Indonesia issues new banking rules on mandatory MSME lending

JAKARTA: Indonesia's central bank has issued new rules making it easier for banks to meet requirements on supporting small and medium business, in a measure also aimed at bolstering an economic recovery from the COVID-19 pandemic, it said in a statement.

The new rules replaced a 2015 regulation mandating banks to provide 20% of their total lending to micro, small and medium enterprises (MSMEs), which some banks had trouble meeting due to a lack of expertise in giving such loans.

Under the new regulation, which takes effect in June next year, banks must provide financing of at least 20% of their total portfolio for MSMEs, their supply chains or low income earners in what Bank Indonesia (BI) calls the macroprudential inclusive financing ratio (RPIM) Channelling loans via other banks or non-bank financial firms as well as buying securities issued for inclusive financing will also count as meeting the RPIM.

The mandatory ratio will go up to 25% in June of 2023 and to 30% in June of 2024 and banks that fail to meet the ratio must pay fines.

"The BI regulation was issued as part of efforts by BI to increase economic inclusion and open up financial access, as well as to strengthen MSMEs' roles in the national economic recovery," BI said in the statement late on Wednesday.

The new rules will also provide more options for banks to meet minimum MSME credit requirements, it said.

Islamic banks must also comply with the new rules. - Reuters

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Indonesia , SME , MSME , lending


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