TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search results
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search resultsAnalysis: Credit growth rebounds, but households remain under pressure
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Visitors line up to take the escalator at Plaza Blok M on Feb. 1, 2025. Consumption remains the main driver of Indonesia's economic growth (JP/Nur Janti)
I
ndonesia's banking sector appears to be recovering, with credit growth returning to double digits in May. Yet beneath the encouraging headline, households face mounting financial pressure as consumer lending slows, layoffs rise, savings decline and purchasing power weakens. The contrast highlights a broader challenge: A banking recovery does not necessarily signal an improvement in the real economy.
Credit growth rebounded to 11.51 percent in May 2026, marking a welcome improvement after lending growth had remained in single digits since February 2025 and lagged behind third-party funds (DPK) growth since August 2025. However, the recovery masks a more concerning reality. Consumer credit remains weak, while households continue to save a smaller share of their income amid mounting cost-of-living pressures. Although stronger credit growth is encouraging, persistently weak purchasing power points to structural challenges that cannot be resolved through short-term policy incentives alone.
The Financial Services Authority (OJK) remains optimistic that bank lending will grow by 10 percent this year. Its confidence is supported by the banking sector's strong capital and liquidity positions, as well as the recent rebound in overall lending. The outlook has remained resilient despite Bank Indonesia raising its benchmark interest rate by a cumulative 100 basis points in June to defend the rupiah against further depreciation.
Nevertheless, the headline figures conceal an uneven recovery. Investment lending expanded by a robust 21.95 percent, while consumer lending grew by only 5.89 percent. Large banks have also adopted a more cautious approach to retail lending, including mortgages, vehicle financing and unsecured loans.
The divergence matters because investment-led credit expansion can support future productive capacity, but without stronger household demand its impact on near-term economic growth will remain limited.
Persistently high inflation and rising energy prices have increased credit risks among households, contributing to a deterioration in asset quality. As a result, the banking sector's non-performing loan (NPL) ratio rose from 2.05 percent in December 2025 to 2.17 percent in May 2026.
The slowdown in consumer credit should serve as an early warning for the broader economy. Household consumption accounts for roughly 60 percent of Indonesia's GDP, making it the country's primary growth engine. Yet household sentiment has weakened steadily this year.
