Corporate Financing Primarily from Internal Sources

Bank Indonesia (BI)'s survey on the supply and demand for banking financing shows that most businesses or corporations meet their financing needs using their own funds by retaining company profits.

This proportion reached 67.7% of total respondents in February 2024, up from 59.2% in January 2024.

Other funding sources came from utilizing overdraft facilities, amounting to 9.7% in February 2024. This percentage decreased significantly from 17.3% in January 2024.

Another method was increasing loans from domestic banks (DN), chosen by 8.6% of respondents in February 2024. This loan option increased from 7.1% in January 2024.

Another major source, obtaining loans or debt from the parent company, was chosen by 5.4% of respondents in February 2024. This option increased slightly from 5.1% in January 2024.

A total of 3.2% of respondents also chose to sell unproductive fixed assets as a primary source of business financing in February 2024. This figure increased from 2% of respondents in January 2024.

However, the option of applying for or increasing foreign debt (ULN) as a primary source was not chosen by any respondents in February 2024. This option was chosen by 2% of respondents in January 2024.

The option categorized as 'other' amounted to 5.4% in February 2024.

Furthermore, several reasons were given for meeting financing needs in February 2024. These include ease and speed of obtaining funds (84.9%); lower costs or interest rates (16.1%); optimization of existing facilities (12.9%); avoiding exchange rate risk (5.4%); and others (5.4%).

BI notes that the survey on the supply and demand for banking financing has been conducted monthly since August 2020. The survey was conducted to support the National Economic Recovery (PEN) program due to the impact of the Covid-19 pandemic.

The purpose of this survey is to obtain information on financing needs (demand side) and its disbursement (supply side).

The survey was conducted on corporations and households from the demand side and banks from the supply side with national coverage. Data processing was done using the weighted net balance (WNB) method, where respondent answers are multiplied by their credit weight (total 100%), and then the difference between the percentage of respondents who answered "increased" and "decreased" is calculated.