By Eko B. Supriyanto, Chairman of Infobank Media Group
The flood of liquidity is not in line with the smooth flow of credit. Like a disease, the banking sector is currently “wet”, but suffering from prostate problems – it is difficult to urinate credit. Imagine, what more could Purbaya Yudhi Sadewa, Minister of Finance, do to inject liquidity into the banking system. Initially, it was Rp200 trillion, then another Rp75 trillion was “poured in” – although at the end of the year, Rp75 trillion was withdrawn again.
The withdrawal of government funds from Himbara banks surprised many parties. On the one hand, it reflects that the government is in urgent need of funds for spending. However, a number of bankers said that the method of injecting liquidity did not meet the government’s expectations. It was not as smooth as it was in the beginning when liquidity was being poured in. And, the sudden withdrawal of Rp75 trillion caused the banks’ performance to decline.
On the other hand, this signals that the funds are actually more of a burden on banks because they are difficult to distribute. Moreover, it is difficult to put them back into Government Securities (SBN) – because it is prohibited. However, money can be mixed in the same liquidity pool.
Not only that. These days, there is clearly a paradox that is poisoning the Indonesian economy. On the one hand, Bank Indonesia (BI) has opened the floodgates: the benchmark interest rate has been cut five times in a row. And, liquidity is abundant in the financial markets, and the reserve requirement ratio has been relaxed.
All these signals are classic emergency sirens to encourage credit expansion. However, on the other hand, what is happening is actually a “credit crunch.” Credit growth is crawling slowly, like a snail in the middle of a drought. Ironically, undisbursed loans are piling up in banks, while daily reports show that the real sector is increasingly sluggish and struggling.
According to Infobank Research Bureau records, the increase in money supply intended to boost economic growth has resulted in a rise in undisbursed loans. Just look at the figures for November 2025, which have skyrocketed to Rp2,509.4 trillion. This is up from Rp2,372.1 trillion, or 22.71 percent, in August 2025. Clearly, the business world is uncertain about its prospects. It is hesitant and uncertain about recent political developments.
Meanwhile, credit growth figures (November 2025) from the same data show growth of 7.74 percent. This figure is lower than the same period in 2024, which was 10.79 percent. So, it can be said that apart from low credit demand, there has actually been a sale and purchase of credit from Himbara banks to smaller banks with the lure of lower interest rates and higher credit limits.
The five-point economic growth that is always described as high turns out to be just a number, failing to attract the workforce and the purchasing power of the middle class, which continues to decline, and the public continues to eat into their savings, as reflected in data from the Deposit Insurance Corporation (LPS) — where savings below Rp100 million are starting to see a decline in their average balance.
Money is abundant, but credit is not flowing. Then, Whose Fault Is It?
This simple question requires a complex answer. We must dare to delve far beyond the technical-monetary narrative. This is no longer about the price of money (interest rates). It has entered the complex realm of political economy. Trauma and power are at play.
This leads to uncertainty, fear, ambiguity, and confusion. As a result, the real sector is hesitant, uncertain, and has lost its direction, confidence, and is adopting a wait-and-see approach. So, the root cause lies in the real sector. In short, it is not just sluggishness, but structural paralysis.
Where there is sugar, there are ants. Where there is a good business, bankers will surely come. Bankers are not newbies. They understand very well that credit will only flow smoothly to the real sector that is healthy, productive, and has bright prospects. However, what do we see today?
Our real sector is suffering from acute chronic illness. Regulatory uncertainty and ever-changing policies have created investment uncertainty. Competitiveness is increasingly eroded by high logistics costs, legal uncertainty costs, and bureaucratic barriers, fostering deep concerns.
Entrepreneurs are asking: why build new factories or expand when the business climate itself is unfriendly and full of pitfalls? This is no longer a matter of a normal business cycle, but an existential fear of survival.
The outcome is predictable. Hesitation to make investment decisions, doubts about the future, loss of entrepreneurial spirit, and most dangerously, loss of confidence in the state’s ability to provide a fair and stable business ecosystem.
The most rational reaction in such conditions is to wait and see, or even more extreme, to move assets and activities to a more predictable jurisdiction. This simple logic is understood by every entrepreneur, but seems to be less understood by policy makers in their ivory towers.
Trauma of Criminalization of Bad Debt and Interventions
According to a limited discussion by the Infobank Institute, on the credit provider side (banks), there are two main pathologies that are equally acute.
First, the collective trauma of the banking sector regarding bad debt. This is not ordinary trauma. It is trauma exacerbated by the phenomenon of criminalization of credit failure. When a banker can be threatened with criminal charges for a problematic loan—which is an intrinsic risk in the banking business—the instinct for self-defense takes over. In fact, even the debtor can be charged with causing harm to the state.
