Tag Archives: Credit

Credit where credit is not due

The Tree of Cell-Phone Life
Sucking a phone signal out of the cashew tree, Lamahera, Indonesia

You can tell a lot about a country from the sort of junk mail it circulates. Or, in the case of Indonesia, junk SMSs. Travelling in areas where a particular tree is designated as a “pohon senyal” or “signal tree” (hold on to the tree and you might just get enough of a signal of your phone to send a text or even make a call) I get quite excited if my phone beeps. But with disappointing regularity, it is someone trying to give me money. “NEED 200 MLN IN QUICK CASH? JUST 1.6 %, NO FEE, QUICK PROCESS FROM WELL KNOWN BANK. CALL EVA AT 021 92526473.”

200 million rupiah is around US$ 21,000. And MY well-known Malay-Indonesian bank assures me they’ll lock in a 7% interest rate if I put it on deposit for three months. So if I borrow at 1.6, and lend at 7.2… Hmmm. Is this beginning to sound like one of those Nigerian “You’ve won the lottery” scams? The easiest conclusion to draw is that a few Indonesians are very credulous, and that this is a plain old scam. But Bank Indonesia, the central bank. recently shocked markets by cutting its base rate to 6%, its lowest rate ever. Which means that money is getting cheaper for everyone — more credit floating around, though 3-month deposit rates of 7.2 become rather less likely.

My well-known bank is one of those trading at about three times their book value, pumping out around 20% more loans this year than last, in response to consumer demand. But wait, it’s also the bank that tried to shove a platinum credit card down my throat “Guaranteed no fees, life-long”. Despite the fact that I am unemployed and on a cultural visit visa. So that I can consume, simultaneously adding to their “assets” and creating demand, and so creating the need for more loans.

Having come from the doldrums of the Euro-wobbly West, it’s great to feel the energy of an economy that is growing at 6.5% a year. Faster even than inflation, for now. Bank Indonesia may well be lowering rates to discourage “hot money” from the West, but they have to consider, too, the message that cheap money sends to the recipients of all those junk SMSs. Does anyone else see the word “bubble” floating on the Indonesian breeze?