Minister Urges Financial Institutions to Ease MSMEs Funds Access

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Cooperatives and Small and Medium Enterprises (SMEs) Minister Teten Masduki has called upon financial service institutions in Indonesia to streamline access to financing for micro, small, and medium enterprises (MSMEs), particularly those operating in productive sectors like agriculture, fisheries, animal husbandry, and plantation.

Speaking at the 2024 BRI Microfinance Outlook event in Jakarta, Masduki emphasised the crucial role of financing in supporting MSMEs, citing data from the Financial Services Authority (OJK) indicating that 47 percent of MSMEs’ financing needs remained unmet by financial institutions in 2021.

“MSMEs play a pivotal role in Indonesia’s economy, contributing to job creation, GDP, and exports. It’s imperative to address their financing needs,” stated Masduki.

Citing a study by Ernst and Young and the Indonesian Fintech Lenders Association (AFPI), Masduki highlighted a projected widening gap between MSMEs’ financing needs and availability by 2026. The estimated financing needs of MSMEs are expected to reach Rp4,300 trillion, while the supply is projected to only reach Rp1,900 trillion.

Despite MSMEs in productive sectors comprising half of Indonesia’s MSME players, the absorption of MSME credits in these sectors remains low. For instance, in the agriculture sector, only 31 percent of MSME credits are absorbed, and in fisheries, it’s merely around two percent.

Masduki stressed the importance of strengthening financing policy innovations for MSMEs, such as MSME financing schemes through supply chains, in line with Government Regulation Number

7 of 2021. This regulation aims to provide certainty for MSMEs to further develop and ensure smoother MSME credit payments.

To address these challenges, Masduki advocated for affirmative measures similar to those implemented by Japan through the Japan Finance Corporation (JFC), which has allocated over 60 percent of financing to productive sectors.

Additionally, in line with Law Number 4 of 2023 on the Development and Strengthening of the Financial Sector, efforts are underway to eliminate bad debts from MSMEs at banks, facilitating new financing access. Masduki also emphasised the need to expand guarantee insurance support to the peer-to-peer lending (P2P) industry and securities crowdfunding as alternative financing options for MSMEs.

In conclusion, Masduki reiterated the government’s commitment to fostering an enabling environment for MSMEs by addressing their financing challenges and facilitating their growth, thus driving economic development and prosperity in Indonesia.