Indonesia loan demand stagnates as MSME and consumption slumps

Underlying demand for loans remains uneven although liquidity will be abundant, analyst said.

Indonesia’s loan demand will continue to be weighed down by weak consumption and micro, small, and medium enterprises (MSME) in the first six months of 2026, according to estimates by Maybank Kim Eng analysts.

System loan growth rose 9.7% year-on-year (YoY) in December 2025, lifted by a 21% rise in investment loans. But a meaningful portal of this recent growth likely comes from loans to Agrinas for the village cooperatives program, said Maybank analysts Jeffrosenberg Chenlim and Faiq Asad in a report published on 4 February 2026.

This suggests that underlying demand remains uneven, Chenlim and Asad said.

“Loan growth outcomes this year will depend on several factors, including the effectiveness of government program transmission into the real economy, the extent to which commodity windfalls translate into broader economic activity, and the trajectory of interest rates,” the analysts said.

Liquidity is expected to remain abundant in early FY2026, which will provide a supportive backdrop for credit growth.

Sector margins are expected to stabilise during the year as funding costs ease alongside lending rates, Chenlim and Asad said.

System loan-to-deposit (LDR) ratio was 85% in December 2025. This may result in banks becoming more selective on deposit pricing, potentially reducing reliance on high-cost special-rate funding, the report said.

“Together with a gradual shift in earning asset growth toward loans, this could support earnings growth across the sector, although the extent will remain dependent on the pace of loan demand recovery and competitive dynamics,” the analysts said.