The Government Targets KUR Distribution To Reach IDR 325 Trillion By 2024

Small entrepreneur illustration. (Irfan Meidianto / VOI)

JAKARTA - Enterprises, Micro, Small and Medium Enterprises (MSMEs) have a significant contribution to achieving national economic growth, amidst the uncertainty and weakening of the global economy. For this reason, the MSME development policy is needed in order to achieve national economic growth that is inclusive and based on a fair market economy.

Realizing the strategic role of MSMEs, the government gradually increases the People's Business Credit (KUR) ceiling over the next five years with a disbursement target of IDR 325 trillion in 2024.

"We want to encourage higher economic growth, 60 percent of our GDP is contributed by MSMEs. So if we want high growth, we have to push high on the basis, "said Deputy for the Coordination of Macroeconomics and Finance at the Coordinating Ministry for Economic Affairs, Iskandar Simorangkir in a statement quoted on Wednesday, January 22

The increase in the KUR distribution target was followed by relaxation of policies such as increasing the maximum KUR micro ceiling and increasing the accumulation of the KUR Mikro ceiling.

“The maximum KUR micro ceiling is from Rp. 25 million to Rp. 50 million per debtor. For the accumulation of the KUR Micro ceiling, the trade sector has also increased from Rp. 100 million to Rp. 200 million. This change in KUR policy has been in effect since January 2, 2020, "said Iskandar.

In addition, following President Joko Widodo's direction at the Limited Cabinet Meeting, the KUR interest rate was lowered back to 6 percent. This reduction refers to the Regulation of the Coordinating Minister for Economic Affairs Number 8 of 2019 concerning Guidelines for Implementing KUR.

The policy to reduce interest rates was followed by an increase in KUR distribution by 36 percent compared to 2019 to IDR 190 trillion in 2020.

Achievement of the KUR Policy

Since being channeled back under the interest subsidy scheme in August 2015, the total accumulated KUR distribution up to December 31, 2019 has reached IDR472.8 trillion accompanied by a relatively low Non-Performing Loan (NPL) of 1.1 percent.

"In 2019 alone, the KUR distribution target is Rp140 trillion, with the realization of the distribution until December 2019 reaching Rp.139.5 trillion or 99.65 percent of the target," said Iskandar.

The increase did not only occur in the nominal amount of KUR disbursement, but SMEs receiving KUR also increased rapidly from 2.4 million debtors in 2014 to 4.4 million debtors in 2018. The total accumulation of KUR recipient debtors from August 2015 to December 2019 has reached 18.6 million credit agreements or 12.9 million (based on the National Identity Number).

"This achievement shows that KUR recipients are dominated by MSMEs that have just accessed financing from formal financial institutions, not recurring MSMEs," said Iskandar.

In addition, since the target for KUR distribution in the production sector (agriculture, fisheries, processing industry, construction and services) was set in 2017, the share of KUR disbursement in the trade sector has decreased, while the share of KUR in the production sector has continued to increase.

Decrease in KUR Interest Rates

Lampung economic and banking observer, Mustofa Endi Saputra Hasibuan, said the government's policy to reduce the interest rate for People's Business Credit (KUR) from 7 percent per year to 6 percent per year, which took effect as of January 1, 2020, triggered the growth of micro, small and medium (UMKM).

"The policy is a breath of fresh air for MSMEs, it will further stimulate and continue to spur business growth," said Mustofa.

Mustofa fully supports President Joko Widodo's corrective efforts in assigning his cabinet's economic team to continue to ground the acceleration of the MSME development program through KUR as a gateway to access financing.

He emphasized that the President's move was not only congruent with the constitutional mandate and Law 20/2008 on MSMEs, but also a form of affirmation of alignments.

"Carefully lowering the KUR interest rate to a single digit since 2017, President Jokowi's populist commitment to strengthening schemes, regulations, information systems, and target program financing targets, now seems to be filled with an immediate rush to see massive and measurable tangible results," said Endi.

He explained that the policy related to KUR had also resulted in MSMEs moving up in grade and the trade balance to recover. "I think the direction of his mystical atmosphere is going there," he added.