Bank Lending: Positive Growth in Q1 2023 but Slowing Down, What’s Next?

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Bank Indonesia (BI) has released the results of its Banking Survey for the first quarter of 2023, revealing positive growth in new bank lending disbursements. According to the survey, the net weighted balance of new credit disbursements was recorded at 63.7 percent.

However, the demand for new credit in the first quarter of 2023 appeared to slow down compared to the previous quarter, with a net weighted balance of 86.3 percent.

Erwin Haryono, Head of the Communication Department at BI, stated in a press release on Wednesday, April 26, 2023, that the slowing down of new bank lending disbursements in the first quarter is in line with historical patterns.

The growth of new credit disbursements has slowed down for all types of credit, as indicated by a slightly lower net weighted balance than the previous period, for working capital loans at 42.1 percent, investment loans at 54.7 percent, and consumer loans at 54.6 percent.

According to Erwin, the slowdown in new credit growth is also in line with the results of the Financing Demand and Supply Survey conducted by Bank Indonesia in March 2023.

The growth of new credit disbursements has mainly occurred in the fisheries sector, with a net weighted balance of 53.8 percent, followed by the agriculture, hunting, and forestry sector with a net weighted balance of 51.0 percent, and the transportation, warehousing, and communication sector with a net weighted balance of 47.1 percent.

The growth of new credit disbursements has occurred for all types of credit, and in the second quarter of 2023, new credit disbursements are expected to increase even further, with a predicted net weighted balance of 99.7 percent.

Respondents prioritize working capital loans for new credit disbursements in the second quarter, followed by investment loans and consumer loans. For consumer loans, the top priority is still home/apartment ownership loans, followed by multi-purpose loans and vehicle loans.

In terms of sectors, new credit disbursements for the second quarter of 2023 are prioritized for the processing industry, wholesale and retail trade sectors, and financial intermediary sectors.

The lending standard index is also expected to be slightly tighter in the second quarter of 2023, with a positive index of 0.1 percent, indicating a tightening of credit disbursement policies, including aspects of credit interest rates, risk premium, and administrative requirements. The tightening of credit disbursement policies aims to maintain the stability of the financial system while also promoting economic growth.