Retail banking to remain key business driver for Indonesia
As demand for banking services grow, Indonesia’s banking industry is expected to continue growing at a rapid pace in 2012, driven primarily by microfinancing and Islamic banking. June 28, 2012 | Doron FooIndonesia’s $813 billion economy expanded by 6.5% in 2011, with this expansion being the largest growth since 1996, driven by growing private consumption, strong investments and exports. Household consumption accounted for 56% of economic activity last year. Although GDP growth is expected to decelerate to 5.9% in 2012, Indonesia will still be ranked one of the most resilient economies in the world. To enhance the growth of its economy, capital spending allocated for infrastructure in the revised 2012 budget was increased by almost 50%YoY to $1.9 billion this year. Figure 1: Net interest margins of selected Asian countries between 2007-2011
According to Indonesia’s Investment Coordinating Board, realised foreign direct investment surged over 30% YoY to $5.5 billion in Q1 2012, up from 25% in Q4 2011. Improved investments within Indonesia has reflected strong interest in the country’s growth prospects, as foreign companies continue to tap domestic consumer markets and Indonesia’s plentiful natural resources. Moreover, Fitch’s upgrade of Indonesia to investment grade in December 2011 will further spur investment inflows. The level of financial services penetration in Indonesia (about 20% of the total population) remains low, underlining domestic retail banking potential. The country’s leading position in having Asia’s highest net interest margin and a domestic-driven model has sterilised the impact of the global economic volatility. Retail banking is the main driver of profitability for the nation, with a microfinance interest rate of 24%, compared to a corporate interest rate of 8%. Among Indonesian banks, regional development banks boast the highest net interest margin (8.1%) while joint venture banks ranked lowest (3.9%) in 2011. With such lucrative profit margins, it is no surprise that Indonesian banks are ... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Asian Banker 500, Databook, Indonesia, Retail BankingAsian Banker 500,Databook,Indonesia,retail, Asian Banker 500,Databook,Indonesia,Retail Banking, Keywords:Asia, Consumer Finance, Bank Indonesia, Bank Rakyat Indonesia, Bank Danamon, Bank Mandiri, Microfinance, Islamic Banking, Net Interest Margin Asia, Consumer Finance, Bank Indonesia, Bank Rakyat Indonesia, Bank Danamon, Bank Mandiri, Microfinance, Islamic Banking, Net Interest Margin
|