President Jokowi Calls for Expedited MSME Credit Relaxation

SEKRETARIAT PRESIDEN

President Joko Widodo chairs a limited meeting through a teleconference from Merdeka Palace in Jakarta on Wednesday (15/4/2020). The meeting discussed mitigation efforts on the impact of COVID-19 on micro, small and medium enterprises.

JAKARTA, KOMPAS — President Joko “Jokowi” Widodo has appealed that credit restructuring for micro, small and medium enterprises (MSMEs) should be expedited. As monitored by the government, so far not all banks and nonbank financial industries have carried out the program badly needed by grassroots communities losing their income due to the COVID-19 pandemic.

President Jokowi at a limited meeting at Merdeka Palace, Jakarta, on Wednesday (15/4/2020), stressed the need to accelerate the realization of the credit restructuring program for MSMEs facing difficulties as a result of the COVID-19 crisis. The program covers, among others, interest subsidies, deferred repayment of principal debts and additional working capital loans.

I want all the budget requirements to be calculated so that we can make decisions.

“This should be promptly executed, never wait until they close down to act. Don’t create upheavals in society. I want all the budget requirements to be calculated so that we can make decisions,” said the President.

Also read : Analyzing the Global Spread of Covid-19

The meeting that discussed the mitigation of COVID-19’s impact on MSMEs was held through teleconference. Connected by the teleconference were Vice President Ma’ruf Amin and ministers of the Indonesia Onward Cabinet.

The President on the occasion also asked ministers and heads of state agencies to prepare financing under a new scheme, especially that having to do with investment and working capital. Their application procedures should be simplified, particularly for MSMEs in COVID-19 impacted regions.

Also read : Strengthen MSMEs in Domestic Market

KOMPAS/HENDRA A SETYAWAN

Yanto arranges plastic bags of aquarium fish on Thursday (2/4/2020) at an ornamental fish farm near Mount Sindur in Bogor regency, West Java. The Covid-19 outbreak in Indonesia has disrupted the activities of thousands of micro, small and medium enterprises (MSMEs), including the ornamental fish trade.

“MSMEs should be given opportunities for production, especially in the sectors of agriculture, home industries, traditional stalls, and foods, with a tight protocol of hygienic practice,” said the President.

Dedi, 42, a microbusiness credit (KUR) program participant in Yogyakarta, said the state bank as KUR distributor had called him several days earlier, offering him a loan repayment relaxation scheme.

When no income is earned today, it provides some relief.

Under the scheme, a customer is only obligated to pay interest for the next six months, April-September 2020, worth Rp90,000 per month. Later, the principal debt is to be repaid only from October 2020 up to 2022, totaling Rp710,000 per month.

“I accepted the offer. When no income is earned today, it provides some relief,” said Dedi.

Also read : Regulation Causes Problems for MSMEs

Suharmono, 43, an automotive credit customer doing business in Yogyakarta, received a short message from a creditor containing a link to supply personal data. However, the driver and car owner engaged in online service had no precise idea of the relaxation scheme offered by the creditor.

Based on data from the Cooperatives and SMEs Ministry, MSMEs in totaled 64,194,056, comprising 63,350,222 microbusinesses, 783,132 small businesses and 60,702 medium enterprises. Their economic potential is vast but so far their contribution has not yet been optimal.

Also read : Temporary Special Treatment for MSMEs

Kompas

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MSMEs have been a target of the government’s empowerment programs. But the programs are scattered and not integrated in 18 ministries and state agencies.

For this reason, President Joko Widodo at a limited meeting in Jakarta (19/02/2020) instructed his assistants to prioritize MSMEs.

The government has set several higher targets for the next five years. MSMEs’ export contribution to national exports, for instance, is set to rise from 14.37 percent in 2018 to 30.2 percent in 2024. The target of MSME contribution to the gross domestic product is increased from 60.34 percent in 2018 to 60.5 percent in 2024. The national entrepreneurship ratio raised in its target from 3.4 percent in 2018 to 4 percent in 2024.

Six strategic programs

Cooperatives and SMEs Minister Teten Masduki, following the limited meeting, described six strategic programs for the MSME prioritization in the national economy.

The first is the expansion of access to markets, products and services. This includes projects of infrastructure development, expenditures of ministries, state agencies and state owned enterprises. “We will also expand the MSME market on the online and export markets,” he said.

The second is the acceleration of access to financing. In turn, MSMEs will be directed to KUR, commercial financing and venture capital. Microbusinesses are to be directed to the Prosperous Families’ Economic Promotion (Mekaar) program, the Micro Capital Service Unit (ULaMM) and the Ultra Micro (UMi) financing program. To this end, the President asked the Financial Services Authority (OJK) to study the schemes.

KOMPAS/TOTOK WIJAYANTO

Cooperatives and Small and Medium Enterprises Minister Teten Masduki

The third, according to Teten, involves business facilities and opportunities. All ministries and state institutions are requested to really provide facilities for the MSME, including licensing.

The fourth is the promotion of competitiveness of MSME products. In this context, the President asked that MSME production technology should be enhanced with modern machinery. The fifth is the development of MSME management capacity and human resources.

The last is program consolidation with the target of the MSME so far scattered in 18 ministries and state agencies. Later they will be coordinated by the Cooperatives and SMEs Ministry for proper direction.

Lately, with the economic pressure caused by the COVID-19 crisis, the government has had to adjust the MSME programs. For example, the most urgent today is MSME credit restructuring. Meanwhile, several other programs remain relevant amid the COVID-19 crisis.

(***) INFOGRAPHICS

Government Measures for MSME Protection amid COVID-19 Pandemic

The total of MSME in Indonesia: 64.19 million units (2018)

Several Government Steps to Protect MSME amid COVID-19 Pandemic:

- Governors record data on residents losing income due to government policies.

- Regional administrations slash non-priority expenditure plans.

- Reallocation of budgets for the procurement of goods and services within the framework of COVID-19 control.

- The implementation of the Pre-employment Cards for workers subjected to dismissals, daily workers losing their income and microbusinesses losing their earnings.

- The OJK offers MSME credit relaxation for the ceiling of less than Rp10 billion.

MSME Credit Relief:

- Deferment of installments up to one year.

- Interest reduction.

- Reduction of principal debt arrears.

- Reduction of interest arrears.

- Increased credit facilities.

- Credit conversion.

Several Credit Relaxation Policies at Banks

- Adjustment of loan interest rates.

- Reduction of interest arrears and/or fines/penalties.

- Debt repayment rescheduling.

- Deferment of monthly principal debt installments up to one year.

- Earlier opportunity for restructuring given to debtors in need.

- Restructuring covers deferment of liability, principal debt repayment, and/or extension of credit periods.

- Earlier restructuring given to debtors in need.

- Adjustment of interest rates.

- Simplifying the extension of validity of credit facilities by providing commission and administration cost relief.

- Increasing credit facilities up to 20 percent is enabled without additional collateral for MSME debtors showing good commitments so far.

Sources: Cooperatives and SMEs Ministry, Kompas reports and Kompas.com.

Processed by Kompas Research & Development Division/RGA