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Jakarta Post

Consumer loan growth to remain weak next year

  • Grace D. Amianti

    The Jakarta Post

Jakarta   /   Mon, November 2, 2015   /  12:05 pm

The growth in consumer loans by local banks is expected to continue to be weak next year despite a series of economic stimulus packages launched by the government recently, according to the National Banks Association (Perbanas).

Perbanas chairman Sigit Pramono said the government'€™s economic stimulus packages would have a positive effect on reviving the country'€™s economy, but it would take time for them to have an impact on people'€™s buying power.

Sigit said demand for consumer loans, such as mortgages and automotive lending, would only start to pick up when there was growth in the industrial sector.

'€œWe can see that middle-income people'€™s demand for mortgages as well as apartment and vehicle loans has started flagging, so we predict consumer lending will probably grow by less than 10 percent next year, or flat compared to this year,'€ Sigit said recently.

The latest Indonesian banking statistics published by the Financial Services Authority (OJK) showed that outstanding loans to the non-industrial sector, including consumer loans, grew by 9.92 percent year-on-year (yoy) to Rp 1.06 quadrillion (US$77.3 billion) as of August, from Rp 968.8 trillion in the same period last year.

The growth was lower compared with the period between August 2013 and August 2014, when such loans grew by 10.4 percent yoy, the statistics revealed.

Indonesia'€™s economy grew by only 4.67 percent in the second quarter this year '€” the lowest since 2009 '€” following a decline in exports and consumer spending.

The latest data from the Central Statistics Agency (BPS) showed that household spending still made up the largest part of the gross domestic product (GDP), accounting for almost 60 percent of GDP in the second quarter, followed by investment with almost 25 percent.

However, their annual growth rates have eased when compared with the previous two quarters. Consumer spending grew at a rate of 2.66 percent in the second quarter, down from 2.75 percent in the first quarter of 2015 and the fourth quarter of last year.

'€œNevertheless, anytime the economy improves, banks will be ready to grow their loans as we don'€™t have any liquidity issues and Indonesia has a huge middle-income population,'€ Sigit said.

Separately, Indonesia'€™s largest banks such as Bank Central Asia (BCA) and CIMB Niaga are concerting their efforts on maintaining positive growth in consumer loans, such as by offering fixed interest rates for mortgages.

BCA consumer banking director Henry Koenaifi said the bank'€™s recent '€œfix and cap'€ program that offered fixed interest rates for up to six years for mortgages might boost demand, but he still foresaw a rather slight increase until year end.

'€œEarlier this year our mortgages stood at Rp 55 trillion and grew 3.3 percent year-to-date to Rp 58 trillion as of September,'€ Henry said.

Meanwhile, Budiman Tanjung, head of retail banking products at CIMB Niaga, said the bank was also offering five-year fixed interest rates for mortgages as well as soft down-payments of 20 percent for sharia-based house financing, with margins similar to conventional loans.

'€œIn order to face the competition, we'€™ve created an innovative mortgage product, called KPR Xtra Manfaat, which connects to a savings account and offers customers the chance to enjoy a zero percent interest rate for mortgages,'€ Budiman said in an email.

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