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Jakarta Post

Sources of cheap financing: From loans to bonds

Jakarta   /   Mon, September 18, 2017   /  10:44 am
Sources of cheap financing: From loans to bonds A view of Bundaran Hotel Indonesia, Central Jakarta. (Shutterstock/Andreas H)

Bank Indonesia (BI) is still looking for the most appropriate policy for the macroeconomic conditions in the future. The easy monetary policy in the form of the benchmark interest rate cut from 4.75 percent to 4.5 percent last month on the first anniversary of the BI seven-day reverse repo rate implementation is likely to continue. The above signal can be captured from the BI’s statement that it will release the monetary stimulus from the macro-prudential area. The loan to funding ratio (LFR) will be relaxed by incorporating corporate bonds. The LFR concept is then shifting toward the financing to funding ratio (FFR). The lower demand for bank loans seems to be the trigger for the FFR policy. As of June, for example, the banking intermediary function through loans grew at a slower pace of 7.6 percent year on year (yoy) compared to 8.6 percent yoy in May, due to the domestic e...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.