More Banks, Finance Firms Allowed to Channel Govt-backed Loans

The government is allowing more banks and multi-finance firms to take part in its subsidized loan program in an effort to boost small and micro businesses amid a sluggish economy.

“The government has arranged certain measures to increase participation in the public business credit [KUR] program in 2016, including by adding more banks as providers,” Coordinating Economic Minister Darmin Nasution said recently.

In 2015, only three state-owned lenders — Bank Rakyat Indonesia (BRI), Bank Mandiri and Bank Negara Indonesia (BNI) – participated in the KUR program, which failed to meet the government’s target.

As of Dec. 31, total loans disbursed for the KUR program reached Rp 21.4 trillion (US$1.54 billion) to 960,424 customers, lower than the Rp 30 trillion targeted.

The lower achievement was mainly due to the program’s launch being delayed until mid-August, Darmin said, while in previous years it had been launched in January and disbursements had reached an average Rp 40 trillion.

In 2016, he went on, the government was targeting Rp 100 to Rp 120 trillion of KUR loans to be disbursed, more than twice the 2015 target.

In order to boost the disbursement, more banks, including privately-owned and regional development lenders (BPD), have been allowed to join the program, with certain requirements in terms of financial situation and business portfolio.

Darmin said banks that would be allowed to participate would be required to be in a healthy financial state, with a maximum 5 percent gross non-performing loans (NPLs) in the micro and small and medium-sized enterprise (SME) portfolio.

The banks must also have a micro and SME portfolio above 5 percent of their total loans, he said, adding that two or three multifinance companies would be selected to participate in the KUR program under the same requirements based on assessment by the Financial Services Authority (OJK).

“Based on the criteria, we found that only 25 out of 118 existing lenders excluding rural banks [BPR] would meet the requirements,” he said.

However, Darmin said banks with gross NPL above 5 percent in the micro and SME portfolio would be given a chance to remedy the situation before joining the program if the government considered them potential KUR lenders.

OJK deputy commissioner for banking supervision Irwan Lubis said the agency would also consider assessing other aspects of financial conditions for banks wishing to join the program, such as liquidity capacity and efficiency levels through cost-to-income ratio (BOPO).

OJK commissioner for the non-banking financial industry Firdaus Djaelani added that the agency would hold discussions with credit insurance firms Jamkrindo and Askrindo on the involvement of multifinance companies in the KUR program.

“We need to discuss the issue with Jamkrindo and Askrindo, as the KUR program’s guarantors. We’ll talk about whether the government should equalize the loan interest rate subsidy for the program,” he said, referring to the fact that multifinance companies usually charge higher interest rates than banks.

Finance Minister Bambang Brodjonegoro said previously that the government would start to impose a new interest rate of 9 percent for KUR starting on Jan. 1 this year after slashing the program’s interest rate from 22 percent to 12 percent in 2015 in an effort to boost take-up of the loans.

Source:, 04/01/15
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