Jakarta. The government has been disbursing microloans to help farmers, fishermen, and other small businesses in the productive sectors for almost a decade now.

These loans -- locally known as KUR -- aim to help its debtors grow their business and remain resilient amidst economic challenges, including the Covid-19 pandemic. As more of these microloans get disbursed, the government aims to boost this financing scheme for productive sectors.

“To achieve food security, about 30 percent of the microloans that we have disbursed went to the agricultural sector. KUR serves [financing] needed for [farmers] to boost production and land infrastructure,” Ferry Irawan, a deputy at the Coordinating Ministry for Economic Affairs, recently told reporters.

Since 2015, the government has disbursed around Rp 1,827.2 trillion (approximately $114 billion) of KUR as of Oct. 31, 2024. The money went to 47.9 million debtors with a subsidized interest of around R 172.2 trillion. In 2024 alone, the government has disbursed Rp 246.58 trillion as of the end of October. This is equivalent to 88.06 percent of the annual target. The government aims to grant Rp 280 trillion worth of microloans to 4.27 million debtors throughout this year. 

According to Ferry, the subsidies also have a huge leverage of up to 10.6 times on the KUR disbursement. The program’s non-performing loan ratio stood at 2.19 percent, much lower than that of the micro, small and medium enterprises (MSME) loan of 4.06 percent. Statistics show that as of August 2024, the microloans contribute to 33.2 percent of the MSMEs credit. The program also made up 6.5 percent of the banking loans nationwide.

In 2023, the KUR microloans contributed 1.24 percent to the nominal gross domestic product (GDP). Data also showed that a single microloan debtor recruited 3 new workers. The microloan recipients absorbed 9.3 million workers throughout 2023.

“The microloan or KUR program is incredibly flexible because it is applicable in almost all government policies,“ Gede Edy Prasetya, the ministry’s assistant deputy for capital market, said.

The government hopes it can maintain the KUR non-performing loan rate at under 5 percent. Indonesia also wants to ramp up its access to productive sectors, especially those that support food security.

"As part of the KUR ecosystem, we are proud to see that the program has had an extraordinary impact on MSMEs and the national economy. I believe that it will have an increasingly positive impact on the MSME ecosystem and give a further boost to the economy,” Supari, the director for micro business at the state-owned bank BRI, said.

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