Economist advocates credit guarantees for business actors in 2021

Economist advocates credit guarantees for business actors in 2021

A screenshot of economist Chatib Basri speaking at the Mandiri Webinar Series in Jakarta on Wednesday (December 2, 2020). (ANTARA / Dewa Wiguna)

Jakarta (ANTARA) - Economist Chatib Basri has spoken in favor of credit guarantees to businesses in 2021 to support economic growth, which has been affected by the COVID-19 pandemic.

"The policy is already there; it remains to be implemented and made [accessible through] simple rules," he said during the Mandiri Webinar Series in Jakarta on Wednesday.

He explained 80 percent of the credit guarantee will be covered by the government and the rest by banks.

According to him, guaranteeing credit to business actors will encourage banks to be more confident in channeling credit in the midst of a pandemic, so that the business world would have room to increase production capacity.

However, he emphasized that in order to absorb the production of the business world, the government must be encouraged to expand the direct cash assistance stimulus (BLT) to the lower middle income community in order to boost demand.

With a rise in demand, business actors will invest, and one of the channels for funding them would be banks, he observed.

"If household consumption is encouraged by being given BLT, the demand is [going to be] there, then investment will increase," he asserted.

The Minister of Finance for the 2013-2014 period added that another way to increase economic growth would be by encouraging investment or business expansion of business actors.

That way, companies will recruit workers, thus encouraging them to have purchasing power, he explained.

However, considering that the COVID-19 pandemic has not ended, he continued, business actors are believed to be reluctant to expand their business, given the limited business capacity in view of large-scale social restrictions (PSBB). For instance, restaurants are required to implement physical distancing rules and ensure the maximum capacity does not exceed 50 percent.

"For example, a restaurant’s (capacity) can be a maximum of 50 percent (under the PSBB); it is impossible to make it 100 percent," he said.

The government has allocated credit guarantees included in the support to the MSME sector under the 2020 National Economic Recovery (PEN) program.

The MSME support budget ceiling is Rp114.81 trillion from the total PEN of Rp695.2 trillion.

For 2021, the government has allocated a PEN budget of Rp372.3 trillion.

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