The loan guarantee program was expected to boost credit disbursement from banks to businesses, Finance Minister Sri Mulyani Indrawati said, adding that it would help spur economic activities and set the stage for economic recovery after three months of large-scale social restrictions.

“We are hoping that the credit guarantee scheme will restore the risk appetite from both banks and firms so that it will boost economic activities,” Sri Mulyani told reporters on Wednesday. “We will use all of our policy instruments to improve the supply and demand sides.”

To be eligible for the government program, labor-intensive firms are required to employ at least 300 individuals, prove that their activities have been affected by the pandemic and have a good track record in paying loans, according to the minister.

The government has struggled to keep the economic wheels turning since the virus outbreak forced businesses to close and banks to hold up their loans. The economy is expected to grow just 1 percent this year in a best-case scenario, or contract 0.4 percent at worst.

The government has allocated Rp 695.2 trillion toward strengthening the country’s pandemic response and boosting economic growth, including Rp 53.57 trillion for big business financing. The stimulus for big business includes a fund placement for labor-intensive debt restructuring and credit guarantee programs.

Indonesian Eximbank and state infrastructure guarantee fund PT Penjaminan Infrastruktur Indonesia (PII) would provide a sovereign guarantee for loans provided by banks to labor-intensive firms, Sri Mulyani said.

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