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Bank Indonesia expands regulation on minimum lending for MSMEs
The new regulation expands the types of borrowers eligible for MSME loans, among other changes.
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Workers remove the fine hairs on cowhide by burning it off before they cut them into small pieces to be used as ingredients for skin crackers at a home industry facility in Depok, West Java, on Feb. 18, 2021. Home industries have suffered a hit in business due to the pandemic, although some still manage to hang on. (JP/P.J.Leo)
B
ank Indonesia (BI) has issued a regulation aimed mainly at encouraging banks to disburse more loans to micro, small and medium enterprises (MSME) by expanding an earlier regulation with a similar aim.
The new regulation, which was issued on Aug. 31, requires banks to disburse at least 20 percent of their loans to either MSMEs, MSMEs’ supply chains or low-income earners, and will gradually raise the mandatory MSME credit ratio to 25 percent in June 2023 and 30 percent in June 2024.
“The essence is a reform or improvement to the MSME [credit] ratio policy,” Juda Agung, assistant governor at BI’s macroprudential policy department, said during an online press conference on Friday.
The new regulation, called the macroprudential inclusive financing ratio (RPIM), expands a 2015 BI regulation that introduced the mandatory 20 percent ratio, but only for MSMEs, and without the gradual escalation.
The 2015 regulation also eased MSMEs financing processes by allowing banks with limited MSME-lending expertise, such as foreign banks, to channel loans through the MSMEs’ partners to meet the requirements, a policy that was carried over in the 2021 regulation.
Read also: Small businesses improve, but demand, access to capital left wanting
MSME credit accounted for 19.62 percent of total national credit disbursement in July, BI data show. The proportion has stagnated around this level since at least 2014.
