiaatmadja said an increase in undisbursed loans lately had prompted the lender to restrain its plan to add new branches. BCA predicts loan growth of about 10 percent in 2016.

'€œWe actually booked new loans, but only some of them were disbursed. That means our credit will grow by only 12 percent at the most by year-end, lower than the expected range of 13 to 15 percent if loan disbursement had been at its best,'€ he said.

Despite predicting loan growth of less than 15 percent in 2016, Bank Mandiri president director Budi Gunadi Sadikin said accelerated government infrastructure development would help sustain the lender'€™s credit growth.

As a mid-size bank focusing on small- and medium-sized enterprises (SMEs), OCBC NISP president director Parwati Surjaudaja, meanwhile, said the lender'€™s loan growth for 2016 would remain relatively unchanged from around 15 to 20 percent targeted this year.

'€œWe are still optimistic about our focus on various sectors in the SME segment, such as services, trading and small manufacturing,'€ she said.