Realigning credit cards
We’re glad to know Bank Indonesia will soon issue more stringent rules on the issuance of credit cards and credit-card debt collection, although the problems here have not yet reached the magnitude of the crisis in South Korea in 2003, which required tens of billions of dollars in bailout funds from the government.
That, we think, is a blessing in disguise, since the March 29 tragedy when politician Irzen Octa who owed Citibank around Rp 100 million (US$11,500), died after a meeting with debt collectors.
The fatality instantly exposed wide open the hazards of mounting credit card debts.
But even though the number of credit cards in Indonesia had increased dramatically to almost 14 million as of February, and credit card-based transactions last year alone totaled Rp 163.2 trillion, the economic toll and social tragedy associated with personal debts cannot yet be considered critical.
However, conditions in Indonesia over the past five years have been quite similar to those experienced in South Korea between 1999 and 2002 when the government, in a bid to stimulate economic growth, encouraged private consumption, including a spending binge via credit cards.
But after less than four years of reckless credit card promotion, the industry plunged into crisis in early 2003 with personal bad debt reaching hundreds of billions of dollars and the media reporting a rash of suicides, violent crime, kidnappings and prostitution attributed to credit card over-borrowing.
Aggressive and sometimes reckless sales campaigns by banks in Indonesia have also succeeded in putting more credit cards into their customers’ hands, and card transactions have more than tripled with around 70 percent of card holders paying their bills in installments despite the 3.5 percent monthly interest rate.
Foreign and local banks have taken out big advertisements in newspapers and offered generous perks as special discounts at restaurants and stores to entice new customers, even with a monthly fixed income of as little as Rp 2.5 million.
While bad debts among card holders have not reached a critical level, they have been increasing steadily to almost 10 percent of the billing balance, from as little as 2.5 percent five years ago. But a crisis could be in the offing if banks are allowed to continue their reckless sales practices amid the fierce market competition, overlooking the credit risk and offering cards to just about anyone who can produce an identity card and wage printout and who is willing to fill out an application form.
The central bank should rein in such aggressive marketing practices because they go totally against prudent risk management.
What is needed now is more stringent requirements regarding the minimum wage, minimum income and credit ceiling for credit card holders and stronger rules on the code of conduct for credit card debt collection.
Better yet, Bank Indonesia could start preparing draft laws on credit cards and debt collection because the use of plastic money, instead of being restricted, should be further be encouraged as a mode of payment to reduce cash transactions and consequently money laundering and tax evasion that has been a struggle to monitor in such a predominantly cash economy as Indonesia.
That, we think, is a blessing in disguise, since the March 29 tragedy when politician Irzen Octa who owed Citibank around Rp 100 million (US$11,500), died after a meeting with debt collectors.
The fatality instantly exposed wide open the hazards of mounting credit card debts.
But even though the number of credit cards in Indonesia had increased dramatically to almost 14 million as of February, and credit card-based transactions last year alone totaled Rp 163.2 trillion, the economic toll and social tragedy associated with personal debts cannot yet be considered critical.
However, conditions in Indonesia over the past five years have been quite similar to those experienced in South Korea between 1999 and 2002 when the government, in a bid to stimulate economic growth, encouraged private consumption, including a spending binge via credit cards.
But after less than four years of reckless credit card promotion, the industry plunged into crisis in early 2003 with personal bad debt reaching hundreds of billions of dollars and the media reporting a rash of suicides, violent crime, kidnappings and prostitution attributed to credit card over-borrowing.
Aggressive and sometimes reckless sales campaigns by banks in Indonesia have also succeeded in putting more credit cards into their customers’ hands, and card transactions have more than tripled with around 70 percent of card holders paying their bills in installments despite the 3.5 percent monthly interest rate.
Foreign and local banks have taken out big advertisements in newspapers and offered generous perks as special discounts at restaurants and stores to entice new customers, even with a monthly fixed income of as little as Rp 2.5 million.
While bad debts among card holders have not reached a critical level, they have been increasing steadily to almost 10 percent of the billing balance, from as little as 2.5 percent five years ago. But a crisis could be in the offing if banks are allowed to continue their reckless sales practices amid the fierce market competition, overlooking the credit risk and offering cards to just about anyone who can produce an identity card and wage printout and who is willing to fill out an application form.
