The Banking Credit in January 2023 Grows but Slows Down

Saving money in bank

Bank Indonesia, the central bank of Indonesia, has reported that banking credit grew by 10.2% year-on-year to reach Rp6,284.6 trillion in January 2023. Compared to the previous month’s growth rate, the figure slowed down from 11% year-on-year growth in December 2022.

According to Bank Indonesia’s report on money supply in January 2023, credit growth was mainly driven by loans to individual borrowers, which increased by 10% year-on-year.

In terms of loan usage, the growth in credit distribution in January 2023 was primarily driven by working capital loans, which grew by 10.1% year-on-year to reach Rp2,796.7 trillion.

The banking credit growth was also supported by investment loans and consumer loans, which grew by 11.4% and 9.3% year-on-year, respectively.

The sub-sector of working capital loans mainly came from the processing industry, which grew by 8.2% year-on-year as of January 2023. The growth in the processing industry sub-sector mainly occurred in the palm oil industry in North Sumatra and Riau.

Meanwhile, loans to the trade, hotel and restaurant sectors grew by 6.0% year-on-year to reach Rp 921.6 trillion in January 2023.

This growth mainly occurred in the sub-sector of wholesale trading of machinery, spare parts, and equipment in Jakarta and East Java.

Investment loans from banks in January 2023 grew by 11.4% year-on-year, mainly coming from the processing industry and the financial, real estate, and business services sectors.

Specifically, investment loans in the processing industry sub-sector grew by 16.6% year-on-year to reach Rp 276.6 trillion, following the development of credit in the palm oil industry in North Sumatra.

Meanwhile, investment loans in the financial, real estate, and business services sectors grew by 23.9% year-on-year to reach Rp 202.4 trillion. This growth mainly occurred in the sub-sector of hardware consulting services in Jakarta and Banten.

On the other hand, the Ministry of State-Owned Enterprises (BUMN) proposed to promote microloans with 0% interest rates. Minister of BUMN Erick Thohir even targeted that this idea could be realized within the next month.

However, bankers and analysts stated that this proposal would only be implemented if it became a government program.

Therefore, Amin Nurdin, a senior faculty member at the Indonesian Banking Development Institute (LPPI), believed that the government would be responsible for the program if it were to be implemented.

Amin suggested three possible ways to achieve this: first, through interest subsidies similar to the People’s Business Credit (KUR).

The KUR interest rate is set at 9%, but the government provides subsidies and additions to reduce it to 3% throughout 2022.