JAKARTA: The national banking industry remains cautious about lending to micro, small and medium enterprises (MSMEs) despite ongoing government efforts to expand credit issuance and boost the country’s economic growth.
The Financial Services Authority (OJK) acknowledged in a press conference last Friday that loan issuance to MSMEs continued to be muted, growing at only 0.23% year-on-year (y-o-y) in September, which was down from 1.3% y-o-y growth in August.
Meanwhile, corporate loan issuance was up by a much stronger 11.53% y-o-y in September, helping to push overall credit growth to 7.7% y-o-y in September from 7.56% y-o-y in the previous month.
“The OJK has noticed that the slow MSME loan growth is due to banks’ current focus on improving MSME credit quality and that banks tend to be cautious, because MSMEs are considered higher risk than other segments,” said the OJK’s chief executive for banking supervision, Dian Ediana Rae.
He went on to say that the recently issued OJK Regulation No. 19/2025 aimed to simplifing credit access for MSMEs was expected to improve overall bank lending in the country.
“In line with this regulation, banks also need to adjust their processes by simplifying requirements and speeding up lending procedures, offering products that match the MSME segment and bolster collaboration with credit guarantee institutions,” Dian said.
He noted also that such measures could help banks to reduce lending risks and improve access to the MSME segment.
The Financial Services Authority reported stable overall credit risk, with the net nonperforming loan rate remaining unchanged for the month at 0.87%, while the loans at risk rate improved to 9.52% in September from 9.73% in August.
The peer-to-peer financial and technology lending business, however, where roughly a third of all loans are disbursed to MSMEs, saw a rise in its share of default within 90 days of disbursement to 2.82% in September from 2.38% last year.
MSMEs are a vital pillar of Indonesia’s economy, contributing significantly to its gross domestic product (GDP) and employment, but their limited access to bank loans remains a persistent challenge.
Traditional assessment models often deem MSMEs a high-risk segment for lenders due to a lack of collateral, incomplete financial records and unpredictable cash flows.
This high-risk sentiment has also kept banks reluctant to boost MSMEs lending despite the government’s 200 trillion rupiah liquidity injection to state-owned banks in September, aimed at underpinning bank lending to support economic growth.
Bank Rakyat Indonesia, Bank Negara Indonesia and Bank Mandiri each received 55 trillion rupiah in deposits of government funds moved from Bank Indonesia to the state-owned lenders, while Bank Tabungan Negara and Bank Syariah Indonesia received 25 trillion rupiah and 10 trillion rupiah, respectively.
Finance Ministry director general of Economic and Fiscal Strategy, Febrio Nathan Kacaribu, said last week that the state-owned lenders had disbursed 84% of the 200 trillion rupiah injection of third-party funds to borrowers.
However, the state-owned banks’ financial reports for the third quarter showed that credit disbursement remained concentrated in corporate lending, while lending to MSMEs remained subdued after the liquidity injection.
Analysts attributed this to persistently weak demand in the MSME sector amid economic uncertainty.
GDP growth slowed to 5.04% y-o-y in the third quarter from 5.12% y-o-y in the preceding quarter, Statistics Indonesia reported. — The Jakarta Post/ANN
