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Govt to reinstate SME loan restructuring program
Coordinating Economic Minister Airlangga Hartarto announced plans for the program’s resumption on June 24, citing a request from President Joko “Jokowi” Widodo. The program was previously extended three times before expiring at the end of March of this year.
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Get cracking: Workers prepare to dry traditional crackers at a micro, small and medium enterprise (MSME) center in Pekarungan village, Serang regency, Banten, on Jan. 22, 2024. The government has projected that MSME players will grow to 83.3 million in the coming 10 years. (Antara/Asep Fathulrahman)
T
he government is planning to revive a COVID-era loan restructuring program to protect small and medium enterprise (SME) borrowers from default, especially on loans disbursed through the state-led subsidized microloan program (KUR).
Coordinating Economic Minister Airlangga Hartarto announced plans for the program’s resumption on June 24, citing a request from President Joko “Jokowi” Widodo. The program was previously extended three times before expiring at the end of March of this year.
It allows banks to reclassify loans that have deteriorated as a result of the economic crisis caused by the pandemic. Loans that would normally be considered “nonperforming” can instead be registered as “loans at risk” (LaR), which helps banks keep their nonperforming loan (NPL) ratios artificially low.
“It would reduce the burden on local banks that need to make provisions for rising bad loans, especially due to the KUR,” Airlangga said at the State Palace.
Read also: Jokowi wants credit restructuring scheme revived
Etikah Karyani Suwondo, a senior researcher at the Center of Reform on Economics (CORE), said that many SMEs were struggling to repay their loans because of limited market access after the pandemic and high interest rates.
She noted that in April, the NPL rate for SME loans increased to 4.26 percent, up from 3.98 percent in the previous month, when the program was still in place.
