Credit Growth Slows, Indonesian Lawmaker Urges Banks to Step Up Lending to Real Sector

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JAKARTA, Sunday, July 13, 2025 — Sluggish bank lending has drawn concern from the House of Representatives, prompting a call for more aggressive efforts to support the real sector and jumpstart economic growth.

Mukhamad Misbakhun, Chair of the House Commission XI overseeing financial and economic affairs, said the banking industry must shift toward more proactive strategies in channeling credit for investment and working capital. His remarks came in response to the latest data showing that credit expansion remained subdued.

According to Misbakhun, overall bank lending in Indonesia grew by just 8.43% year-on-year in May 2025, down from 8.8% in April and 9.16% in March—marking the slowest pace since mid-2023.

“This decline stems primarily from weakening household purchasing power and a shrinking middle class,” he said in an official statement on Sunday.

Strategic Sectors Left Behind

Misbakhun pointed to key industries—textiles, mining, and downstream processing—that continue to struggle with limited access to bank financing. These sectors, he said, are vital to national development but face persistent credit bottlenecks.

“The lack of sufficient financing has constrained both capital expenditure and operational spending among businesses, slowing down expansion and productivity,” he explained.

While investment credit grew 13.74% and working capital loans rose 4.94% in May, these rates remain inadequate to support the evolving needs of businesses, Misbakhun argued, citing data from the Financial Services Authority (OJK).

Banks Must Embrace a Proactive Lending Approach

To reinvigorate the economy, Misbakhun urged banks to look beyond capital preservation and play a more active role in fueling growth.

“Productive sectors require support from banks that go beyond traditional risk-averse approaches. A proactive mindset is still lacking,” he said.

By providing more targeted credit, he added, banks can help businesses scale up, enhance competitiveness, and generate jobs.

“This is also in line with President Prabowo’s broader economic agenda,” Misbakhun noted, referencing the new administration’s focus on real sector revitalization.

Collaboration Key to Breaking Credit Stalemate

Misbakhun emphasized the need for close coordination between regulators, banks, and business actors to ensure that credit distribution is not only adequate but also well-targeted.

“Strong synergy is essential to overcome persistent barriers in financing, especially in sectors that have been underprioritized,” he said.

He concluded by stressing that robust and well-directed credit growth remains a cornerstone of Indonesia’s broader development goals.