Govt’s MSME credit push overlooks deeper structural problem
The government aims to boost bank lending to micro, small and medium enterprises (MSMEs) by raising the credit target from Rp 1.5 quadrillion (US$84.6 billion) to Rp 2 quadrillion in 2027, but doubts remain over whether the move will effectively address structural issues that have hindered lending to the sector.
The Indonesian government plans to increase the credit target for micro, small and medium enterprises (MSMEs) from Rp 1.5 quadrillion to Rp 2 quadrillion by 2027, aiming to boost bank lending to this crucial sector. However, concerns persist about whether this move will effectively tackle the structural issues that have hampered lending to MSMEs.
MSMEs Minister Maman Abdurrahman announced the plan on August 21, stating that there was a request from the Office of the Coordinating Economic Minister to raise the credit target. The current outstanding bank credit to MSMEs totals around Rp 9 quadrillion, with Rp 1.5 quadrillion allocated to this sector, including Rp 300 trillion in subsidized microcredit (KUR) and the remaining Rp 1.2 quadrillion in commercial loans.
The government is currently evaluating the financing structure should the target be raised to Rp 2 quadrillion for the following year. Additionally, plans are being considered to increase the KUR portion. However, Abdurrahman acknowledged that expanding small business financing would require proper management and planning to prevent an increase in nonperforming loans.
He emphasized the need for MSME players to receive support to ensure their products can access the market, and for the government and other stakeholders to enhance both financing and market access for MSMEs, enabling them to absorb the additional financing.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
