[Newsphopick=Kingsley Lim] The Indonesian government has announced that it will be introducing a new microcredit program (KUR) for retrenched workers and housewives who own micro-sized businesses. The aim of the program is to help those who have been hit hardest by the effects of the coronavirus pandemic.
According to Iskandar Simorangkir, the Coordinating Economic Ministry’s deputy for macroeconomic and finance, the Indonesian government intends to disburse KUR supermicro loans worth Rp 12 trillion ($US814 million) to three million people by the end of 2020.
During a virtual briefing to the press, Iskandar said “We expect the program, which will be launched by the end of August, can help laid-off workers and housewives build their micro-sized productive businesses.”
According to the latest figures from the Manpower Ministry, there are as many as 2.15 million employees who have been affected by the coronavirus pandemic. An estimated 631,000 informal workers have been retrenched and a further 1.13 million formal workers have lost their jobs.
The National Development Planning Agency (Bappenas) estimates that the projected unemployment rate will reach between 8.19 percent and 9.2 percent in 2020. This is higher than the 2019 unemployment rate of 5.28 percent.
Workers who have been retrenched and housewives who have run micro-sized businesses for a period of at least three to six months, and have never received KUR loans, are eligible to participate in the program.
According to Iskandar, the applicants to the programs must actively take part in a formal or informal mentorship program and have a family member with an existing business.
“Borrowers can apply for a maximum Rp 10 million in loans with a zero percent interest rate until this December,” said Iskandar as he added that an interest rate of 6 percent will be levied from 2021.
The zero percent interest rate will help workers and housewives with their current cash flow needs. Apart from that, banks will not be allowed to seek additional collateral for these loans.
While the program’s intention is to help micro-sized enterprises, sole proprietors and retrenched workers get through the coronavirus pandemic, the Indonesian government hopes that this program can be a permanent fixture in the economy so as to stimulate growth and encourage entrepreneurship, which will contribute to society’s welfare.
As of July 2020, data from the Coordinating Economic Affairs Ministry shows that 2.67 million debtors have been served via the program. KUR loan disbursement reached Rp89.2 trillion although there was a slight plunge during the peak of the coronavirus pandemic from March to May.
Since the third week of June, demand for KUR loans has sky-rocketed as social restrictions within the country is eased. The government intends to increase the total loan disbursements for the year.
“We have raised the KUR loan disbursement ceiling for this year by Rp 22.2 trillion, making this year’s total figure Rp 198.73 trillion, from the previous Rp 176.53 trillion,” said Iskandar.
He also added that “We’ve decided to extend the subsidy because many KUR borrowers have yet to recover from the impacts of the pandemic.”