Willem A. Makaliwe, Managing Director of the FEB UI Management Institute, assessed that this was due to the high loan interest rates provided by banks. Where the average is above 10%
“As a retailer or an individual, you can save at least 1%, but if you are a borrower it’s 10% and even a dozen percent. This large spread makes banks pay close attention to large margins. So the numbers make the increase in credit not so big,” he said at the Squawkbox event, CNBC Indonesia TV, Friday (21/1/2022)
The BI7DRRR reference interest rate dropped drastically and is now at the 3.5% level since last year. Credit interest rates did fall, but much slower than the decline in banking deposit rates causing the spread between credit and deposit rates, as well as banking Net Interest Margin (NIM), to continue to increase.
Bank Indonesia has repeatedly asked banks to disburse credit/financing, including by lowering credit interest rates, to be increased in order to further encourage the recovery of the national economy.
According to Willem, there needs to be incentives designed by the regulator so that banks can cut loan interest rates to a better level.
“There needs to be a policy that can encourage lower loan interest rates so as to encourage higher credit,” he concluded.