A top adviser to President Prabowo Subianto says the government will issue a presidential regulation to cancel the debts of some 6 million borrowers to allow them to obtain loans from banks instead of loan sharks or peer-to-peer lending platforms.
top adviser to President Prabowo Subianto says the government will issue a presidential regulation to cancel the debts of some 6 million borrowers to ensure they can get loans from banks instead of loan sharks or peer-to-peer lending platforms.
Hashim Djojohadikusumo, who is also Prabowo’s brother, said on Wednesday that the banks had already written off the debts from their books but that they had not been deleted, which rendered the borrowers ineligible to apply for new loans.
“All these debts have been written off for a long time, and bank insurers have covered [the losses], but the right of claim has not been removed. Therefore, these 6 million, 5 million [borrowers] cannot acquire [new] loans. Where do they go? To loan sharks and online lenders,” Hashim was quoted as saying by Kumparan.
In banking, a write-off means debt, as an asset, gets removed from the lender’s balance sheet when it is unlikely to be recovered to reflect the true financial health of the bank, but the bank retains the legal right to claim the unpaid amount, which means the borrower still has the status of a debtor.
Such borrowers are typically unable to, or face serious constraints in, applying for another loan until they square off the debt. The state, through the Financial Services Authority (OJK), keeps track of every banking customer’s credit history.
Read also: OJK adds insurers, P2P lenders to credit score database
The OJK’s central credit score database, known by its acronym SLIK, is used by banks to assess a customer’s creditworthiness before they decide whether to issue a loan.
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