Indonesia mulls moving up to 10 trillion rupiah per lender to regional banks to boost growth

[JAKARTA] Indonesia is considering moving up to 10 trillion rupiah (S$780 million) per lender to regional banks, its finance minister said on Tuesday (Oct 7), in a bid to quickly boost economic growth through more lending.

The fund would be sourced from the government’s cash deposit in the central bank, currently at more than 270 trillion rupiah, Finance Minister Purbaya Yudhi Sadewa told reporters.

“We have offered the funds if they (regional banks) need them,” Purbaya said, adding the lenders could then later disburse the fund quickly through loans for cooperatives and small-scale businesses in Indonesia’s scattered regions.

The first two recipients could be the regional Bank of Jakarta and East Java’s Bank Pembangunan Daerah Jawa Timur, Purbaya said, adding that both had enough loan demand and capacity to use the funds.

Purbaya added that each of the regional banks could get government funds of between five trillion and 10 trillion rupiah.

The move would come on top of the government’s 200 trillion rupiah transfer into five state-owned banks last month, namely Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, Bank Tabungan Negara and Bank Syariah Indonesia.

The intent was to boost economic growth, which has hovered at around 5 per cent since the Covid-19 pandemic. President Prabowo Subianto wants growth to reach 8 per cent by 2029.

Loan growth was at 7.56 per cent in August, still below the target range from Indonesia’s central bank at 8 to 11 per cent in 2025.

Purbaya said that the government was planning to inject liquidity into regional banks because the funds previously allocated to the five state lenders were not being translated quickly enough into loans for businesses in the regions.

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Bank Mandiri said on Monday in a statement that it has disbursed 34.5 trillion rupiah worth of loans, or 63 per cent of the total government’s fund placement.

Mandiri noted that it had channelled the loans to labour-intensive industry and also to micro, small and medium enterprises. REUTERS