Consumer Lending Drives Economic Growth from Household Consumption Component

The dominant contribution of household consumption and UMKM as drivers of the economy is supported by the swift distribution of consumption credit from banks and other financial services institutions. Realizing this, the financial sector, especially the banking industry and financing services are encouraged to facilitate access to financing that has a direct effect, while accelerating the annual credit growth target.

The encouragement was conveyed by the Board of Commissioners of the Financial Services Authority (OJK) in a press conference at the OJK Monthly Board of Commissioners Meeting (RDKB) which was held virtually, Friday (7/11/2025).

OJK Chairman of the Board of Commissioners Mahendra Siregar stated that, with financial sector stability and growing domestic demand, OJK supports sector players to increase their share in economic growth through expanding access to financing for household consumption and UMKM. This is in line with OJK Regulation Number 19 of 2025 concerning Ease of Access to Financing for UMKM.

"With better supervision and policy synergy, we are optimistic that the performance of the financial sector will be more positive and contribute to the national economy. In the Q3 economic growth release, household consumption credit was recorded to grow 7.74% year-on-year, illustrating the explanation of what we said," said Mahendra.

On that occasion, Mahendra emphasized that banks and financing institutions need to pay attention to the eligibility of prospective debtors as a whole, not only from the OJK's Financial Information Service System (SLIK). Mahendra reminded that SLIK is a neutral source of information and is not intended as an obstacle to granting credit.

In addition to SLIK neutrality, Mahendra also conveyed the progress of the plan to write-off UMKM bad debts at Himbara member banks. According to him, until the October RDKB was held, OJK had submitted a proposal on the issuance of a follow-up to the government regulation related to the write-off, so that the implementation of the regulation could be more optimal.

"We have submitted the proposal to the Coordinating Minister for the Economy, Minister of UMKM, Minister of Finance, BPI Danantara, as well as the Minister of Law and Minister of State Secretary. The goal is that the process of eliminating financing bills can be continued to Himbara banks and will be effective in the future," he said.

Reinforcing Mahendra's explanation, OJK's Chief Executive of Banking Supervision Dian Ediana Rae revealed that the room for credit growth is still quite large, especially by looking at the loan-to-deposit ratio (LDR) of 84.19%, or still below the threshold of 92%, and still below the pre-pandemic level.

Dian acknowledged that bank loans grew by 7.70% YoY during Q3 2025, but in September 2025, UMKM loans only grew by 0.23%. OJK identified this phenomenon as due to the focus of banks on the quality of UMKM loans, especially related to write-offs and write-offs, so that banks are more careful.

"However, with the issuance of POJK 19/2025, banks also need to adjust procedures by easing requirements, speeding up processes, and offering products according to the needs of UMKM and mitigating distribution risks so that the UMKM segment is easier to obtain credit," said Dian.

In addition to encouraging easy access to financing, the former head of the Financial Transaction Reports and Analysis Center (PPATK) also reminded the need for support from various parties to create a truly empowered UMKM ecosystem, starting from support for strengthening management, financial records, digitalization, finding offtakers, to market access that opens opportunities for UMKM to upgrade.

Observe and innovate

In responding to OJK's recommendations that have been conveyed on various occasions, banking industry players have expressed their commitment to pay close attention to the direction of credit demand and accelerate distribution. However, because they operate with public funds, the principles of prudence and proper distribution and maintaining a risk profile in accordance with existing regulations are also always maintained.

OCBC NISP Director Hartati stated, with Indonesia's strong economic resilience in the face of global uncertainty, the banking industry has sufficient room to continue to encourage prudent credit growth, among others by supporting productive sectors that can sustain national economic growth.

"OCBC always carries out the banking intermediary function by prioritizing risk management and good governance. We are committed to maintaining public trust, and providing services that can be accessed through various channels according to customer needs, "he said in a written statement received by SUARFriday (8/11/2025).

In her banking role, Hartati added, the stability of the banking sector is positive for the sustainability of national economic growth. Therefore, by keeping a close eye on global and domestic dynamics, the momentum of Indonesia's economic growth which has reached 5.04% in Q3 2025 can be well maintained.

Apart from accelerating credit, banks also have other ways to increase ease of access to financing for UMKM and household consumption. Not only by encouraging loan disbursement, banks can also expand the agent network through Koperasi Desa/Kelurahan Merah Putih (KDKMP) which is very extensive throughout Indonesia.

Engine does not shut down

Stable financial sector performance and growing domestic demand, especially in Q4 2025, are evidence that the recent political instability had a temporary impact on market sentiment. Fundamentally, demand and supply of credit as well as economic transaction flows remain smooth and resilient, so intermediation continues to run.

Bank Permata Chief Economist Josua Pardede assessed that despite applying more cautious lending standards, demand for new loans is still strong and disbursements will increase in Q4 as project visibility improves and year-end seasonal patterns. A number of factors such as a very thick liquidity foundation, a ratio of liquid tools well above the liability threshold, and maintained asset quality allow this growth to occur.

"This shows that this year's credit machine is not extinguished, just running more selectively without stopping expansion. The combination of ample liquidity, improved low-cost funds, and controlled risk makes banks able to absorb temporary shocks, so that transmission to the real economy continues," said Josua when contacted. SUAR, Saturday (11/8/2025).

In addition to promising performance, macroprudential policies in the form of easing interest rate cuts to the increasing volume of digital economy and financial transactions indicate that household and business payment flows remain active. This situation, according to him, minimizes the chance of demand disconnection due to sentiment disruption in the short term.

"There is indeed a shift in composition. Working capital loans slowed down, while investment loans were more vigorous. Sectorally, real estate strengthened, while manufacturing and agriculture softened. This means that the economy is not immune from business caution, but the impetus from investment and project-related spending keeps the aggregate pulse," he said.

In such a situation, banks and financing institutions have a wide opportunity to facilitate access to financing to sectors that are the direct support of the economy. Market mechanisms have provided more than one signal that credit is flowing, third-party funds are accumulating fast, liquidity is adequate, and payment infrastructure is working smoothly.

"With this foundation, the mid-quarter turmoil did not shift the main trend. The positive growth in Q3 is very much in line with the signals that have already emanated from the banking industry," concluded Josua.