The government plans to reduce the annual interest rate for its microcredit program (KUR) from 7 percent to 6 percent per year starting Jan. 1, 2020.
It will also rise the ceiling for KUR from Rp 140 trillion (US$10 billion) to Rp 190 trillion, in line with fund allocation, as stated in the 2020 state budget. It expects the figure to increase to Rp 325 trillion by 2024.
Coordinating Economic Minister Airlangga Hartarto said the policy was part of an effort to accelerate the development of micro, small and medium enterprises (MSMEs) throughout the country. The interest rate reduction was expected to provide more MSME owners with access to funding, he said.
“We’ve also raised the total accumulative ceiling for KUR in the trade sector from Rp 100 million to Rp 200 million, whereas the ceiling for KUR in the production sector is unlimited,” Airlangga said during an official meeting with the MSME Funding Policy Committee in Jakarta on Tuesday, as quoted from the ministry’s press statement.
He expressed hope that the new KUR policy would improve MSME growth in the country, considering the sector’s vital contribution to national economic growth. Data from Statistics Indonesia (BPS) in 2017 showed that MSMEs contributed up to 60.34 percent to the country’s GDP.
The government has made significant changes to the KUR policy since 2015, with none-performing loans remaining stable at 1.23 percent and a total of 18 million debtors between August 2015 to September 2019.