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Jakarta Post

Rate cut great but access to loans needs improvement

  • Made Anthony Iswara

    The Jakarta Post

Jakarta   /   Wed, July 24 2019   /  12:16 am

The central bank cut its benchmark interest rate last week and has signaled that there may be more cuts, a move expected to bring down borrowing costs for business expansion and consumer purchases that will boost growth amid sluggish economic activities. But will that really be the case? Borrowers, especially micro, small and medium enterprises (MSMEs), do not share the excitement the economic theory portrays about the effect of a rate cut, which policymakers and economists strongly believe will have positive effects on the economy.Yes, they praised Bank Indonesia’s (BI) decision to cut its reference rate as a signal that would encourage the sector to take up loans with lower interest rates, according to Association of Indonesian MSMEs (Akumindo) chairman Ikhsan Ingratubun.But even with low rates, the difficulty MSMEs face in obtaining access to bank loans has hampered the sector’s p...