Jakarta – Foreign joint venture companies, with greater capitalization at their disposal, dominated the country's non-bank financial services last year, controlling the majority of total financing.
Newly elected chairman of the Indonesian Financial Services Association (APPI), Wiwie Kurnia, said here Wednesday that 37 foreign joint venture non-bank financial firms in the 140-member association accounted for 60 percent to the industry's total loans of Rp 92.8 trillion (around US$9.92 billion) in 2006.
This year, he said, the foreign joint venture companies will continue controlling a majority share of total financing, expected to increase 40 percent to Rp 130 trillion.
"They can work better because they have strong capitalization. They also receive support from their holding companies," said Wiwie, who is also president director of PT Mega Central Finance.
He said nearly all of the joint venture firms were affiliated with Japanese companies. Among existing foreign joint venture firms are PT Orix Indonesia Finance, PT Summit Oto Finance, PT Oto Multiartha and PT GE Finance Indonesia.
Wiwie said in the first semester of this year, the value of disbursed loans increased by more than 20 percent to around Rp 50 trillion, from around Rp 40 trillion in the same period last year.
"We expect the value to rise by 40 percent in the second semester with the decline of Bank Indonesia's key interest rate. It shows a trend of further declining, so we're upbeat the industry will experience higher growth in the next few years," he said, adding that financing businesses depended on the key interest rate, which now stands at 8.25 percent.
Wiwie said non-bank financial services still had a lot of room to grow, especially in the automotive sector, which absorbed around 80 percent of total loans. The heavy machinery sector absorbed around 15 percent and the electronics sector less than 5 percent.
He said automotive and heavy machinery financing would experience growth because improving economic conditions will encourage people to buy automobiles and motorcycles, and allow industrial companies to purchase machinery.
He also announced the APPI's executives for the 2007-2010 term.
Wiwie replaces outgoing chairman Susilo Sudjono, PT SUN Finance's president director, who joins the association's advisory council. Dennis Firmansjah, president director of PT IFS Capital Indonesia, was reelected as secretary-general, and Henry Koenaifi, president director of PT BCA Finance, retained his position as treasurer.