NUSADAILY.COM – JAKARTA – Increasing portion of bank lending for Micro, Small and Medium Enterprises (MSMEs) could accelerate economic recovery through boosting economic activity and job absorption, Institute for Development of Economics and Finance (Indef) economist Eko Listiyanto, stated.
“Encouraging banks to increase the portion of credit to MSMEs is one solution that can quickly have an impact on economic recovery. The MSMEs’ business turnover can relatively increase production quickly and can directly lead to absorption of workers,” Listiyanto noted in his statement here on Monday quoted from Antara.
In the midst of the dampened purchasing power of the people, marked by limited demand for MSMEs’ products, increasing economic activity at the MSMEs level is deemed as being the most prudent choice.
Listiyanto expounded that nationwide, the total bank credit for MSMEs was still very low, or at only 19.68 percent of the total national banking credit.
Apart from raising the credit distribution ceiling, the Indef economist also highlighted the need for incentive policies from banks to MSMEs in the form of assistance to increase the level of MSMEs to make them eligible for funding by banks.
“If they (MSMEs) are not guided, then their business will likely always be small or even become the target of various forms of illegal non-formal financing that currently surrounds them,” he remarked.
The government has, in fact, encouraged state-owned banks to raise the credit ceiling for MSMEs. However, only BRI Bank is willing to do so by targeting lending of up to 85 percent to MSMEs.
Until the end of March 2021, BRI’s credit distribution was recorded at Rp914.19 trillion, supported by the growth of micro loans reaching Rp360.03 trillion, or a 12.43-percent growth, as compared to the corresponding period in the previous year, while consumer loans grew by 1.62 percent to reach Rp145. 06 trillion, from the same period in the previous year.
BRI President Director Sunarso targets MSMEs lending to continue to increase to reach 85 percent of the current MSMEs loan portfolio of 80.60 percent of all BRI loans.
“This figure shows an improvement, as compared to the March 2020 period during which the portion for MSMEs was recorded at 78.71 percent. We will continually strive to increase the portion for MSMEs to reach 85 percent of the total loan portfolio,” Sunarso noted.
In the meantime, Director of the Center of Economic and Law Studies (CELIOS) Bhima Yudhistira remarked that bank credit can be an instrument to encourage developments in the MSMEs sector during the pandemic.
“MSMEs actors, who get business capital from banks, can recruit employees, buy raw materials, and help the family economy because MSMEs actors are usually household-scale businesses,” he stated.
MSMEs, if managed properly with various incentives and the right policies, will be able to help boost the purchasing power of people from the middle and lower class brackets.
Yudhistira believes that the portion of MSMEs credit from national banking credit should reach 30-40 percent. However, currently, the total credit for MSMEs is only around 19.68 percent.
Apart from BRI, which focuses on developing MSMEs, other banks are unable to provide 20 percent of the credit to the MSMEs sector.
“This (target) should not be an obstacle, as banks can make distributions to BPR and fintech as well,” he remarked.
Minister of State-Owned Enterprises Erick Thohir had earlier directed BRI to optimize its services to MSMEs players, with credit allocations of up to 80 percent.
Thohir expressed belief that 80 percent of the credit for MSMEs from BRI could be realized as BRI continues to expand.(mic)