JAKARTA (TheInsiderStories) – Banking loan growth in Indonesia is estimated to be lower next year, influenced by the effects of the global economy also domestic conditions. Some bankers rated global economic conditions are estimated to remain uncertain in 2019.

“Some of the global risks such as the possibility of the continuing US – China trade war, the increase in policy rates in the US and the weakening of commodity prices will continue in 2019,” said Finance Director of PT Bank Mandiri Tbk (IDX: BMRI) Panji Irawan in written information received on Thursday (12/13).

In terms of the banking industry, according to him, there are still significant challenges, namely the trend of rising interest rates, tightening liquidity conditions, and volatility in the Rupiah exchange rate.

Taking this into account, Bank Mandiri has set a target for next year’s loan growth of 11.5 percent, lower than this year target at 13 percent. Other state-owned lender, PT Bank Tabungan Negara Tbk (IDX: BBTN) is optimistic loan will grow 15 percent in 2019, supporting from housing sector, said the President Director Maryono.

Then, PT Bank Negara Indonesia Tbk (IDX: BBNI) expect the lender’ credit could grow up to 15 percent next year. Moreover, President Director of PT Bank OCBC NISP Tbk (IDX: NISP) Parwati Surjaudaja said, the loan growth for next year will hold steady from this year which is in 10 percent to 15 percent, caused by challenging domestic and international conditions.

Furthermore, President Director of PT Bank Central Asia Tbk (IDX: BBCA) Jahja Setiaatmadja is forecasting that infrastructure and corporate sectors will be prospective for the next year and support the bank loan growth to 10 percent in 2019.

Previously, Financial Service Authority (FSA) Chairman Wimboh Santoso stated that loan growth in 2019 would indeed be slightly corrected due to the impact of the escalating trade wars. He expect loan growth to reach 12 percent in 2019. Whereas this year, bank loan growth is estimated to reach 13 percent with realization in October 2018 of 13.35 percent.

Indonesia’s central bank (BI) has issued a new regulation on reserve requirements, which aim to stimulate lenders to pump liquidity into the market and disburse more loans.

The governor Perry Warjiyo said commercial lenders having excess liquidity will get zero interest rate when they put the money on the central bank. Banks now get 2.5 per cent interest for the funds they park at BI that is above the required level.

The new rule is expected to encourage banks to put excess liquidity into the financial markets. This is also hoped to reducing the volatility in the overnight money market.

BI will also introduce a macro-prudential liquidity buffer that will replace rules on secondary reserve requirements. The bank will still have to put 4 percent of its total savings into central bank debt papers or government bonds.

The new regulation will allow the bank to repurchase 2 percent of those debt papers to the central bank in the case of tight liquidity. Theoretically, it may increase liquidity in the interbank market and may help bank to lower cost of fund.

Loan growth in Indonesia has fallen to below 10 percent pace since 2016, compared with more than 20 percent during the commodity boom years before that.

The President has made the call given the fact that the banking loan growth has been slow, despite easing policies applied by the central bank by reducing BI’s benchmark rate.

The other reason for slow loan growth is that the source of funding is not only from the banking sector. Companies have also in the past two years or so have increasingly utilized the capital market to find fresh funds through issuing bonds, rights issue as well as medium-term notes due to favorable lending rates.

Written Staff Editor, Email: theinsiderstories@gmail.com