Labor Intensive Credit Interest Subsidy Encourages Industry

OJK (Photo: dock. Antara)

JAKARTA - The Financial Services Authority (OJK) said that interest subsidies provided by the government for labor-intensive investment credit schemes can contribute to supporting industrial growth and prevent termination of employment (PHK).

With the assistance from the government for the provision of cheaper funds, it is hoped that these labor-intensive sectors can increase access to financing and reduce funding costs, so that they can further optimize or even expand production capacity and increase competitiveness.

"In the end, it can encourage industrial growth in Indonesia and at the same time absorb new workers and prevent layoffs," said OJK Banking Supervision Chief Executive Dian Ediana Rae quoting Antara.

OJK welcomes government programs and incentives to support and encourage credit growth, including through interest rate subsidies.

In general, based on data from November 2024, credit to the processing industry still grew positively to 8.68 percent year on year (yoy), an increase compared to the same period the previous year.

Dian said the growth in lending to industries that are labor-intensive is quite diverse. As an illustration, credit to the food, beverage and tobacco industry grew high, supported by strong credit demand.

On the other hand, credit to textile sub-sectors and clothing is still growing weakly, although it is slightly higher than the previous year. Likewise credit to the construction sector is still relatively stagnant, although it has grown positively compared to last year.

The disbursement of consumptive loans related to the labor-intensive sector, namely home ownership loans (properties) is still relatively strong, as can be seen from its growth in November 2024 of 10.38 percent (yoy).

However, the growth in property ownership credit was driven by property ownership type 22 and above, while residential houses up to type 21 experienced a decline, reflecting the weakening of demand in the lower middle class.

Provision of credit or financing will certainly depend on demand for credit in the community. Credit requests for businesses, especially manufacturing, are also largely determined by economic conditions, global and domestic monetary policies, people's purchasing power, and market opportunities for business expansion.

For this reason, efforts to improve industries in Indonesia can not only be made through the provision of banking funds, but must also be supported by various other factors such as human resource support, infrastructure, legal certainty, as well as transparency of licensing and ease of investment.