The distribution of bank credit in Indonesia has seen a rapid growth in February 2023, driven by the strong performance of corporate debtors.
According to the recently released Money Supply Analysis report for February 2023 by the Bank of Indonesia (BI), the total amount of credit disbursed by banks reached IDR 6,348 trillion in February 2023, representing a year-on-year (yoy) growth of 10.4%, up from 10.2% yoy growth the previous month.
The report notes that “the growth in credit distribution is mainly driven by the corporate debtor group, which grew by 11% yoy.” The corporate credit in February 2023 saw a higher growth rate compared to the previous month, rising by 10.4% yoy. On the other hand, individual credit saw a growth slowdown, dropping from 10% in January 2023 to 9.8% in February 2023.
The growth in credit distribution was mainly driven by investment credit, which grew by 11.8% yoy to IDR 1,686.4 trillion in February 2023. The growth in investment credit was due to the outstanding performance of credit in the processing industry sector, which grew by 22.9% yoy to IDR 294 trillion.
“The growth of credit in the processing industry sector is in line with the development in the cement, lime, and gypsum industries, as well as products made of cement and lime in East Java and South Sulawesi,” the BI report states.
Meanwhile, working capital credit grew steadily by 10.1% to IDR 2,817 trillion in February 2023, and consumer credit grew by 9.5% yoy to IDR 1,844.5 trillion.
In addition, credit distribution to micro, small, and medium-sized enterprises (MSMEs) reached IDR 1,255 trillion in February 2023, up by 8.6% yoy.
BI Governor Perry Warjiyo said that “banking intermediation continues to increase, supporting efforts to strengthen economic growth.” The high credit distribution in February 2023 was driven by the availability of supply in line with adequate liquidity conditions and loose banking credit distribution standards.
From the demand side, the increase in credit was also supported by demand from corporations, including MSMEs, and improving household consumption.
The increase in credit was also supported by BI’s policy of macro-prudential incentives in the form of a reduction in the minimum reserve requirements for banks that distribute credit to priority and inclusive sectors.
“Perry said that going forward, BI will continue to encourage banks to increase intermediation to support economic recovery.”