Consumer Credit in Indonesia

PROSPECTS

Little sign of slowdown in durables lending

Indonesia was one of the countries that experienced the most consistent growth rates amongst global economies over the last few years. It is a populous country with a young and expanding population, which are key factors in the rising level of consumer confidence, along with rapid urbanisation.

Government support boosts consumer credit

Government support was one of the factors driving and maintaining the growth of consumer credit in 2019. For instance, the national bank supported the easing up of the credit ratio with respect to guaranteed assets (loan to value ratio) LTV/FTV in recent years.

Healthy growth in consumer credit is predicted in the forecast period

Demand for consumer credit is high in Indonesia; however, many banks are reluctant to invest, because giving loans to consumers who are not financially capable means they risk having a high rate of non-performing loans. However, during the review period, commodity prices rose and the inflation rate was low.

COMPETITIVE LANDSCAPE

Promotions and partnerships support growth

The largest private bank, Bank Central Asia, relies on auto loans and card lending to support the growth of consumer credit. Promotions are given for auto loans during special periods, such as on its birthday.

Digital applications for loans speed up the process

Many banks are starting to use digital methods to provide a better service to consumers. For example, in the second quarter of 2019, DBS Indonesia, through its Digibank, launched an instant personal loans (consumer credit without any secured assets held as guarantee) feature.

Digital credit services are being aggressively promoted

Indonesia has a very large unbanked population. The number of unbanked people is especially high in rural areas, where access to banking infrastructure is limited, or the population is deemed unbankable by banks due to their lower income level and lack of proper documentation.

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