Jakarta. President Joko "Jokowi" Widodo has called on local lenders to disburse more loans to small and medium enterprises to accelerate growth in the Indonesian economy this year.
"I want to see banks grant loans to everyone, not only to some 'mature' parties. It must be spread more equally [to include small and medium enterprises]," Jokowi said in his speech at the annual meeting of the financial services industry, hosted by the Financial Services Authority (OJK) in Jakarta on Thursday (18/01).
Indonesia has seen single-digit loan growth over the past two years as banks held back on disbursements to deal with a spike in bad loans due to a sluggish economy. This has often resulted in reduced access to loans for smaller businesses, deemed a greater risk than their more established counterparts.
However, the president said many indicators are pointing to an improving economy this year, which should encourage bankers to adopt a more optimistic view on loan disbursements.
"We have good monetary policy, good fiscal expenditure with an improved 2.42 percent state-budget deficit, improved trade balance, improved composite index and improved forex reserves of $130 billion," Jokowi said.
He added that global credit rating agencies have made favorable assessments of the Indonesian economy, with the latest by Fitch Ratings, which upgraded the country's long-term sovereign debt rating to "BBB with a stable outlook," in December last year.
"The ease of doing business has also improved, with Indonesia currently ranked in 72nd place, up from 120th previously," Jokowi said. "With these healthy economic indicators, why can we still not run fast?"
OJK chairman Wimboh Santoso meanwhile said the financial sector has shown positive signs of recovery last year partly due to lower interest rates, which prompted companies to raise Rp 294 trillion ($20.5 billion) in the capital markets – compared with Rp 217 trillion in 2016 – to support business expansion, among others.
"Last year, we had an economic growth rate of 5.1 percent, which was deemed adequate. We are optimistic that the financial sector can contribute significantly to this year's target of 5.4 percent, set by the government," Wimboh said.
The OJK has stated that it will push for more varied financing options this year to assist the country's current infrastructure boost. These options include perpetual and regional bonds. In addition, the OJK will also stimulate regional growth in the financial sector by simplifying procedures and making it easier for stakeholders to obtain regulatory approval.
Bank Indonesia has decided to keep its benchmark rate unchanged, on the back of a recovery in the global and domestic economy. The central bank has maintained its seven-day reverse repo rate at 4.25 percent for four consecutive months.
The bank noted that there has been an improvement in economic resilience in Indonesia, marked by low inflation within the target rate over the past three years, a robust current-account balance, high inflows of foreign capital, a stable rupiah exchange rate, foreign exchange reserves reaching record levels and strong financial stability.
Externally, the global economy is recovering, especially due to the positive impact of tax reforms on growth in the United States economy, which is fueling higher prices for Indonesia's commodity exports.
The US Federal Reserve is expected to raise the benchmark interest rate and lower its balance sheet as planned, reducing any risks of shocks in the global financial market, Bank Indonesia said.