Last year’s state liquidity injection, which saw hundreds of trillions of rupiah placed in commercial lenders with the instruction to boost credit disbursement, benefited mostly large corporate borrowers.

This latest initiative is aimed specifically at lending to micro, small and medium enterprises (MSME).

In principle, it makes good sense to work on both ends of the market, because if small businesses want to seize the opportunities generated by more corporate activity, they too need affordable funding.

However, some economists have expressed doubts about the effectiveness of Purbaya’s signature policy, introduced just days after he assumed office last year, mainly because they believe a lack of liquidity is not the biggest obstacle to increased economic activity.

Those same doubts apply to the plan of turning PNM into a special mission vehicle under the Finance Ministry for MSME lending, with economists telling The Jakarta Post that the move failed to address core issues like risk assessment and borrower repayment capacity.

Capital is necessary but not sufficient for business expansion.