JAKARTA —
Muhammad Fadhil Raihan has had a school pick-up and drop-off business since 2019. His business is running smoothly, and he also intends to access people’s business credit (KUR) to develop it.
He intends to borrow a maximum of IDR 100 million and apply to three banks. Everyone refused on the grounds that Fadhil could not provide a guarantee in the form of a house ownership certificate (SHM).
Fadhil couldn’t fulfill this guarantee, because he didn’t have a house yet. He also offered the deed of sale and purchase of his parents’ house and the BPKB (Motor Vehicle Owner’s Book) of his car, but this was also rejected. Regarding the house, the bank refused because the owner had not paid off his KPR (public housing credit).
“What I can conclude from this process is that now it must be SHM even though the characteristics of the business are still in the MSME category. “Maybe the reason is that some say it’s because after COVID-19, banks are a bit hesitant to give out loans,” he told VOA.
He also regrets this, because based on Coordinating Minister for Economic Affairs Regulation number 1 of 2023 concerning Guidelines for implementing KUR, loans under IDR 100 million do not require additional collateral.
Fadhil said, banks should be fairer in asking for guarantees from MSME players who want to access KUR. According to him, the guarantee requested must be adjusted to the characteristics of MSMEs such as production capacity and income potential.
“Usually we are asked what the performance projections are, what the production is, how much potential income per month. For example, if there are credit application criteria that ask for that capacity, in my opinion it is more rational, more affordable. So there’s no direct SHM (guarantee). We haven’t said that (banking) has said that this must be (there is a guarantee) for SHM. “Even if I put SHM, the NJOP value is high, if I get (loan capital) only IDR 100 million, that’s tough,” he explained.
“In terms of interest, I think the current one is still competitive, but the requirements should not be the same, because no matter how much you want to borrow, you still have to pay SHM. But it would be nice to have steps,” he added.
Fadhil’s experience was also echoed by the Secretary General (Sekjen) of the Indonesian MSME Association (Akumindo) Eddy Misero. According to him, the government policy which states that loans under IDR 100 million for MSMEs do not require collateral has not been realized in the field at all.
“For example, the government’s decision regarding the allocation of KUR for MSMEs with loans of IDR 100 million and under does not require collateral, there is no need for collateral. It turns out that the realization in the field, after preparing all the administrative requirements, after everything was fulfilled, the banking people asked whether there was a guarantee or not? Is there a certificate? “We’re playing around with that name,” said Eddy.
He explained that what MSME players want is not cheap loan interest, but acceleration in getting business capital. With conditions like this, it is not uncommon for many MSME players to end up accessing easier loans, such as through loan sharks and online loans (pinjol).
“So my friends and I tend to, well, let’s just borrow from a loan, we borrow from a fintech, or if there’s a loan shark, we just borrow, even though the interest is much higher, but we need it today, it was already prepared yesterday,” he said. .
ILLUSTRATION – A bank teller counts rupiah banknotes for his customers in Jakarta, August 26 2015. (REUTERS/Nyimas Laula)
When asked whether this step could give rise to new problems because the interest offered was definitely higher, Eddy admitted that this was part of the risk of a business which inevitably had to be taken to support the sustainability of this MSME business.
“So many people need working capital assistance, many get projects, but in the end they can’t carry out the projects because of a lack of working capital. So they calculate, ah, it’s still not bad, through borrowing even though the interest is high, but there is still an advantage in the profit margin. “Imagine if we were given KUR with an interest rate of only 0.5 percent, we would be really happy,” he said.
“Requirements that have been determined by the government, for example IDR 100 million and under, do not need to use guarantees or collateral, so do that. so we don’t dream. For example, if the government can only give KUR IDR 25 million without collateral, then tell the MSMEs. “Don’t then say that Rp. 100 million KUR can be done without a guarantee, but it turns out that the realization in the field never happened,” he stressed.
President Joko Widodo said that credit distribution to MSMEs nationally is currently still at the level of 21 percent. This figure, according to him, is still far below other countries.
“And, what I always encourage regarding financing, MSME financing must be made easier. Because if we look at the distribution of bank credit to MSMEs, it is only 21 percent of the total existing credit. “In China, it is very large, 65 percent, in Japan 65 percent, in India 50 percent,” said Jokowi in Jakarta, Thursday (7/12).
Jokowi tasked related ministries and institutions such as the Ministry of BUMN, Bank Indonesia and OJK to change existing regulations. “Don’t just look at the collateral, also look at the prospects (of the business), you don’t have collateral but if the prospects are good, you should be able to give credit,” stressed Jokowi.
Jokowi said that 61 percent of national economic GDP came from MSMEs, and around 97 percent of the workforce was absorbed by MSME players. (gi/ab)