JAKARTA (Reuters) – Indonesia will give some companies until May 2025 to receive full loan forgiveness from state-owned banks in a policy aimed at boosting lending and economic growth, according to details of new regulations. A six-month grace period was provided.
Indonesian President Prabowo Subianto signed a government regulation last week that allows state-run financial institutions to fully write off bad loans of certain micro, small and medium enterprises (MSMEs), which contribute significantly to Indonesia’s gross domestic product.
“We hope this can help our compatriots who work in agriculture, small and medium-sized enterprises, and fishermen who are very important food producers. They can continue to operate,” Prabowo said in a statement. “We can do that and be more beneficial to the country.”
Prabowo has pledged to increase Indonesia’s annual economic growth rate by three percentage points to 8% during his current presidential term, which runs until 2029. Promoting food production is one of his important plans.
Beneficiaries of the new regulations are small and medium-sized enterprises with non-performing loans of up to 500 million rupiah ($31,887.76), which, according to the regulations, must be written off by banks at least five years before the exemption policy takes effect. I need to be there.
Under this policy, affected MSMEs now have access to new financing. Previously, even after bad loans were written off, banks still retained the right to recover them, and MSMEs were not able to access loans.
State-owned bank Rakyat Indonesia (BRI), which focuses on MSME financing, said the policy would open up new financing opportunities, while Bank Mandiri said the policy would not impact its finances.
The regulation also ensures that state-owned banks and their boards are not charged with creating state loss, which can lead to prison sentences, when writing off bad loans.
(1 dollar = 15,680.0000 rupiah)
