Jakarta. The government aims to write off non-performing loans disbursed by state banks to micro, small, and medium-scale enterprises (MSME) by May 2025, a minister said on Friday.

Last month, President Prabowo Subianto’s administration issued a regulation that calls for state banks to forgive MSME debts to help small businesses recover and restart economic activities without being hindered by debt loads from the past.

“We were given six months to conclude the debt cancellation and will make sure the job is done before the deadline,” MSME Minister Maman Abdurrahman told a news conference at his office in Jakarta.

Maman said he had met with members of the Association of State-Owned Banks (Himbara) to discuss ways to implement the regulation before the May 5 deadline.

Vice Finance Minister Suahasil Nazara said recently that state banks were unable to forgive all non-performing loans taken by MSMEs due to banking rules, so the government issued a regulation to provide the legal basis for the policy, which will also benefit farmers and fishermen.

He added that the Finance Ministry is drafting guidelines for state banks to forgive MSMEs’ bad debt without seriously impacting the banks’ performance.

MSMEs account for more than 97 percent of business structures in Indonesia, making them the backbone of the national economy.

Finance Minister Sri Mulyani Indrawati said earlier that the regulation is aimed at protecting critical sectors, especially in the country’s food security efforts. She said MSMEs need the government’s intervention and support to grow their businesses.

“It’s the government’s commitment to protecting MSMEs and empowering them to become resilient because they play a pivotal role in the country’s economy,” the minister said.

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