The step is deemed necessary to support MSME players in the productive sectors, such as agriculture, fisheries, animal husbandry, and plantation.
At the 2024 BRI Microfinance Outlook event here on Thursday, Masduki, quoting data from the Financial Services Authority (OJK) in 2021, stated that 47 percent of the needs of financing for MSMEs have not been fulfilled by financial services institutions.
"Financing is an important issue for MSMEs. This is because MSMEs have an important role in Indonesia’s economy, as providers of jobs, contributing to GDP, including exports," he stated.
Masduki noted that a study by Ernst and Young and the Indonesian Fintech Lenders Association (AFPI) in 2023 forecast an increasingly large gap between the need and availability of financing for MSMEs in 2026.
He estimated that MSME financing needs will reach Rp4,300 trillion (around US$275.61 billion), while the supply of financing will only reach Rp1,900 trillion (around US$121.78 billion).
The minister remarked that half of the Indonesian MSME players are from the productive sectors, such as agriculture, fisheries, animal husbandry, and plantation. However, the absorption of MSME credits in those sectors is still low.
“For example, in the agriculture sector, it is 31 percent, and in fisheries, it is only around two percent. Where do most MSME credits go to? To the trade sector because the potential of nonperforming loan is low," he explained.
He stated that financing policy innovations for MSMEs should continue to be strengthened, such as MSME financing schemes through supply chains in accordance with Government Regulation Number 7 of 2021 to provide certainty that MSMEs can develop further and MSME credit payments run more smoothly.
He assessed that affirmation and seriousness are needed to provide ease of financing to productive sectors, akin to what has been done by Japan through the Japan Finance Corporation (JFC), which has provided more than 60 percent financing to the productive sectors.
Based on Law Number 4 of 2023 on the Development and Strengthening of the Financial Sector, the state has an interest in eliminating bad debts from MSMEs at banks.
"This is aimed at providing smooth new financing access to MSMEs. There must also be an expansion of guarantee insurance support to the peer-to-peer landing (P2P) industry and securities crowdfunding as alternative financing for MSMEs," he remarked.
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Translator: Shofi Ayudiana, Raka Adji
Editor: Azis Kurmala
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