Jakarta to extend help to three million more small businesses


  • Economy
  • Tuesday, 08 Sep 2020

JAKARTA: The government is seeking to expand its business assistance programme to around three million more small businesses affected by the Covid-19 outbreak by reallocating funds from other programmes within the government’s stimulus plan.

Cooperatives and Small and Medium Enterprises Minister Teten Masduki said that the ministry planned to increase the initial target of 12 million micro and small businesses to 15 million by mid-December.

“We’re confident that we will reach this target given the high level of interest among micro businesses, ” he said during a recent live-streamed webinar.

Through the assistance programme, eligible small businesses can receive a grant of 2.4 million rupiah (US$163) to help them survive the economic impacts of the health crisis.

With the expansion, the government plans to increase the budget allocation for the program from 22 trillion rupiah to 36 trillion rupiah. The additional funds will be sourced from other programmes managed under the government’s 695.2 trillion rupiah stimulus programme, according to Teten.

Indonesia’s economy relies heavily on small businesses, which account for more than 60% of gross domestic product (GDP) and employ a majority of the labor force.

The assistance comes as many small businesses struggle to survive the pandemic, as the economy shrank 5.32% year-on-year (y-o-y) in the second quarter this year.

According to a survey of 1,165 businesses conducted between April and May by the Asian Development Bank (ADB), 91.8% of small businesses said they needed loans without interest or collateral, and 89.5% wanted cash assistance or grants.

The government has allocated 123.47 trillion rupiah in the state budget for small businesses as part of its stimulus program.

President Joko “Jokowi” Widodo launched the small business assistance programme on Aug 25, providing aid to one million small businesses across the country.

As of Sept 2, the government had disbursed 13 trillion rupiah, or about 61% of its initial budget of 22 trillion rupiah. The funding was disbursed to 9.1 million micro businesses that had yet to receive any form of government assistance, including interest-rate subsidies or debt restructuring.

The programme was especially aimed at micro businesses that had trouble getting bank loans or that did not have bank accounts at all, Teten previously stated.

Although he acknowledged that some aid recipients might use some of the funds for non-business expenses, Teten believed it had been disbursed to the right targets.

“We’ve gone through a rigorous validation process with the help of state-owned banks to make sure that the aid is disbursed to those who really need it, ” he said.

Given that the aid is disbursed through banks, Teten said it was hoped the programme would help micro businesses to become more bankable, giving them access to funding they can use to scale up their businesses.

The head of the country’s economic recovery task force, Budi Gunadi Sadikin, meanwhile, added that his team would likely fund the additional small business assistance with excess from the 35.28 trillion rupiah allocated for the interest-rate subsidy programme.

“We don’t really need as much money as we initially estimated, so we can channel the excess to other uses, like this programme, ” he said.

Budi said the team had estimated there would be more than 21 trillion rupiah in excess from the subsidy rate programme, as it was likely to only require 14 trillion rupiah.

As of August, only 7.2%, or about three trillion rupiah, of the funds allocated for the interest-rate subsidy budget programme had been utilised. The funds were used to subsidise 322 trillion rupiah in loans for around 7.8 million MSMEs. — The Jakarta Post/ANN

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