Micro credit contributes the main problem of credit due to Imprudence of loans by banks

The credit stagnation lies as the main ground of credit problem for financial agencies. According to the study conducted by society access to finance indonesia (Pakindo) underlines that the majority of microfinance clients have great difficulties to pay for their credit obligations. This study of pakindo aims to inquire the reason of overloaded loan to figure out the reasons for the high debt microfinance clients.

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According to the report claimed as much as 54% of clients in financial institutions has three types of loans and 86% reasons taking credit for business purposes particulalry micro and medium enterprises.

Nevertheless around 60% of this clients are incapable to manage the flow of cash thus hardly fulfill the obligations of the loan installment purposes.

Further, pakindo stressed that many institutions iffer loans in such easy process hence clients capable to take multiple loans. This implies on clients' excess laons yet incapable to meet the credit obligations.

This is definitely a great alarm of financial institutio looking to the fact of other countries such as india, mexico, nicaragua and cambodia which experienced high penetration credit leads to massive stagnation.

Chairman of pakindo slamet riyadi said that;" in the areas we examined the growth of the gross loan porto folio of financial institution reached 140% per year and customer growth 97%. It requires mechanism for financial institution to be selective on clients information thus reducing  the risk of congestion due to excessive lending.

Credit stagnation becomes the highlight of national economy problem this year. Bank of indonesia recorded the backward step trend of credit growth. The non performing loan indicates higher for instance in july around 3.2% higher than previous month june 2016 which is 3.05%. There are around 6 banks with large asset experincing significant high NPL surpassing the NPL of industries namely permata bank, mandiri bank, cimb niaga bank, may bank, BTN and danamon. Meanwhile the ratio of NPL of with medium asset is also quite high.

In fact the banks have strived to to surpress the NPL by increasing the compliance value to loss reserves(CKPN). Until last july total loans reached Rp 134,226 trillion surged 31.40% over the same period last year.

Bank of indonesia reported that generally the growth of credit by july is 7.7% lower than previous month which is 8.9%. This signifies the sluggish credit growth hence the main cause of credit stagnation is basically not due to the increasing number of clients but the current clients who can not meet their obligation installment payment. This also indicates the non prudence of banks to massively serve loans without selective information about clients as to ensure the capability to pay the obligations. Many banks especially in aline with the progress of technology offers the ease to take loans for the customers even without collaterals. Furthermore, the complete information about the legal documents to trace the clients is less considered after the banks target too much on rising of credit loans than the returning of loans itself.