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Indonesia's construction sector has most loan risk in 2014: official

Xinhua, February 12, 2015 Adjust font size:

A senior official at government- sanctioned financial service regulator agency said on Thursday that construction sector has the most loan risk compared to the other sectors throughout last year, adding that the government's massive infrastructure projects contributed to the risk.

Head of Strategic Policy Development Department at the Financial Service Authority (OJK) Irmansyah said that construction sector registered 4.4 percent of Non-Performing Loan (NPL) ratio, or close to the maximum limit of 5 percent as of December last year.

"The high NPL ratio in the construction sector was caused by late payment received by constructors from projects they were working on," he said in his office.

He added that acceleration of the government's infrastructure projects has significant contribution to the high NPL ratio in the construction sector.

"This would be government's jurisdiction on how to mitigate risk of projects they carried out," he said.

According to Irmansyah, growth of overall loans channeled by financial institution in the country was slowing down from 11.89 percent in November to 11.59 percent in December last year.

Despite the slowing loan growth, he added that construction and household sectors registered the highest loan growths during that period.

The OJK estimated that total loans to be channeled this year may grow to 4,352 trillion rupiah (about 339.8 billion U.S. Dollar) or 16.43 percent over last year. Endi