Bank Indonesia is finalizing a raft of incentives to kickstart corporate lending and ensure that the economic recovery gathers pace in the coming year. The key incentive will allow banks that lend more to reduce the size of their minimum statutory reserves (GWM), which lenders are obliged to deposit with the central bank. Despite the central bank keeping its key lending rate at a record low of 6.5% for the past five months, banks have been reluctant to pass on the reduced borrowing costs to their corporate customers. Overall lending grew just 10.7% last year, below Bank Indonesia's target of 15%, as many companies were reluctant to take on further debt and many lenders were wary of adding risk. The central bank hopes it can drive credit growth to 20% this year by providing incentives to lend.
Source: The Jakarta Globe.com, p. B, 7 January