Indonesia: Government Relaxes Rules on Micro Credit

Jan 2010
Jakarta, Indonesia, January, 12 2010 - The government has relaxed some rules on its micro credit support program (the KUR) including cutting lending rates and extending loan restructuring periods to support micro-, small- and medium-sized businesses (MSMEs).

This year government will provide a loan guarantee facility of Rp 2 trillion (US$218 million), to support up to Rp 20 trillion of KUR, Coordinating Economic Minister  Hatta Rajasa said Tuesday at the signing of an MoU with the banks.

The lending rate on micro credit (below Rp 5 million) was cut from 24 to 22 percent; that for retail credit (between Rp 5 and Rp 500 million) was cut from 16 to 14 percent.

Debtors holding working capital loans can now request a loan  extension from three to six years; those  with investment loans can now  request extension from five to 10 years.

Debtors can now also borrow consumer loans. Credit referencing with the Bank Indonesia (BI)debtor information system (SID)  no longer applies to micro credit loans.

“We can also raise credit ceilings for linkage (on-lending) institutions with loan recovery strategies to Rp 1 billion,” said Hatta.

This relaxation of the rules should  help MSMEs, which contribute 55.6 percent of the country’s gross domestic product (GDP), he said.

Source : The Jakarta Post

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