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View all search resultsBanks still 'cautious' about lending to high-risk MSMEs
The national banking industry remains cautious about lending to micro, small and medium enterprises despite ongoing government efforts to expand credit issuance and boost the country’s economic growth.
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A participant arranges bags made during a small business training program on May 14, 2024, in Denpasar, Bali. (Antara/Nyoman Hendra Wibowo)
T
he national banking industry remains cautious about lending to micro, small and medium enterprises (MSMEs) despite ongoing government efforts to expand credit issuance and boost the country’s economic growth.
The Financial Services Authority (OJK) acknowledged in a press conference on Friday that loan issuance to MSMEs continued to be muted, growing at only 0.23 percent year-on-year (yoy) in September, which was down from 1.3 percent yoy growth in August.
Meanwhile, corporate loan issuance was up by a much stronger 11.53 percent yoy in September, helping to push overall credit growth to 7.7 percent yoy in September from 7.56 percent yoy in the previous month.
“The OJK has noticed that [the slow MSME loan growth] is due to banks’ current focus on improving MSME credit quality [...] and that banks tend to be cautious, because [MSMEs] are considered higher risk than other segments,” said the OJK’s chief executive for banking supervision, Dian Ediana Rae.
He went on to say that recently issued OJK Regulation No. 19/2025 aimed to simplify credit access for MSMEs and was expected to improve overall bank lending in the country.
“In line with this [regulation], banks also need to adjust their processes by simplifying requirements and speeding up lending procedures, offering products that match the MSME segment and bolster collaboration with credit guarantee institutions,” Dian said, noting that such measures could help banks to reduce lending risks and improve access to the MSME segment.
The OJK reported stable overall credit risk, with the net nonperforming loan (NPL) rate remaining unchanged on the month at 0.87 percent, while the loans at risk (LaR) rate improved to 9.52 percent in September from 9.73 percent in August.
