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MSMEs struggle to get loans from 'picky' lenders
Only 19 percent of bank loans went to small businesses last year, far short of the President’s target. Experts urge the government to simplify regulations and do more to help MSMEs.
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Get cracking: Workers prepare to dry traditional crackers on Jan. 22, 2024, at a micro, small and medium enterprise (MSME) center in Pekarungan village, Serang regency, Banten. The government expects the number of MSMEs in the country to grow to 83.3 million within 10 years. (Antara/Asep Fathulrahman)
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nly 19 percent of bank loans went to small businesses last year, according to government data, falling far short of the President Joko "Jokowi" Widodo’s 30 percent target and hampering development of a sector that is crucial to employment.
Since his early days in office, Jokowi has continuously encouraged banks and other financial institutions to increase credit disbursement to micro, small and medium enterprises (MSMEs).
Analysts have noted that, despite government subsidies provided through the micro credit program (KUR), financial institutions remain selective in granting loans, leaving many MSMEs struggling to obtain affordable funding.
They urge the government to become more involved in helping small enterprises through the relevant ministries and state-owned enterprises (SOEs), and to make loan eligibility criteria clearer.
The Jokowi administration has taken various measures to support MSMEs, such as easing the process to create legal entities and lowering the income tax burden for small businesses.
Loan disbursement from the banking sector, however, remains below expectations.
"We need a breakthrough, a strategy to increase bank loans as working capital for MSMEs, so we can see those businesses grow better," Jokowi said during the Financial Services Industry Annual Meeting in Jakarta on Feb. 20.
