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Govt vows to cut SME lending rate to 9% in 2016
(Tempo/Wahyu Setiawan)After slashing the interest rate for Peopleâs Business Loans (KUR)âwhich are given to new entrepreneurs and small and medium enterprises (SMEs)âfrom 22 percent to 12 percent this year, the government has announced to reduce the rate further to 9 percent in 2016
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(Tempo/Wahyu Setiawan) (Tempo/Wahyu Setiawan)
(Tempo/Wahyu Setiawan)
After slashing the interest rate for People's Business Loans (KUR)'which are given to new entrepreneurs and small and medium enterprises (SMEs)'from 22 percent to 12 percent this year, the government has announced to reduce the rate further to 9 percent in 2016.
Vice President Jusuf Kalla said the measure was necessary, because the lending rate for SMEs was higher than the rate applied to corporate loans. The reduction was aimed at reducing that inequality and boosting the real economy.
"The government has given a guarantee that next year's lending rate should be 9 percent, no matter what. We can't build the economy if the interest rate is high," he said at Bank Indonesia's annual meeting in Jakarta on Tuesday.
Kalla pointed to the relatively high interest rates in Indonesia, saying that Indonesian banks' average lending rate was higher than that of neighboring countries at around 11 percent, compared to around 5 percent and 3 percent in Malaysia and Singapore, respectively.
The high lending rates, according to Kalla, had curbed investment and hampered economic activity. The Vice President promised to control inflation by suppressing logistics and bureaucracy costs, thereby easing the economy and ultimately prompting bankers to slash lending rates.
At the same occasion, Bank Indonesia Governor Agus Martowardojo said the central bank had recently pursued a policy of monetary easing by slashing the loan-to-funding ratio (GWM) from 8 percent to 7.5 percent.
"By lowering the GWM to 7.5 percent, there will be additional funds of Rp 18 trillion [US$ 1.3 billion] to US$20 trillion in our banking system. Bankers will have overwhelming funds, which will ultimately force them to adjust their lending rates," said Agus.
Bank Mandiri president director Budi Gunadi Sadikin added that the extra liquidity could at least prevent bankers from raising the lending rate. He welcomed the government's efforts to encourage banks to push their lending rates into single digits.
"To get there, the cost of funds needs to be lowered. A decline in inflation in December should gradually be able to reduce the cost of funds," Budi explained. (ags)(+)
