Undisbursed Loans Stay High as Government, Banks, and Analysts Clash Over Credit Momentum

JAKARTA, Investortrust.id — Indonesia’s undisbursed loan balance remains elevated even as the government insists credit demand is intact, framing the issue as one of access and risk appetite rather than a lack of interest from businesses.

Finance Minister Purbaya Yudhi Sadewa said the Rp 2,509.4 trillion in undisbursed loans recorded in November 2025 did not reflect weak appetite for borrowing. Undisbursed loans refer to approved credit facilities that have been committed by banks but not yet drawn down by borrowers, often reflecting timing mismatches, project delays, or cautious lending conditions rather than a lack of credit demand.

“Saying demand for credit does not exist, that is not true,” Purbaya said on Friday, Jan 2, 2026.

He argued that credit growth continued but was constrained by banks’ willingness to lend, citing cases where viable borrowers struggled to secure financing.

Purbaya pointed to a debottlenecking session involving textile manufacturer PT Mayer Indah Indonesia, which sought loans but was rejected because banks classified the sector as sunset. “Why? Because banks can put their money in places that are more comfortable,” he said.

Instead of extending loans, Purbaya suggested banks preferred safer investment instruments that offered predictable returns.

Bank Indonesia data showed undisbursed loans reached Rp 2,509.4 trillion in November 2025, accounting for 23.18 percent of total available credit ceilings.

That figure rose 2.39 percent from October 2025, when undisbursed loans stood at Rp 2,450.7 trillion or 22.97 percent of available credit.

To stimulate lending, the government placed Rp 276 trillion of public funds into state owned banks, known collectively as Himbara, with the aim of boosting credit flows to the real economy.

Purbaya said similar measures during the Covid-19 period in 2020 and 2021 had lifted credit growth into double digits. “The undisbursed loan problem exists, but when the economy grows, people will borrow more,” he said.

He added that signs of recovery were already visible at the grassroots level. “If you look at villages and peripheral areas, economic activity has started to move again,” Purbaya said. “At least it is not as bleak as before. Why are people no longer protesting on the streets? Because they have hope for a better future.”

Purbaya also acknowledged that fiscal injections had flowed through the banking system more slowly and less effectively than expected.

“During the injection process, we withdrew Rp 75 trillion and then spent it again,” he said at a press conference on Wednesday, Dec 31, 2025.

“We pulled it out but spent it, so it entered the system, but not directly as funds sitting in banks,” he said, adding that the money was channeled through central and regional government spending, which he argued could have a more direct impact on the economy.

He admitted the Rp 276 trillion placement into state banks and regional development banks had not delivered the optimal results he initially estimated.

“The impact of the injection policy was not as optimal as I previously estimated,” Purbaya said.

One reason, he said, was insufficient coordination between fiscal policy and Bank Indonesia, though he claimed alignment had improved over the past month.

“Going forward, with increasingly synchronized policies between us and the central bank, the economy will grow better than now,” he said.

Despite the challenges, Purbaya said base money growth had rebounded toward double digits, approaching 13 percent, supported by stronger coordination with Bank Indonesia.

Bank Indonesia reported adjusted base money, or M0, stood at Rp 2,136.2 trillion in November 2025, growing 13.3 percent year on year, following 14.4 percent growth in October.

Broad money, or M2, also expanded 8.3 percent year on year to Rp 9,891.6 trillion in November 2025, accelerating from 7.7 percent in October.

Credit growth, meanwhile, continued at a moderate pace, with bank lending reaching Rp 8,196.4 trillion in November 2025, up 7.9 percent year on year.

Banking analyst and Senior Vice President of the Indonesian Banking Development Institute, Trioksa Siahaan, said the sector faced a difficult transition period before a potential rebound in the second quarter of 2026.

“For banks to recover, there needs to be an external trigger such as a recovery in purchasing power, low inflation, efficient funding costs, and well maintained liquidity,” Trioksa said on Friday, Jan 2, 2026.

He said if those conditions stabilized in the first quarter of 2026, banking performance could improve in the following quarter.

Trioksa said banks in 2025 struggled to balance credit expansion with asset quality, liquidity management, and rising funding costs, while credit demand remained subdued.

“To rebound, banks need support from economic growth, low inflation, efficient funding costs, and strong liquidity,” he said.

He also emphasized the role of technology in driving efficiency, noting that digitalization had allowed banks to close inefficient branches and reduce operating costs.

“Technology has played a positive role and continues to push banking efficiency, as seen in the closure of inefficient branches,” Trioksa said.

The Financial Services Authority reported that banking intermediation remained stable, with credit growing 7.36 percent year on year to Rp 8,220.21 trillion in October 2025.

Asset quality was maintained, with gross nonperforming loans at 2.25 percent and net NPLs at 0.90 percent, while the industry’s capital adequacy ratio stood at a strong 26.38 percent.

As policymakers and bankers debate the causes of high undisbursed loans, the tension highlights a deeper challenge in Indonesia’s financial system, translating ample liquidity and fiscal support into productive lending amid cautious risk assessments.