Indonesia to Unleash Loan Funds as Micro-lending Rates Cut

Thursday, June 11, 2015

Indonesia wants to unleash 30 trillion rupiah ($2.3 billion) of new loans for small businesses and halve some bank micro lending rates to help revive an economy running at its slowest pace in five years.

The government has asked state-owned lenders to cut lending rates for so-called Kredit Usaha Rakyat, or financing given to small businesses that may not meet bank criteria, as part of the package, said Gatot Trihargo, a deputy at the State-Owned Enterprises Ministry, in an interview in Jakarta on Wednesday. Rates for such loans can be as high as 24 percent.

The move is the latest by policy makers who are trying to spur flagging growth in Southeast Asia’s biggest economy, having already loosening lending rules for mortgages and with plans to cut corporate tax. Bank Indonesia has little room to cut its benchmark interest rate because of a current account deficit and a currency at its weakest in 17 years, while planned government spending on infrastructure has yet to kick in.

“The economic growth target is high, so the government wants to get everyone underneath its authority involved in helping, including the banks,” said Rully Arya Wisnubroto, a financial market analyst at PT Bank Mandiri in Jakarta.

Source: Bloomberg (link opens in a new window)

business development, microfinance, public policy