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Ultra-micro financing combats poverty

The government increased the budget for ultra-micro financing by 65 percent to Rp 2.5 trillion, from Rp 1.5 trillion in 2017. 

Windraty Ariane Siallagan (The Jakarta Post)
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Jakarta
Tue, July 10, 2018

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Ultra-micro financing combats poverty Sulis, 30, rakes the brown sugar to be packed into 50-kg sacks in a home industry in Genengan village in East Java. (JP/Aman Rochman)

T

he ultra-micro financing (UMi) credit program has given a glimmer of hope in the government’s efforts to reduce extreme poverty since its launch in the second half of last year.

This year, the government increased the budget for the UMi by 65 percent to Rp 2.5 trillion, from Rp 1.5 trillion in 2017. 

The UMi is not the first credit program introduced by the government that aims to help the poor. But not all credit programs have been effective in helping micro, small and medium enterprises (MSMEs). Until the end of 2015, the number of MSMEs in Indonesia was around 61.6 million. 

However, only 28.5 percent of them had gained access to funding, leaving the remaining 71.5 percent or around 44 million MSMEs unable to obtain financing. On account of rigid requirements, ultra-micro business owners are unable to get credit from banks. The UMi program plays a complementary role to the government’s existing credit programs for MSMEs. 

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