Beritasatu TV, Jakarta – President Joko "Jokowi" Widodo has asked Indonesian banks to cut their lending rates to accelerate growth after Bank Indonesia, the central bank, gradually lowered their benchmark interest rate in the past four months.
"The BI rate has dropped; the banks' [interest rates] have not. I am still waiting," Jokowi said in his opening remarks at the Indonesian Banking Expo 2019 on Wednesday.
The comment was met with applause from the hundreds of bankers attending the event, and Jokowi was quick to see the gesture as a sign of agreement.
"Your applause meant you agreed with me. I'll put this down in my notes," Jokowi said.
Bank Indonesia has cut its benchmark interest rate by 100 basis points to 5 percent since August. It has also loosened some lending requirements to encourage vehicle loans and home mortgages.
The prime lending rate for corporate loans at the "Big 3" state lenders – Bank Rakyat Indonesia, Bank Mandiri and Bank Negara Indonesia – was at 9.95 percent in October, the same as it was in August.
Businesses have grown to expect up to a six-month lag before Indonesian banks cut their rates in response to the central bank's cue.
But, Jokowi said the country cannot afford to go about its business as usual. Lenders, according to the president, need to make loans more affordable for micro, small and medium enterprises instead of just big companies immediately.
The prime lending rate for microbusinesses has stagnated at 17 percent for a while at the state-controlled lenders. "Make them [SMEs] a priority so we can narrow inequality gaps and encourage economic growth," Jokowi said.
Indonesia's 59 million SMEs accounted for 60 percent of the country's gross domestic product in 2018, according to government data.
Jokowi also requested that the Financial Services Authority (OJK) strengthen its SME loan policies. "The regulation should be made simple, provide incentives and disincentives," Jokowi said.
BRI President Director Sunarso said banks would need time to cut their interest rates unless the government decides to issue a new rule to enforce it.
"Interest rates will follow the market. If they go down in the market, ours will follow. [But] there's another way to control interests, which is through regulation," Sunarso said.