The economy grows. Who does the new credit go to?

On 5 November two institutions published numbers that belong together. BPS reported that the economy grew 5.47 percent in the third quarter. The same day OJK reported that bank credit grew 13.26 percent to September: corporate credit by 21.31 percent, credit to micro, small and medium businesses by 2.68 percent.

The last figure is easy to read as banks refusing small companies. That reading is too simple. Put the two releases next to each other and a pattern shows: credit moves to where growth is being made, and most smaller companies are not yet connected to it.

Where the 5.47 percent comes from

Government consumption grew fastest on the spending side, 8.95 percent, which BPS links to civil service pay and the free meals programme. Capital spending on construction rose 63.65 percent, on Finance Ministry data quoted by BPS. The second engine is downstream processing: basic metals grew 9.94 percent on copper cathode, nickel matte and aluminium exports, and chemicals 8.10 percent as biodiesel feedstock rose under the B50 mandate. Household consumption, still 51.97 percent of GDP, grew 5.04 percent, below the economy as a whole.

The OJK release points the same way. Investment credit grew fastest, 23.20 percent. Projects, smelters and biodiesel plants need large, long financing, and it flows to the companies that hold the contracts.

What it means for an owner

Two series moving together do not prove cause, and small business credit is still rising, from 2.32 percent in August. But a lender’s first question is always where repayment will come from. A company with a project contract or a long supply agreement can show the answer on paper. A company selling into the open market has to argue it with projections.

So the way into this growth is the supply chain of those engines: supplying government contractors, processing plants or the meals programme, then borrowing against that contract. It has a cost. One large buyer moves your risk onto its payment schedule, and government projects follow the budget cycle.

The first step is simple: map the largest buyers near your business that receive state spending or sit in a processing chain, and ask them two things. What does it take to become a regular supplier, and does their bank offer a facility for suppliers?

Growth of 5.47 percent already has an address. A mid-sized company that wants to grow with it has to supply that address, then borrow with the contract.