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Bank lending grows at healthy pace, BI says

Jakarta Post - July 11, 2008

Aditya Suharmoko, Jakarta – Bank lending grew by 9.4 percent until May from the end of last year to Rp 1,096.21 trillion (US$119.7 billion), with half of the lending going to productive sectors as working capital, the central bank reported Thursday.

Compared to a year earlier, lending rose 31.4 percent. Bank lending rose Rp 34.44 trillion in May, a 3.24 percent increase from Rp 1,061.77 trillion in April, with working capital loans rising Rp 17.04 trillion to Rp 573.5 trillion.

According to the central bank, the trade and industrial sector secured 41.38 percent of total lending in May. The business service sector and the agriculture sector absorbed 11.16 percent and 5.4 percent of total lending, or Rp 122.39 trillion and Rp 59.21 trillion, respectively.

Since the start of the year, the industrial sector has enjoyed the most significant growth of Rp 19.39 trillion, from Rp 205.61 trillion in December 2007 to Rp 225 trillion in May.

Bank Indonesia deputy governor Muliaman D. Hadad said earlier bank lending had recorded significant growth so far this year, and banks had been careful in channeling their loans on fear of increasing their non-performing loans (NPLs). In May, net NPLs stood at 1.78 percent, down from 1.83 percent in April, Muliaman said.

Consumer credit, the most prone to NPLs, grew by 12.02 percent this year to Rp 316.53 trillion, accounting for 28.87 percent of total lending.

Investment credit, meanwhile, grew by 10.72 percent from Rp 186.22 trillion in December 2007 to Rp 206.19 trillion in May.

Bank Indonesia said lending to micro, small and medium enterprises reached Rp 553.5 trillion in May, a 29.2 percent increase from a year earlier. Total lending to MSMEs accounted for half of total bank lending, the central bank said.

The central bank's governor, Boediono, has said banks need to support MSMEs as the country's economic backbone.

Bank Indonesia has targeted lending to grow by between 22 and 24 percent this year, which it hopes will help the economy expand by 6.2 percent, in line with the government's target.