The central bank should rein in such aggressive marketing practices because they go totally against prudent risk management.
What is needed now is more stringent requirements regarding the minimum wage, minimum income and credit ceiling for credit card holders and stronger rules on the code of conduct for credit card debt collection.
Better yet, Bank Indonesia could start preparing draft laws on credit cards and debt collection because the use of plastic money, instead of being restricted, should be further be encouraged as a mode of payment to reduce cash transactions and consequently money laundering and tax evasion that has been a struggle to monitor in such a predominantly cash economy as Indonesia.
In the name of justice
A revelation last week by the Judicial Commission that judges in Antasari Azhar’s murder trial had ignored important evidence and testimony that might have cleared the former chief of the Corruption Eradication Commission (KPK) of all charges was surprising and a considerable breakthrough in our legal system.
Commission members have alleged that the judges deliberately disregarded expert witnesses in the murder of businessman Nasruddin Zulkarnanen, particularly in connection with the type of firearm and bullets that were used to kill him. An IT expert also testified in court that text messages containing threats, supposedly from Antasari, that were stored in Nasruddin’s cell phone were bogus, but used by police investigators as incriminating evidence that Antasari had a motive to kill Nasruddin.
The commission’s move is obviously helpful in ensuring transparency and fairness in the country’s judiciary system, particularly when it comes to court verdicts.
It is true that judges should remain independent in their job and heed their conscience when issuing verdicts. However, judges have frequently ignored the evidence presented and witnesses’ testimonies and merely honored the dossiers submitted by prosecutors.
The revelation by the commission therefore sends a strong message that judges need to carefully and thoroughly examine the facts in cases on trial. Otherwise, they will be subject to the commission’s examination and if later proven that they deliberately ignored or dismissed evidence and witnesses’ testimonies, they can be sanctioned, with dismissal from active duty at the maximum.
We have had the saddening experience of wrong verdicts by judges in the past, with the Sengkon-Karta case being the most well known. In this particular case, two people were sentenced by the Bekasi District Court in 1977 to 12 and seven years respectively for killing a man. But the Supreme Court overturned the verdict and ordered their release in 1981 after it had been proven that the police had tortured them to extract false confessions.
In the name of justice, cases of wrong verdicts like those handed down to Sengkon and Karta as well as to others must not be repeated. It would be better to release 1,000 wrongdoers than to jail an innocent person, as the saying goes.
Commission members have alleged that the judges deliberately disregarded expert witnesses in the murder of businessman Nasruddin Zulkarnanen, particularly in connection with the type of firearm and bullets that were used to kill him. An IT expert also testified in court that text messages containing threats, supposedly from Antasari, that were stored in Nasruddin’s cell phone were bogus, but used by police investigators as incriminating evidence that Antasari had a motive to kill Nasruddin.
The commission’s move is obviously helpful in ensuring transparency and fairness in the country’s judiciary system, particularly when it comes to court verdicts.
It is true that judges should remain independent in their job and heed their conscience when issuing verdicts. However, judges have frequently ignored the evidence presented and witnesses’ testimonies and merely honored the dossiers submitted by prosecutors.
The revelation by the commission therefore sends a strong message that judges need to carefully and thoroughly examine the facts in cases on trial. Otherwise, they will be subject to the commission’s examination and if later proven that they deliberately ignored or dismissed evidence and witnesses’ testimonies, they can be sanctioned, with dismissal from active duty at the maximum.
We have had the saddening experience of wrong verdicts by judges in the past, with the Sengkon-Karta case being the most well known. In this particular case, two people were sentenced by the Bekasi District Court in 1977 to 12 and seven years respectively for killing a man. But the Supreme Court overturned the verdict and ordered their release in 1981 after it had been proven that the police had tortured them to extract false confessions.
In the name of justice, cases of wrong verdicts like those handed down to Sengkon and Karta as well as to others must not be repeated. It would be better to release 1,000 wrongdoers than to jail an innocent person, as the saying goes.
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