Trade finance, a facility to finance export and import activities, remains attractive for the banking sector of Indonesia in 2018. In the first two months of 2018 trade finance surged 20 percent.
Hendra Lembong, Chief of Transaction Banking at CIMB Niaga, said recent rupiah weakness against the US dollar has not impacted negatively on trade finance as many clients have been hedging against rupiah weakness. Indeed there are some medium-sized companies that have been in a wait & see mode before importing raw materials given the depreciating trend of the rupiah in late-January and February. However, in terms of volume, the impact is not too significant. After all, imports are needed to maintain normal operations for these companies.
There is also a sort of natural balance at play. In times of rupiah weakness, Indonesian exporters offer more competitive goods to foreign buyers, hence are eager to boost exports. However, Indonesian importers become more hesitant to import as it becomes a more expensive activity.
While CIMB Niaga's fee based income from transaction banking and trade finance fell 1.4 percent year-on-year (y/y) to IDR 146 billion (approx. USD $10.7 million), Bank Negara Indonesia (BNI)'s outstanding trade finance rose 42 percent (y/y) per February 2018.