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Micro lender holding hoped to boost financial inclusion
The holding company plans to serve ultra-micro companies with annual revenues of under Rp 300 million (US$20,696) and who require loans under Rp 10 million.
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The Badung Traditional Market in Denpasar, Bali, is seen in this 2017 photo. (JP/Anggara Mahendra)
W
ith the recent formation of a state-owned micro lender holding firm, Indonesia’s tiniest businesses may expect easier access to more affordable loans, paving the way for the leveling up of an economic sector that absorbs the majority of the country’s workforce.
The government issued earlier this month Government Regulation (PP) No. 73/2021 that hands over a majority stake in financing firm PT Permodalan Nasional Madani (PNM) and pawnshop chain PT Pegadaian to small business-focused lender Bank Rakyat Indonesia (BRI) to form the holding company, popularly called the “ultra-micro holding”.
The holding firm is not only expected to help micro but also ultra-micro enterprises. The former are defined as businesses with an annual gross revenue of under Rp 2 billion (US$138,020) according to the PP while the latter have revenues under Rp 300 million as defined by the Small And Medium Enterprise (SME) Center at the University of Indonesia (UI).
UI SME Center head Dewi Meisari Haryanti said the consolidation would enable the holding to reach more micro businesses and thus erode their reliance on informal lenders. The holding could offer more ultra-micro loans of under Rp 10 million per business.
“So far, many formal institutions are not inclusive, which means many ultra-micro businesses are unable to access loans,” Dewi told The Jakarta Post on July 19.
“The ultra-micro holding should be able to reduce small businesses' dependence on high-risk informal financing sources.”
On top of that, the consolidation would allow the three state-owned companies to operate more efficiently through economies of scale and thus, lower interest rates, she said.
