Jakarta. Indonesia’s banking sector is positioning for a modest rebound in 2026 after credit growth cooled to single digits last year, with economists expecting lending to be driven less by household spending and more by capital investment tied to industrial expansion and government-backed projects.

Bank Indonesia data show total bank lending grew 9.96% in 2025, within the central bank’s target range but below the double-digit pace seen earlier in the post-pandemic recovery. The slowdown reflected cautious borrowing despite ample liquidity and easing monetary conditions. Undisbursed loans stood at Rp2,439 trillion ($144 billion) at the end of December, pointing to weak demand rather than funding constraints.

Looking ahead, Bank Indonesia estimates lending growth in 2026 will edge up within an 8%–12% range as rate cuts and government programs gradually revive demand. Permata Bank chief economist Josua Pardede forecasts credit growth of 9%–11%, in line with expected economic expansion of about 5.1%–5.2%. Indonesia posted a 5.11% growth in 2025.

“Investment loans will remain the main engine, supported by capacity expansion, downstream mineral processing, manufacturing, construction, real estate and housing, as well as financing for small and medium-sized enterprises,” he told The Jakarta Globe.

Liquidity incentives prioritized for agriculture, industry, services, construction and SMEs had reached nearly Rp398 trillion by early January.

The lending structure in 2025 underscores this shift. Investment loans surged more than 20%, while consumer credit rose 6.6% and working capital loans grew just 4.5%. Josua said this reflects a capital expenditure–led cycle, as companies delayed drawing approved facilities amid uncertainty and intense competition for deposits, which has slowed the pass-through from policy rate cuts to lending rates.

Large banks posted mixed results in 2025. Bank Central Asia recorded loan growth of 7.7%, while Bank Mandiri expanded lending by 13.1%, supported by stabilizing domestic liquidity. BNI reported credit growth of nearly 16%.

Bank Indonesia kept its benchmark interest rate unchanged at 4.75% and has held rates steady since December after delivering a cumulative 150 basis points of easing since September 2024, bringing the policy rate to its lowest level since 2022. Governor Perry Warjiyo said the central bank remains open to further cuts, provided inflation stays under control. 

Paul Sutaryono, a banking analyst at Gadjah Mada University, said lower policy rates should help reduce banks’ funding costs but have yet to significantly lift credit demand, as household purchasing power has not fully recovered and global economic uncertainty continues to weigh on the domestic outlook.

“The outlook for banking credit growth is expected to improve in 2026, although the increase is unlikely to be strong, but it is projected to return to double-digit levels,” he said.