Indonesia's finance firms face rising borrowing costs in 2027

Strong new car and EV sales will help support industry growth.

Indonesia’s finance and leasing companies will see the impact of rising borrowing costs in 2027, according to Fitch Ratings.

The companies still benefit from earlier, cheaper funding, which should support profitability in 2026, the credit rating company said in a report.

Industry profitability improved in H1 2026 thanks to the lower funding costs and better demand, although loan impairment costs continue to weigh on profitability.

A recent rate hike by the Bank of Indonesia has increased borrowing costs, Fitch said.

Strong new car and electric vehicle (EV) sales alongside demand for heavy equipment will support industry growth, it added.

EV financing in particular is becoming increasingly important despite asset-quality risks due to the faster depreciation of collateral, Fitch said.

Fitch said that financiers mitigate these risks through strategies such as targeting middle- to high-income borrowers, setting lower loan-to-value ratios and offering shorter tenors.

However, it warned that credit risks may rise as lower-priced EVs become popular and financiers expand into lower-income segments with weaker credit profiles.

Companies with wider margins or less price-sensitive borrowers are likely to be more resilient to these cost pressures, Fitch said.