BCA EYEING A CREDIT BUREAU TO BOLSTER LOAN, TACKLE NONPERFORMING LOANS
Posted on August 22, 2015 on 10:31:37 WIB
Bank Central Asia, the biggest privately-owned bank in Indonesia in terms of assets, plans to establish a credit bureau (which will operate as a subsidiary) as part of an effort to bolster lending growth and tackle the escalating issue of bad loans prevalent across the country.
A credit bureau is a financial institution that collects and records data on loans and potential customers, then distributes the information among other financial institutions to help identify of their creditworthiness, according to Bank Indonesia definition.
"We are looking into how we can have a credit bureau. We have a big database [to support the plan] and going ahead, I think that a credit bureau will definitely ease the process of lending money to consumers," Jahja Setiaatmadja, president director of BCA, said on Friday.
Bank Indonesia is currently the only financial institution in the country to have a credit information bureau. A local credit rating agency Pemeringkat Efek Indonesia, or Pefindo, is expected to open its own credit bureau called the Pefindo Credit Bureau in September, making it the country's first privately-owned credit bureau.
The central bank issued a regulation on the Credit Information Management Bureau in 2013, which allows the establishment of privately-owned credit bureaus in Indonesia as it seeks to collect more data on debtors.
Under the regulation, a company looking to establish a credit bureau must have legal footing as a company in Indonesia and possess a minimum capital of Rp 50 billion ($3.75 million). The regulation also limits single ownership of such an agency at 51 percent.
A 2014 report by the Policy Economic Research Council ? a research organization based in the United States ? noted that bank ownerships in a credit reporting agency, especially in emerging markets like Indonesia, could give a "relative advantage" over its early stage of development.
Still, worries remain as the report emphasized that bank ownerships of credit bureaus in emerging markets should eventually recede over time, since a long-term majority ownership by lenders could hamper the institution's functions.
Publicly-listed BCA has earmarked over Rp 1 trillion for acquiring a small to mid-sized bank and expanding its other businesses, including to establish such a credit bureau.
Indonesian lenders have been facing sluggish lending demands coupled with rising of bad loans this year as the slow growth environment continues to drag down the private sector as well as household spending.
Indonesia's economy grew 4.7 percent in the first quarter of this year from the same period in 2014 ? the weakest pace since the 1998 Asian financial crisis. This has also translated into a higher nonperforming loan ratio in the country. NPL ratio for commercial banks in Indonesia climbed to 2.5 percent of the total outstanding loan value in April this year, compared to 2.05 percent in the same period in 2914, data from the Financial Services Authority (OJK) reported.
BCA itself, saw its NPL ratio rising slightly to 0.7 percent as of March, from 0.5 percent in March 2014. When asked about BCA's acquisition plan, Jahja said the lender has slowed its search on the back of slow economic growth.
"We've been looking around [for a bank], but with the current economic slowdown, we'd like to wait until the third quarter to see which bank survives with a good performance," said Jahja.