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Although bankers are optimistic of stronger credit growth next year, “soft infrastructure reform” to hasten investment and development is still needed to meet the 2010 target of 20 to 25 percent loan growth, senior bank executives said on Saturday.

Soft infrastructure refers to measures to simplify doing business, regulatory reforms and logistical improvements, bank executives and analysts said.

“We are willing to expand our lending, including to the eastern part of the country. However we are facing a lack of [both brick-and-mortar and soft] infrastructure and difficulties in gaining project development approval from the government,” Abdul Rahman, special asset management director of PT Bank Mandiri, said. “If soft infrastructure is not improved, that will become an obstacle for us in providing loans.”

Abdul said banks were in perfect shape to expand lending. Domestic lenders’ average capital adequacy ratio and lending to deposit ratio had risen to 17.8 percent and 73.6 percent, respectively, through September.

CAR measures a bank’s strength in facing risk. Bank Indonesia requires banks to have a minimum CAR of 8 percent, and a high ratio allows more room for credit expansion.

According to the central bank, year-on-year loan growth for August was up 13 percent. BI is projecting credit growth of 9 to 10 percent this year, down sharply from a 30 percent rise in 2008.

“If there is no policy support from the government, we are stuck,” Abdul said. “For funding for toll-roads projects, we have signed many commitment letters to finance the projects since 2006. However due to the land clearance problem, [Mandiri] has only disbursed loans for three projects,” he said.

These roadblocks have led many banks to increase lending to small- and medium-sized enterprises and retail borrowers instead of catering to corporations and funding infrastructure projects.

Chatib Basri, head of the University of Indonesia’s Institute of Economic and Social Research, said credit growth was needed to accelerate the domestic economy. If the nation expected to reach its 7 percent growth goal by 2014, investment growth, including bank lending, must grow by at least 28-30 percent per year, he said.

Chatib said the investment growth goal would not be achieved unless physical and soft infrastructure were improved, with poor policy support for reforms costing the economy in terms of competitiveness.

“Poor [transportation] infrastructure has made our inland transportation costs 1.5 times higher than the average in Asian countries.”

The government was trying to solve these problems by accelerating development policies including land clearance, Chatib said.