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Bank lending expands in Indonesia on strong economy
Real estate news By People's Daily Online
October 16, 2007
The banking industry in Indonesia has rebounded from a disappointing 2006, with lending poised to register growth of more than 20 percent by the end of the year. According to data from the central bank, bank lending as of the end of August had reached 893.5 trillion rupiah (one U.S. dollar equals 9000 rupiah), up nearly 23 percent from the same period last year, as the economy continues to improve, slowly ironing out the recent problems of low demand and high borrowing costs.
More than half of total lending was disbursed as working capital loans, which grew by 23 percent year-on-year to 461.7 trillion rupiah. Both investment and consumer loans showed solid growth as well, rising nearly 26 percent to 174.4 trillion rupiah and more than 24 percent to 257.4 trillion rupiah, respectively. Most of the working capital and investment loans went to businesses in the manufacturing, trade and tourism industries, while consumers in the country took up more mortgages, car and motorcycle loans.
Small and medium enterprises (SMEs) were a main lending market, with loans to the sector increasing by 20 percent to 461.7 trillion rupiah. Bank Indonesia is eyeing overall loan growth of 22 percent for this year, from 14 percent last year, the Jakarta Post daily reported on Tuesday. Although borrowing costs in the country are still high, the average base lending rates have declined to 13.4 percent from 14.9 percent in August last year, in line with Bank Indonesia having trimmed its key rate to 8.25 percent at present. Indonesia's economy is also expected to grow higher by 6.4 percent in the third quarter from 6.3 percent the previous quarter on rising consumer spending and investment.
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