Number of credit cards in Indonesia to reach 290 million by 2017

Key Highlights of a report by Market Research (Market Research)

- The Indonesian card payments channel registered significant growth during the review period (2008–2012), recording a compound annual growth rate (CAGR) of 21.26% to reach 113.2 million cards in circulation by the end of 2012. It is anticipated to grow at a projected CAGR of 20.36% over the forecast period (2013–2017), to reach 289.9 million cards in 2017.

- Growth in the Indonesian cards payments channel is expected to be driven by increasing demand for prepaid cards, a better regulatory framework, a growing market for online and mobile commerce, and a positive economic outlook.

- Indonesia's central bank, Bank Indonesia (BI), enforced new regulations for the credit card category in January 2013, placing a cap on interest rates charged by banks on credit cards. BI also set the minimum monthly income requirement at IDR3 million (US$32), and the maximum available credit limit at three times this rate. Credit card users must be at least 21 years old.

- The popular payment channels in Indonesia are credit transfers, checks and cards. The payments channel structure has changed significantly in the past decade and new channels with paperless transactions have gained popularity. Most transactions, however, are still made with cash.

- In terms of transaction value, the channel grew at a CAGR of 19.68% from IDR846.7 trillion (US$87.3 billion) in 2008 to IDR1.7 quadrillion (US$185.2 billion) in 2012.

- Debit and credit card transactions remained the key growth drivers, followed by prepaid cards which registered increased demand from Indonesian consumers.

- Over the forecast period, the total card transaction value is expected to grow at a CAGR of 12.52%, to reach IDR3.3 quadrillion (US$328.8 billion) by the end of 2017.

Indonesia's motorbike sales growth slows in Nov to 10.6 pct y/y

Motorbike sales in November rose 10.6 percent from a year ago, compared with a 14 percent annual increase in the previous month. The number of motorbikes purchased in November was 687,329, or 3.8 percent fewer than bought in October. (Source: Reuters). It needs to be seen if the slowdown is only because of the increase in the interest rate or if this is an indication of slowing economy. 

Target is lower the lending growth

Bank of Indonesia has called for lower lending growth, which is above 20 per cent. BI has asked the banks to target between 15 to 17 per cent. This call has been positively taken by most of the banks (http://www.thejakartaglobe.com/business/banks-side-with-bi-governor-on-need-to-lower-lending-growth/). Though this is a prudent and proactive move to avoid overheating specially in the property sector, BI has to be careful to not dampen the demand. 

Indonesia Foreign Exchange Reserve has increased

The Indonesian central bank (Bank Indonesia/BI) has announced that the country's foreign exchange reserves last October were US$97 billion, an increase of US$1.3 billion over September.

Indonesia's annual import bill is around $226.6 billion i.e. around $19 billion per month. Thus, the foreign exchange reserve is equal to around 5.2 months of imports. To compare with India, its foreign exchange reserve is around $280 billion and import value is around $580 billion per annum i.e. around 5.8 months of imports. Same numbers for Singapore is foreign exchange reserve of around $174 billion and imports of around $490 billion i.e. 4.3 months of imports.

FDIs in Indonesia are at highest ever recorded

Total investments jumped 23 percent year-on-year to top Rp 100.5 trillion (US$8.9 billion) in July-September, the highest ever recorded, despite the capital outflows and financial market turbulence that took place during that period.

The new BKPM chairman, who was just elected last month, targeted to realize Rp 450 trillion of investments next year, a 15 percent increase compared to this year.

Investments account for around 25 percent of Indonesia's gross domestic product (GDP), which is the second-biggest growth driver after household consumption.

(Source: Antara News)

Online Banking in Indonesia is quite low relative to Asian counterparts

Online banking is increasing all over Asia and has already surpassed branch banking in 2012. Some countries such as China are much ahead where already 60% of total transactions are registered online. Whereas, some countries such as Indonesia, Vietnam, and Philippines are behind.

In Indonesia of the 55 million Internet users, about 25% of the population, only 7% of these internet users actually do online banking, which indicates online banking is still relatively underdeveloped in Indonesia. Enhancements in the mobile online banking platforms including better security and ease of use, may help the industry attract more users and increase market penetration.

(Source: Finextra)

Banks: Overall Indonesian Banks have moderate foreign exchange exposure

Following is from Fitch Ratings Report

''Fitch Ratings believes the credit profiles of most major Indonesian banks will be resilient to rising pressures on the rupiah and a more challenging operating environment, as reflected in their Stable rating Outlooks.

The banks' resilience is mainly due to the modest proportion of foreign-currency loans and low net open foreign-currency exposure at the banking system level, strong standalone loss-absorption cushions, and - in some cases - firm backing from highly rated foreign parents.

The major Indonesian banks have generally become more selective in extending foreign-currency loans over the years, focusing on borrowers that generate income in matching foreign currencies. In response to the potential decline in asset quality amid more challenging economic conditions, the banks have taken measures to identify vulnerable borrowers, step up monitoring, and explore restructuring solutions for viable businesses. The banking system's foreign-currency loans form 15.5% of total loans as at end-June 2013, around its historical low.

Foreign-currency loans have been funded predominantly by matching foreign-currency deposits, with the loans/deposit ratio of the banking sector remaining below 100%. The foreign-currency net open position exposure of the banking sector has been at an average 2% of capital over H113, well below Bank Indonesia's limit of 20%. This helps protect against impairments stemming from a sharp depreciation of the rupiah, which has fallen more than many other Asian currencies over mid-2013.

Fitch expects the loss-absorption cushions of most Indonesian banks to remain strong. Their core operating profitability is strong and the average Tier-1 capital adequacy ratio is around 16%. Many major foreign-owned banks tend to have lower core capital buffers than that, but Fitch believes they are likely to benefit from extraordinary support from their highly rated parent banks.''