When It's Easy to Get Credit Cards in Indonesia

Original source: Kompas.com

The value of stagnant credit or non-performing loan (NPL) for credit cards is still high. Based on the Indonesian Banking Statistics (SPI), the value of credit card NPL per September 2009 is Rp. 2.95 trillion, or 8.7 percent of the total outstanding credit that reaches Rp 33.63 trillion.

Since July 2009, the credit card NPL value has seemed reluctant to go below 8 percent. Per August, the NPL ratio was still 8.8 percent with the value of Rp. 2.89 trillion and total credit of Rp. 32.82 trillion.

Business Director of PT Bank UOB, Buana Safrullah Hadi Saleh said, the high NPL for credit cards is due to banks being more aggressive in persuading customers to use credit cards. "This is evident from the ease of the process to issue a new credit card. Sometimes without selecting the customer," he said.

According to Safrullah, the NPL ratio for credit cards that exceeds 8 percent is a warning for banks to be more careful in issuing new credit cards, "The normal NPL for credit cards should be around 7 to 8 percent," said Safrullah.

Mansyur S. Nasution, Executive Vice President for Consumer Credit of Mandiri Bank, affirmed Safrullah's opinion. "If the credit card NPL was lower, banks would be safer. The credit card business then could run better," he said.

Though the NPL value as stated by SPI is still high, our interviewed banker stated that the NPL in their establishment is low. In Mandiri Bank for instance, Mansyur said that the NPL ratio per September 2009 is only 2.74 percent.

Meanwhile, UOB Buana, having issued 170,000 Platinum credit cards, confessed that their NPL ranges from 3 to 4 percent. "Most of our customers can still fulfill their obligations," said Safrullah.

The same goes for Citibank that has issued 1.6 million credit cards in Indonesia. Citibank Country Marketing Head, Rico Frans, stated the bank had not seen any increase on NPL.

"Our NPL is still in the low single digit and still stable since last April," he stated. Strict requirements for credit cards and annual debtors' review are the keys to suppress credit card NPL