Economist: Banking Credit Still Has Potential to Grow in Line with BI Target

JAKARTA - The Head of the Center for Macroeconomics and Finance of the Institute for Development of Economics and Finance (Indef) M Rizal Taufikurahman stated that bank credit has the potential to grow in accordance with the Bank Indonesia (BI) target, although it tends to be around the lower limit.

"In terms of prospects, credit growth is still likely to be in the Bank Indonesia target range at the level of 8-12 percent, but with a tendency to be at the lower limit," said M Rizal Taufikurahman, quoted by Antara, Tuesday, March 31.

He said that the seasonal momentum during Ramadan and Eid, the acceleration of government spending, and the support of macroprudential liquidity policies are expected to provide a short-term boost to credit growth.

However, without a stronger recovery in the real sector, particularly through investment, the impetus for credit growth will be limited.

"This means that the target may be achieved in aggregate, but it does not reflect the strengthening of quality intermediation," he said.

Rizal said the main challenge for the banking sector today is the gap between sufficiently loose liquidity and still weak credit demand, amid increased credit risks and pressure on margins.

In addition, he highlighted the distribution of credit which is still concentrated in certain sectors, so that it has not created a broad growth base.

According to Bank Indonesia (BI) data in Jakarta, Friday, March 27, credit distribution in February 2026 grew 8.9 percent year-on-year (yoy), lower than in January 2026 which was 10.2 percent yoy.

Rizal said the slowing credit growth reflected the weak transmission between liquidity and real demand.

He explained that, on the demand side, business actors still tend to wait and see amid global uncertainty and high cost of capital, so that investment expansion and working capital needs are held back.

He stated that households were also not strong enough to support credit demand, reflected by a more cautious consumption trend.

Meanwhile, on the supply side, banks are tightening the selection of distribution due to increased risks, especially in sectors that are sensitive to global economic pressures, so that even though liquidity is relatively sufficient, the desire to expand credit has not fully recovered.

He also emphasized the importance of ensuring that the existing liquidity actually has an impact on the real sector and encourages economic activity, not just being held in financial instruments.

"Thus, banks need to strengthen the quality of intermediation by expanding financing to more resilient productive sectors, increasing efficiency so that credit pricing is more competitive, and maintaining asset quality," said Rizal.

In line with M Rizal Taufikurahman, Economist of the Economic and Social Research Institute of the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) Teuku Riefky stated to ANTARA that the distribution of credit in the future is still limited due to high global and domestic uncertainties.

In addition, the slowdown in credit disbursement was also caused by a number of long holiday periods in the first quarter of this year.

"In February, it began to enter a period of many holidays so that working days also began to decrease. Then, in February, MSCI warnings and various rating institutions (raters) were issued which made uncertainty increase," added Teuku Riefky.