Bank Indonesia Urges Foreign Banks to Change
ID/Grace Dwitiya Amianti
Indonesia’s central bank has urged foreign lenders operating in the country to boost their lending portfolio on working capital and investment loans, a Bank Indonesia official said.
That could help spur economic growth in Indonesia, said Mulya Effendi Siregar, executive director for research and banking regulations at the central bank.
Mulya said foreign lenders should be oriented toward providing working capital or investment.
“We will ask them what they will do here and what their business here will look like,” Mulya said.
Several foreign banks, including Citigroup, HSBC, Standard Chartered Bank and DBS Bank, operate in Indonesia. Analysts say foreign banks have focused on consumer loans in Indonesia, wanting to capitalize on changing spending habits.
Overseas lenders should no longer only provide consumer loans but also investment and working capital credits, Mulya said, adding that the central bank would not regulate foreign banks’ ceilings for each type of credit.
“The portion will not be determined, but it will depend on the supervisors,” he said.
He said the central bank would carefully monitor to see whether the credit was being channeled to sectors that impact the national economy.
Finance observer Lin Che Wei said that foreign lenders were active in credit sectors in which they should not be allowed. Many countries prohibit foreign banks from entering the retail or consumer sector as well as microfinance, he claimed.
“They have the potential of spacing out the opportunity for private national banks in developing the retail segment and microfinance more seriously,” Lin said.
Bank Indonesia cut its economic growth target this year to 6.3 percent, and last week it announced a cut in the economic growth forecast, reflecting slowing exports triggered by the debt crisis in Europe and slowing economic growth in the US.