In a recent report, Bank Indonesia (BI) has unveiled significant growth in the demand for corporate financing during June 2023. This surge in financing requirements has been notably spurred by the mining and construction sectors, making them key catalysts for the increase.
As part of their efforts to assess the state of corporate financing in the country, BI released its Survey on Banking Financing Supply and Demand, which revealed a substantial rise in the net weighted balance (NWB) for corporate financing, reaching 17.8 percent in June 2023, a considerable uptick from the NWB recorded at 12.5 percent in the preceding month of May 2023.
The report, released on Tuesday, July 18, 2023, further highlighted the specific industries that contributed significantly to the escalating need for financing.
According to BI’s findings, the construction, trade, and mining sectors played pivotal roles in driving this uptrend. This noteworthy increase in corporate financing was primarily geared towards bolstering operational activities and ensuring timely fulfillment of financial obligations.
Examining the NWB data in more detail, it is evident that the construction sector experienced a remarkable surge, with the NWB climbing to 4.3 percent in June 2023, compared to the relatively modest 1.8 percent recorded in the previous month.
Additionally, the mining sector also demonstrated substantial growth in financing needs, as indicated by the NWB of 1.2 percent in June, contrasting sharply with the negligible NWB recorded for the same sector in the preceding month.
The BI report further delved into the sources of corporate financing during the reporting period, revealing interesting trends in funding mechanisms.
According to the survey respondents, a significant portion of the financing needs (64.6 percent) were met through the utilization of their own funds. Additionally, financing sourced from the exploitation of relaxed draw facilities accounted for 11.5 percent, showcasing a noteworthy increase when compared to the previous month.
However, there was a slight indication of a slowdown in financing from domestic bank loans, as it stood at 10.6 percent in June, a reduction from the figures recorded in the preceding month.
As BI sought to understand the factors driving the choice of financing sources, survey respondents pointed to the ease and speed of acquiring funds as the primary motivator (88.6 percent). Moreover, a considerable proportion of respondents also highlighted the allure of cheaper costs or interest rates as another influential factor (18.1 percent).
Looking ahead, the BI report painted a positive outlook for corporate financing needs, projecting that demand will remain robust for the next three months, until September 2023. According to the estimations, the NWB for corporate financing is expected to reach 21.7 percent by September 2023.
This comprehensive report serves as a valuable assessment of Indonesia’s corporate financing landscape, shedding light on the sectors driving the surge in demand and providing insights into the preferences and considerations of businesses when choosing financing sources.
With the mining and construction industries leading the charge, and financing needs expected to remain high in the coming months, BI’s analysis offers critical information for policymakers and businesses alike to navigate the evolving financial landscape with confidence and foresight.