Jakarta. The total assets of the multi-finance industry in Indonesia grew by 4.95 percent last year, the slowest pace in six years, as the industry took a hit from regulation.

According to data from the Financial Services Authority (OJK), the combined assets of the multi-finance companies operating in Indonesia rose to Rp 420.44 trillion ($33.3 billion) last year from 400.6 trillion the previous year.

That pace was the weakest since 2008.

“If the multi-finance industry is like an aircraft, then from 2008 to 2012, we could have flown the aircraft without turning on the engine, the situation was that good,” said Suwandi Wiratno, chairman of the Indonesian Multi-Finance Companies Association (APPI).

“But since 2012, we’ve had to turn on the engine to fight headwinds, and strong winds from the left and the right of the plane,” he added.

The multi-finance industry has been hit by a series of measures by authorities to tighten supervision on fears of a bubble in the sector. Since June 2012, automotive financing companies have had to ask their customers for higher down payments to reduce the risks of bad loans.

The central bank’s benchmark interest rate, the BI rate, was at its lowest level in 2012, at 5.75 percent. Since June 2013, however, the rate has gradually increased, reaching 7.75 percent by end of 2014.

Firdaus Djaelani, a commissioner for non-banking supervision at the OJK, acknowledged that the financing industry had been dragged down by slower economic growth last year.

To support growth going forward, the OJK wants the multi-finance industry to be able to finance loans for working capital for small and medium enterprises.

At present, the largest proportion of multi-finance loans still go to automotive, consumer-related goods and heavy equipment purchases.

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Source: The Jakarta Globe