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Jakarta Post

Govt to extend assistance to 3 million more small businesses

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Mon, September 7, 2020   /   12:39 pm
Govt to extend assistance to 3 million more small businesses Odd-even policy: Shoppers and vendors mill around Tanah Abang Market in Central Jakarta on Monday. The market’s management has applied an odd-even number system to prevent the spread of COVID-19, allowing shops to open on alternate days depending on their lot number. (JP/Dhoni Setiawan)

The government is seeking to expand its business assistance program to around 3 million more small businesses affected by the COVID-19 outbreak by reallocating funds from other programs within the government’s stimulus plan.

Cooperatives and Small and Medium Enterprises Minister Teten Masduki said on Sept. 4 that the ministry planned to increase the initial target of 12 million micro and small businesses to 15 million by mid-December.

“We’re confident that we will reach this target given the high level of interest among micro businesses,” he said during a live-streamed webinar.

Through the assistance program, eligible small businesses can receive a grant of Rp 2.4 million (US$163) to help them survive the economic impacts of the health crisis.

Read also: Fintech firms offer to help disburse govt COVID-19 funds

With the expansion, the government plans to increase the budget allocation for the program from Rp 22 trillion to Rp 36 trillion. The additional funds will be sourced from other programs managed under the government’s Rp 695.2 trillion stimulus program, according to Teten.

Indonesia’s economy relies heavily on small businesses, which account for more than 60 percent of gross domestic product (GDP) and employ a majority of the labor force.

The assistance comes as many small businesses struggle to survive the pandemic, as the economy shrank 5.32 percent year-on-year (yoy) in the second quarter this year. According to a survey of 1,165 businesses conducted between April and May by the Asian Development Bank (ADB), 91.8 percent of small businesses said they needed loans without interest or collateral, and 89.5 percent wanted cash assistance or grants.

The government has allocated Rp 123.47 trillion in the state budget for small businesses as part of its stimulus program.

President Joko “Jokowi” Widodo launched the small business assistance program on Aug. 25, providing aid to 1 million small businesses across the country.

As of Sept. 2, the government had disbursed Rp 13 trillion, or about 61 percent of its initial budget of Rp 22 trillion. The funding was disbursed to 9.1 million micro businesses that had yet to receive any form of government assistance, including interest-rate subsidies or debt restructuring.

Read also: Government disburses $163m for micro businesses

The program was especially aimed at micro businesses that had trouble getting bank loans or that did not have bank accounts at all, Teten previously stated.

Although he acknowledged that some aid recipients might use some of the funds for non-business expenses, Teten believed it had been disbursed to the right targets.

“We’ve gone through a rigorous validation process with the help of state-owned banks to make sure that the aid is disbursed to those who really need it,” he said.

Given that the aid is disbursed through banks, Teten said it was hoped the program would help micro businesses to become more bankable, giving them access to funding they can use to scale up their businesses.

The head of the country’s economic recovery task force, Budi Gunadi Sadikin, meanwhile, added that his team would likely fund the additional small business assistance with excess from the Rp 35.28 trillion allocated for the interest-rate subsidy program.

Read also: Govt partners with Mastercard, NGO to launch business, cybersecurity mentoring for MSMEs

“We don’t really need as much money as we initially estimated, so we can channel the excess to other uses, like this program,” he said.

Budi said the team had estimated there would be more than Rp 21 trillion in excess from the subsidy rate program, as it was likely to only require Rp 14 trillion.

As of August, only 7.2 percent, or about Rp 3 trillion, of the funds allocated for the interest-rate subsidy budget program had been utilized. The funds were used to subsidize Rp 322 trillion in loans for around 7.8 million MSMEs.