DIGIVESTASI - Increase in Non-Performing Financing Ratio in Multifinance Accompanied by Slowdown in Financing Growth. The non-performing financing (NPF) ratio in the multifinance industry has increased this year, coinciding with a slowdown in financing growth.

Data from the Financial Services Authority (OJK) as of April 2024 shows that the gross NPF ratio reached 2.82%, up by 35 basis points (bps) year-on-year. Compared to December 2023, the NPF ratio rose by 38 bps.

The net NPF ratio as of April 2024 also showed an increase of 20 bps to 0.89%, up by 25 bps compared to December 2023.

Chairman of the Indonesian Financing Companies Association (APPI), Suwandi Wiratno, mentioned that the rise in multifinance NPF was due to the decline in purchasing power caused by the surge in basic needs prices since late 2023.

"In this condition, like it or not, some people will inevitably postpone their installment payments," Suwandi told CNBC Indonesia on Thursday (June 14, 2024).

The growth of receivables in the multifinance industry also slowed, especially in the automotive sector. Besides the decline in purchasing power, financing companies are also facing difficulties in finding debtors with good credit quality.

Suwandi explained that non-performing loans are currently an issue across the financial industry, resulting in many potential multifinance debtors having poor credit scores.

"Many people have issues in their SLIK (Financial Information Service System) checks," he added.

OJK data records that multifinance receivables as of April 2024 increased by 10.82% year-on-year (yoy) to Rp 486.35 trillion. Growth in the fourth month of this year was lower compared to April 2023, which recorded a growth of 15.13% yoy to Rp 435.85 trillion.

When compared to December 2023, receivables growth was also lower. At the end of last year, financing receivables rose by 13.23% yoy, while in December 2022, they increased by 14.18% yoy.

Data from the Indonesian Automotive Industry Association (Gaikindo) shows that new car sales from January to April fell by 14.8% yoy to 289,551 units. In the same period, data from the Indonesian Motorcycle Industry Association recorded new motorcycle sales dropped by 1.11% yoy to 2,154,226 units.

Head of the Regulation and Development Department of Financing Institutions, Venture Capital Companies, and Microfinance Institutions at OJK, Ahmad Nasrullah, stated that the increasing cost of living is one of the reasons for the swelling NPF.

"Currently, debtors' ability to repay has decreased due to higher living costs. So, they are unable to pay their installments," Ahmad said during an OJK FGD with Mass Media Editors on Thursday (June 13, 2024).

Senior economist and former Finance Minister Muhamad Chatib Basri noted that the economic condition of the middle class in Indonesia is beginning to be pressured, as evidenced by the drastic drop in the sales of durable goods.

This situation poses a serious threat to the purchasing power of the middle class. Finance Minister Sri Mulyani also highlighted the sharp decline in motorbike and car sales as durable goods early this year.

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