Why take the risk of channeling credit to dynamic but risky sectors (such as MSMEs or startups) if the consequences could lead to imprisonment? It is safer to “bury” money in Government Securities (SUN) or place it in BI through its monetary instruments. High levels of undisbursed loans are a reflection of this extreme risk aversion psychology. Banks have become “very cautious spectators” rather than “players” in the economic arena.
Second, structural interventions that actually marginalize business logic. Consider the case of Himbara banks (BNI, BRI, BTN, Bank Mandiri). As state-owned banks, they are not only accountable to their boards of commissioners and internal risk management units. Every large loan must be reported to Daya Anagata Nusantara (Danantara) as an extension of the state as a shareholder.
The process, although intended for oversight, in practice creates additional bureaucracy, complexity, and most importantly, hidden fears among directors. Credit decisions that should be based purely on business feasibility analysis are now burdened by political considerations and layers of administrative accountability.
This is what organizational science refers to as “analysis paralysis”—confusion and paralysis due to too many eyes watching and too high a burden of non-business consequences. Intervention is good on one hand, such as Himbara banks not cannibalizing each other’s credit. However, this is clearly an unnecessary intervention because it involves lengthy bureaucracy. And, the directors become a kind of figurehead.
The cure is not just monetary
The “rain of liquidity” from the BI and Minister of Finance’s policies only wets the surface. Meanwhile, the ground beneath—the real sector and the courage of the banking sector—has hardened and cracked due to various structural and political factors. It is full of uncertainty.
It may be that conventional monetary remedies can no longer be relied upon. Further interest rate cuts would be like giving “paracetamol” to a patient with a complex fracture. What is needed is economic and political “surgery.” The Rp275 trillion liquidity injection from Finance Minister Purbaya only wet the banks’ vaults, which quietly returned in the form of SBN.
According to the Infobank Institute, monetary medicine is no longer effective. The BI’s remedies cannot revive the real sector. Even the fiscal sector, which is pouring in liquidity, is not stimulating the banking sector. So, there are four things that need to be addressed.
First, the government must firmly and consistently improve the business climate. Remove overlapping regulations, ensure legal certainty, and significantly reduce the high costs that burden the real sector. Trust must be restored. The government must rebuild trust, because after a year in office, it has begun to erode. This may be because the public is tired of hearing “We will, we will…”
Second, the state needs to provide clear and firm guarantees that business failure is not a crime. Legal protection for bankers who make professional decisions needs to be strengthened. Without this, the culture of “fear of failure” will continue to kill credit distribution initiatives. In fact, even debtors can be charged with “profiting” from bad debt.
In short, President Prabowo asked law enforcement officials (APH) to intervene in the increasingly rampant criminalization of bad debt. Or, at the very least, the Financial Services Authority (OJK) should step up to explain the issue of bad debt. This is because the OJK knows exactly the history of the loans granted by a bank.
The OJK’s silence is considered by most bankers to be a safe stance. In fact, it is not uncommon for bank business plan meetings (RBB) to pressure banks to increase lending. However, when loans go bad, the OJK does not “defend” bankers to the APH. It does not have to defend them, but it should mediate with the APH regarding bad loans, which often cause losses to the state.
Third, for state-owned banks, Danantara should reevaluate the supervisory mechanism. Supervision should be oriented towards performance and sound risk management, not bureaucratic reporting that stifles initiative and creates burdens.
Fourth, the issuance of Patriot Bonds sends a negative signal to the business world. This is clearly seen as a form of “subtle extortion” of entrepreneurs. The issuance of Patriot Bonds, which are also planned to be issued early this year in the amount of Rp50 trillion, is an anti-market signal, or not market friendly.
This credit drought is a symptom of a deeper disease. A crisis of confidence and courage. Abundant money will mean nothing if the economy’s room for maneuver is shackled by uncertainty, fear, and unproductive intervention. The economy will only thrive if its players—businesspeople and bankers—feel secure, trusted, and have a clear future horizon.
It is time to stop the “artificial rain” in the sky and start repairing the ground we stand on. The real sector is now not only sluggish, but paralyzed by the collapse of middle-class purchasing power. Mr. President Prabowo, Indonesia’s economy in 2026 is not doing well. The business climate is poor and uncertain, as reflected in the growing number of undisbursed loans.
The credit drought amid this liquidity deluge is a sign that the real sector is not just sluggish, but paralyzed, Mr. President. It is time to dismantle the “Yes Men” around the President, or replace them to restore trust. That is the only remedy.
