Total Financing Companies' Loans Reach Rp 186.35 Trillion in 2010

Total financing activities recorded by financing companies reached Rp 186.35 trillion in 2010, an increase of 30.73 percent from 2009's financing of Rp 142.54 trillion. Based on data of the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK), the increase was prompted by an increment in consumer financing.

In 2010, consumer financing, including motor vehicle financing, increased by 39.78 percent to Rp 130.01 trillion. Total consumer financing contributed 69.76 percent to total financing. In addition to this, lease financing increased by 14.3 percent to Rp 53.16 trillion. This contributed 28.52 percent. Factory financing was up 12.8 percent to Rp 2.29 trillion,contributing 1.23 percent to total financing. On the other hand, credit card financing dropped by 5.91 percent to Rp 875 billion. In total, financing company assets jumped 32.7 percent to Rp 230.3 billion, compared to 2009's Rp 173.54 trillion.

Wiwie Kurnia, Chairman of the Indonesia Financing Company Association, said that this was induced by the high growth of the automotive industry. In 2010, the Indonesia Motorcycle Industry Association (AISI) recorded a 26 percent increase in the sales of motorcycles or 7.39 million units and a 57 percent increase in car sales or 764,710 units.

Moreover, the increase in commodity price was also a supporting factor. “This year, financing distribution will likely grow only 15 to 20 percent due to progressive tax enforcement and the fuel oil limitation plan," he said.

Stanley Setia Atmadja, Chief Executive Officer of Adira Dinamika Multi Finance, added that a hindrance to this year's financing industry is the potential increase of bank loan interest rates after the BI Rate increase to 6.75 percent. This is expected to increase consumer mortgage interest distributed by a financing company.

The government imposed a progressive tax of 1.5 percent to first vehicle ownership, 1.75 percent to second ownership, 2.5 percent to third ownership, 4 percent to fourth ownership and so on. The government plans to impose fuel oil limitation on April 2011.

Non-Performing Loans

The high financing distribution in 2010 made total financing companies loans to go up. In 2010, total financing industry's loan increased by 43.74 percent to Rp 145.31 trillion compared to 2009. The biggest loan came from domestic banks reaching Rp 84.9 trillion, with the rest coming from foreign bank loans, bonds, and subordinated loans.

Although financing industries are growing, it was not followed by the growth of non-performing loans. In 2010, total non-performing loans were only 1.3 percent or a decrease of 1.9 percent from 2009 total non-performing loans.