Betting on an improving economy and a declining trend in the central bank's key interest rate, financing firms said they expect a 20 percent growth in loans this year.

They said loans could reach US$140 trillion (some US$15.2 billion) because borrowing would become cheaper.

The Indonesian Financial Services Association (APPI) said Tuesday the favorable economy would help increase automotive industry sales -- the largest recipient of financing.

APPI chairman Wiwie Kurnia said lending for motorcycles and cars this year would make up some 70 percent, from 62.7 percent last year.

"Good national economic conditions, which will hopefully not be greatly affected by a global economic slowdown, will up people's purchasing power for motorcycles and cars," Wiwie said.

Motorcycle sales in Indonesia this year could reach 5.2 million units, up from 4.7 million units sold in 2007, and car sales to 500,000 units, up from 433,000 units last year, Wiwie said.

Indonesians mostly finance the purchase of cars and motorcycles by loans.

APPI said loans extended in 2007 reached Rp 117.3 trillion, a 26.4 percent rise from Rp 92.8 trillion in 2006.

Loans across the automotive sector in 2007 came to Rp 73.6 trillion, 45 percent of which were used for motorcycles and 55 percent for cars. This figure was up from Rp 62.5 trillion in 2006.

The second biggest portion went to leasing transactions at Rp 39.8 trillion.

Wiwie said although automotive loans still dominated the total lending from financing companies, loans for leasing transactions booked the highest growth last year.

"Demand for office leasing for instance was very high last year, especially from companies operating in the agriculture and mining sectors in Sumatra and Sulawesi," he said.

In total, loans used for leasing in 2007 reached Rp 39.8 trillion, increased by 50.8 percent from Rp 26.4 trillion the year before.

"This year, loans used for leasing transactions in the two sectors will still take the second biggest portion of the total lending from the industry, after motorcycles and cars."

The non-performing loans (NPLs) in the automotive sector last year stood at around 3 percent.

"We hope the NPLs will not exceed 3 percent this year," he said, adding that the NPL rate was lower than the NPLs in the banking sector which averaged around 5 percent.

There are 216 financing companies that are registered in the Finance Ministry, 140 of which are members of the association.

Wiwie said the total financing firms in the country, 85 percent of which were controlled by foreign investors.