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Having enjoyed tremendous growth from 2001 to 2005, the
financing industry here has been under pressure since the start of the
year amid high inflation and interest rates.
High interest rates are putting a brake on loan demand and high
inflation is eating up the purchasing power of consumers -- a key
growth driver in Indonesia's consumption-driven economy.
And, while the central bank at home has showed signs of easing its
tight monetary policy by lowering its benchmark rates, chances are that
the U.S. Federal Reserve will continue its rate hike which would force
Bank Indonesia to follow suit to protect the rupiah.
Against this backdrop, the next 18 months are likely to be a
challenging period for financing firms in the country.
"If financing firms are not careful, they could face another round of
crises," said Eko B. Supriyanto, the director of InfoBank Research
Bureau, following the announcement of InfoBank's 2006 rating of
financing firms.
"Problems in installment payments have begun surfacing and will prevail
until the end of the year, or even beyond. There is also fierce
competition among firms in battling for reliable customers," Eko said.
According to a study conducted by InfoBank, after the 1997-1998 crisis
crushed the economy, the financing industry began showing significant
growth right until the end of 2005.
That year, the financing industry extended total loans of Rp 61.04
trillion (US$6.7 billion), 31.84 percent higher than 2004's Rp 44.66
trillion. In 2003, the industry extended Rp 31.84 trillion in loans, Rp
24.59 trillion in 2002 and Rp 20.55 trillion in 2001.
To assess the development of the financing industry, InfoBank Research
Bureau studied 2005 financial reports from 130 financing firms.
The bureau has come out with three ratings based on three categories of
assets, namely: above Rp 1 trillion, below Rp 1 trillion and above Rp
100 billion, and below Rp 100 billion.
Infobank ranked Wahana Otomitra, Oto Multiartha, Federal International
Finance, Dipo Star Finance and Summit Oto Finance as the top five
financing firms with assets above Rp 1 trillion.
As for the five highest ranking firms with assets below Rp 1 trillion
and above Rp 100 billion, they are from the top: Danpac Finance,
Mandala Multifinance, BCA finance, Tifa Finance and Indojasa Pratama
Finance.
The top five firms with assets below Rp 100 billion are Reksaarta
Pertiwi, Otomas Mulfinance, Artha Prima Finance, Arthaasia Finance and
Mulia Upaya Raya Nilai Inti Finance.
Tjiptono Darmadji, a long time player in the financing industry did not
share Eko's projection, saying that he was fairly optimistic about the
industry's future.
"The year 2005 was marked by the Bali bombing and the fuel (BBM)
'bomb', the effect of which was enormous on inflation which reached
about 18 percent," Tjiptono said.
Tjiptono said that judging from the fact that inflation was
continuously easing and that the interest rate was going down even
though at a slow pace, the country's economy was growing well too.
"I don't think people will stop applying for loans for motorcycles or
cars, for example. I agree the industry could decline in the near
future, but I don't think it would be too serious," he said.
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