Banking Credit Can Continue to Grow 10-12 Percent

Bank credit has reached the target of 10-12 percent, namely 12.4 percent on an annual basis.

KOMPAS/NIKSON SINAGA

Illustration. Residents dry rice in rice fields in Pangururan District, Samosir Regency, North Sumatra, Sunday (10/10/2021).

SAMOSIR, KOMPAS — The banking industry is expected to maintain credit growth momentum of 10-12 percent in 2024. This is considering that liquidity will become increasingly abundant along with the implementation of the macroprudential liquidity incentive policy or KLM for the sector -sectors that have leverage for economic growth.

Head of the Financial Sector Group, Department of Macroprudential Policy Bank Indonesia (BI) Nugroho Joko Prastowo said that the economic fundamentals of the Indonesian economy were still maintained amidst the challenges of global uncertainty. These conditions, among other things, are supported by financial system resilience, credit growth, and maintained inclusive and sustainable financing.

In March 2024, banking credit distribution has met the growth target of 10-12 percent, namely 12.4 percent on an annual basis. The contribution to credit growth mainly came from the transportation, trade, industry, electricity, gas and water sectors, as well as the consumption sector.

"The growth of credit should not decline again because there will be additional liquidity in June 2024," he said during a journalist training event in Samosir Regency, North Sumatra, on Monday (29/4/2024).

KOMPAS/AGUSTINUS YOGA PRIMANTORO

BCA economist David Sumual gave a statement to media crew at the Journalism Training held by Bank Indonesia, Sunday (28/4/2024).

The additional liquidity, according to Joko, comes from the expansion and improvement of KLM in several sectors that support government programs and have a leveraging effect on the economy. The maximum liquidity incentive that banks will receive is 4 percent of the minimum mandatory balance (GWM).

Every bank is required to keep the funds collected from the community in BI as GWM at 9 percent. Through KLM, the bank will obtain the flexibility to store a maximum of 4 percent of its funds, so that the mandatory GWM deposited by the bank becomes 5 percent.

Bank liabilities (GWM) can be used to distribute credit and not only have a single impact, but there will also be a multiplier effect. This is the sweet medicine for economic growth.

Previously, the KLM covered the downstream sector, housing, tourism, inclusive financing, ultra-micro financing, and green financing. The expansion of the KLM sector will include the automotive, trade, electricity, gas, water, and social services sectors.

"This incentive to reduce bank liabilities (GWM) can be used to distribute credit and will not only have a single impact, but there will also be a multiplier effect (multiplier effect). "This is the sweet medicine to maintain economic growth," said Joko.

Since its implementation from October 2024 to March 2024, the incentive value provided through the KLM amounted to Rp165 trillion. Following the KLM's expansion to additional sectors in June 2024, the total liquidity of KLM at the end of 2024 is estimated to reach Rp280 trillion.

Joko emphasized that the liquidity of the banking industry is still well-maintained until now, as reflected by the third-party funds (DPK) to liquid assets (AL) ratio of 27.18 percent. This indicates that the liquidity of the banking industry is sufficient, allowing for room for credit growth.

From the demand side, credit growth will continue to grow in line with positive corporate performance and household consumption. Meanwhile, credit supply was also maintained, as demonstrated by maintained appetite and liquidity in the banking industry.

Also read: BI Interest Rates Rise, Bank Credit Distribution Risks Slowing

Double-digit growth

Recently, a number of banks have reported performance in the first quarter of 2024 with average double-digit credit growth. These banks include, among others, PT Bank Tabungan Negara (Persero) Tbk or BTN, PT Bank Rakyat Indonesia (Persero) Tbk or BRI< /a>, and PT Bank Central Asia Tbk (BCA).

KOMPAS/AGUSTINUS YOGA PRIMANTORO

President Director of PT Bank Tabungan Negara (Persero) Tbk or BTN Nixon LP Napitupulu (center) with the board of directors in a press conference presentation of BTN's performance in 2023, in Jakarta, on Monday (12/2/2024).

BTN President Director Nixon LP Napitupulu said that BTN's credit distribution in the first quarter of 2024 had reached IDR 344.2 trillion or grew 14.8 percent annually. This growth was supported by credit and housing financing, as well as high-margin credit (high-yield loans) which were quite popular with the public.

Out of the total credit distributed, the housing sector remains the main contributor with around 85 percent of all credit and financing disbursed by BTN. During the first quarter of 2024, the total housing credit reached Rp 292.7 trillion or grew by 10.7 percent annually.

"Our strategy of targeting more distribution of non-subsidized KPR (home ownership credit) to the middle to upper segment has started to show results. "For mortgages with ticket sizes above IDR 750 million, the growth will reach 176.6 percent on an annual basis in the first quarter of 2024 with total disbursement of IDR 1.05 trillion," said Nixon in a press conference explaining BTN's quarterly performance. I-2024 in Jakarta, Thursday (25/4/2024).

We ensure liquidity is maintained, but that doesn't mean putting the brakes on credit. We must ensure double digit credit growth

In a separate occasion, BRI reported a credit growth of 10.89 percent annually to reach Rp 1,308.65 trillion in March 2024. Of that amount, 83.25 percent of it is credited to the micro, small, and medium enterprise (MSME) segment.

In detail, micro credit segment recorded a 10.51 percent annual growth to reach Rp 622.61 trillion, while consumer segment grew 11.62 percent annually to reach Rp 193.96 trillion. Meanwhile, the small and medium segment grew 8.06 percent annually to reach Rp 272.85 trillion, and the corporate segment grew 15.10 percent annually to reach Rp 219.24 trillion.

"The current national economic condition has resilience against global economic stability. BRI is committed to supporting government programs that promote domestic economic growth," said BRI's President Director Sunarso in the performance presentation.

TANGKAPAN LAYAR

The Chief Executive of Banking Supervision at the Financial Services Authority (OJK), Dian Ediana Rae, explained the development of the banking sector during the OJK's Monthly Commissioner Meeting in March 2024, held online on Tuesday (2/4/2024).

He added, BRI will continue to maintain its liquidity ratio at an adequate level amidst tight banking liquidity due to the era of high interest rates. This is reflected in the loan to deposit ratio (LDR) as of the end of March 2024 of 83.28 percent.

Therefore, BRI is committed to optimizing the liquidity space available to distribute credit. "We ensure that liquidity is maintained, but that doesn't mean putting the brakes on credit. "We must ensure double digit credit growth," added Sunarso.

Meanwhile, BCA's credit distribution in the first quarter of 2024 recorded a 17.1% annual growth to IDR 835.7 trillion. This is thanks to the optimism of consumer spending, especially during the momentum of Ramadan and Eid al-Fitr.

Also read: Interest Rate Policy Has Limited Impact on the Property Sector

In detail, corporate credit grew by 22.1% annually to reach Rp 389.2 trillion and commercial credit grew by 9.3% annually to reach Rp 125.2 trillion. On the other hand, the performance of small and medium-sized enterprise credit grew by 13.5% to reach Rp 110.4 trillion, and consumer credit grew by 14.9% annually to reach Rp 201.6 trillion.

"We are optimistic about maintaining our performance growth until the end of this year, in line with the positive outlook for the national economy," said President Director of BCA, Jahja Setiaatmadja.