Global Economic Dynamics That Slows Down Indonesian Banking Credit

OJK Chairman Wimboh Santoso and President Joko Widodo. (Photo: OJK)

JAKARTA - Chairman of the Board of Commissioners of the Financial Services Authority, Wimboh Santoso, said that banking credit growth in 2019 was only 6.08 percent (year on year / yoy). This figure is certainly much lower than the realization of credit growth in 2018 which was 11.8 percent (yoy).

At the Annual Meeting of the Financial Services Industry in Jakarta, Thursday, January 16, Wimboh said that throughout 2019, the dynamics of the global economy with various fluctuations provided difficult conditions for the economy, especially the domestic banking industry.

Bank credit growth in 2019, said Wimboh, was also affected by the realization of the domestic economic growth rate.

"Bank credit only grew 6.08 percent, far below last year's (2018) which was 11.8 percent. We also saw a lot of financing originating from offshore," he said.

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OJK noted that there was a significant increase in offshore banking financing, while credit slowed down. Offshore financing or loans from foreign banks surged by 133.6 percent (yoy) to Rp130.4 trillion.

The sluggish credit growth was also evident from the support of third party funds (DPK) from banks which only grew 6.54 percent (yoy). "However, the purchase of securities instruments increased 15.8 percent to Rp97 trillion," said Wimboh.

Meanwhile, the quality of banking assets also declined with the non-performing loan ratio (NPL) indicator rising to 2.53 percent (gross) in 2019 compared to 2.3 percent in 2018.

Banking liquidity conditions tend to remain tight with the loan to deposit ratio (LDR) increasing to 93.6 percent in 2019. However, LDR has decreased compared to 2018 which was 94 percent.