Two thirds of small and medium enterprises (SMEs) in Indonesia are expected to make use of alternative borrowing products in 2022 in what researchers call a potentially worrying trend for traditional banks.
Two thirds of small and medium enterprises (SMEs) in Indonesia are looking to move away from conventional lending options this year.
Sixty-seven percent of domestic SMEs expect to take up new or alternative borrowing products in 2022, a report by United States-based analytic software company FICO has found, while 70 percent of SMEs in the Asia Pacific region are less than satisfied with access to credit through their main bank.
“Indonesia’s SMEs have made it clear that they require financial support in 2022 but are less optimistic about getting it from their main banks. This is a potentially worrying trend for traditional banks, considering there are over 62 million SMEs in Indonesia, which is one for every five Indonesians,” said Aashish Sharma, senior director of FICO's Asia Pacific decision management solutions.
A survey by data insights company RFI Global, based on research from the SME Banking Council on 737 businesses from Indonesia in 2019 and 2021, found that 67 percent of Indonesian SMEs were less than satisfied with their main bank’s access to credit and level of support in response to the pandemic, indicating early signs that traditional banks in the country are at risk of losing SMEs' business to nontraditional competitors.
The SME Banking Council in its 2019 and 2021 polls observed a total of 4,700 SME owners across the Asia and Oceania regions with annual revenue of up to US$10 million. Malaysia, New Zealand and Indonesia were the countries with the highest number of respondents, at 1,044, 1,036 and 737, respectively.
Micro, small and medium enterprises (MSMEs) in Indonesia account for 60 percent of the GDP of Southeast Asia’s largest economy. Around 50 percent of them are in need of loans, according to a 2021 report by the University of Indonesia's Faculty of Economics and Business Institute for Economic and Social Research (LPEM FEB UI)
Read also: P2P lending helps SMEs earn more, scale up business: Research
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