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Jakarta Post

Unsecured-loan time bomb ticking amid pandemic

  • Arwin Rasyid

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PREMIUM
Jakarta   /   Mon, July 20, 2020   /  11:39 am
Unsecured-loan time bomb ticking amid pandemic Easy money: A craftsman completes a bamboo-made becak (pedicab) miniature in Cimangenteung village in Lebak, Banten, on July 8. Banks are offering unsecured loans for small-scale enterprises, among other customers. (Antara/Muhammad Bagus Khoirunas)

Unsecured Loans (KTA) are one of the mainstay products of the banking industry. As personal loans, they are extended to micro businesses, formal and informal-sector workers and self-employed professionals. All sorts of people avail of such loans, ranging from teachers and public servants to street hawkers, food vendors and motorcycle taxi drivers. According to banking sector data, KTA lending currently accounts for some Rp 142 trillion (US$9.8 billion) of the Rp 1 quadrillion of outstanding loans in the SME sector, or a total of 14.2 percent. On average, the loans vary between Rp 10 million and Rp 15 million. However, if we assume that the average KTA loan is Rp 15 million, there are some 10 million KTA borrowers in Indonesia today. KTA lending is a mainstay banking product that is very popular among lower-income people. One of the characteristics of the KTA business is that bor...

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