Jakarta.  The government is initiating measures to forgive the debts of millions of farmers, fishermen, and small and medium-sized enterprises (SMEs). State-Owned Enterprises Minister Erick Thohir announced that his office is drafting a government regulation to provide the legal framework for these debt write-offs, particularly for loans recorded at state-owned banks.

Erick highlighted the necessity of a legal foundation to ensure state-owned banks can effectively participate in the program. This regulation aims to boost government initiatives in both agriculture and the financial sector, in line with the Financial Sector Strengthening and Development Act.

"We need a legal framework so that state-owned banks have a strong basis. A draft government regulation on this matter is being prepared, and its spirit aligns with the goal of providing full support," Erick said in a release quoted by Antara on Nov. 5, 2024.

He also said that this policy aligns with President Prabowo Subianto's goal of achieving food self-sufficiency. By eliminating bad debts, farmers and SMEs in the agricultural sector are expected to gain easier access to new loans, thereby enhancing productivity.

The total amount of bad loans in the SME sector for farmers and fishermen at state-owned banks was estimated at Rp 8.7 trillion. President Prabowo intends to issue a Presidential Regulation (Perpres) specifically aimed at forgiving debts for farmers and fishermen facing financial difficulties. This initiative seeks to reopen banking access for around 6 million farmers, fishermen, and SME operators who have been unable to secure new loans due to outstanding debts, many of which date back to the financial crises of 1998 and 2008.

Erick also discussed the proposed duration for the debt write-off, suggesting that a 5-year period would be ideal. While other options, such as 2 years or 10 years, were considered, he believes that 5 years is the most realistic and effective choice, as two years would be insufficient to adequately resolve the bad loan issue.

"The proposal could be for 2 years, 5 years, or 10 years, but ideally, it should be 5 years," Erick explained.

This policy aims to give farmers and fishermen burdened by accumulated debts the chance to restart their businesses without financial constraints, while also boosting productivity in the agricultural sector, which remains a key focus for the government.

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