Indonesian People’s Household Financing Needs Decrease in the Future

Bank Indonesia

Plans for additional household financing by the Indonesian people will decline in the future. This can be seen based on a survey from Bank Indonesia (BI).

Based on the Banking Financing Demand and Supply Survey, which was released by the central bank on Monday (12/19/2022), there are indications of this decline in respondents planning to increase future financing by 6.7 percent as of last November.

This number is lower than in October which reached 7.6 percent. In detail, 1.2 percent of household respondents plan to add financing in the next 3 months, while another 1.8 percent plan to apply for credit in the next 6 months.

“In the plan to apply for future financing, commercial banks are estimated to still be the main source of financing to meet credit needs [54.8 percent share], observed a slight increase compared to the results of the previous survey,” wrote the report.

The other source chosen by household respondents to meet future financing is leasing with a share of 17.1 percent, while cooperatives and friends have a share of 8.7 percent each.

On the other hand, the survey shows that new credit distribution in the last quarter of 2022 will increase. This is reflected in the weighted net balance (WNB) of new credit disbursement in the fourth quarter of 89.1 percent, higher than the third quarter of 84.5 percent.

Furthermore, the Governor of Bank Indonesia Perry Warjiyo predicts bank lending until the end of 2022 will be in the range of 9-11 percent.

This projection is supported by demand from the business world and banking supply factors. From the supply side, several main factors make banks continue to extend credit. One of them is related to banking liquidity which is considered to be very loose.

This can be seen from the liquid assets per third-party funds (AL/DPK) which are above 27 percent. With liquidity still loose, Perry stated that an increase in the benchmark interest rate would not make banks rush to raise lending rates. Currently, the BI 7-Day Reverse Repo Rate (BI7DRR) is at the level of 5.25 percent.