The Indonesian government intends to disburse IDR 30 trillion (USD 2.2 billion) in small business loans under its Kredit Usaha Rakyat (KUR) program, which is intended to provide credit to micro-, small and medium-sized enterprises (MSMEs) and cooperatives. The aims of KUR include boosting economic growth in 2015 and decreasing microcredit interest rates.
Bambang Brodjonegoro, the Finance Minister of Indonesia, said that the government would subsidize state banks so they could cut their microcredit interest rate from 21 to 12 percent, starting in 2015 . Gatot Trihargo, the Deputy Minister for Business Services at the State-Owned Enterprises Ministry, added that at an unspecified date “the government aims to further cut the lending rate to 9 percent, as it may secure funding from Japan of IDR 50 trillion (USD 3.70 billion) to subsidize the KUR interest rates”  .
The government reduced the cap on the annual interest rate of loans under KUR from 22 percent to 21 percent and set the maximum amount of each collateral-free loan at IDR 15 million (USD 1,150) as of March 2015 [2,3]. Through KUR, working capital is provided to microfinance institutions (MFIs) by commercial banks. The loans are guaranteed by the state.
By Caroline Zhu, Research Associate
About Kredit Usaha Rakyat (KUR):
Established in 2008, Kredit Usaha Rakyat is an Indonesian government program that aims to provide credit to micro-, small and medium-sized enterprises (MSMEs) and cooperatives. Through KUR, working capital is provided to microfinance institutions (MFIs) by commercial banks. The loans are guaranteed by the state.
Sources and Additional Resources:
 Bloomberg news: “Indonesia to Unleash Loan Funds as Micro Lending Rates Cut,” http://www.bloomberg.com/news/articles/2015-06-10/indonesia-to-halve-lending-rates-to-small-business-amid-slowdown
 The Jakarta Post news, “Govt eyes untouched sectors for new micro-loan subsidies,” http://www.thejakartapost.com/news/2015/06/25/govt-eyes-untouched-sectors-new-micro-loan-subsidies.html
 MicroCapital, May 12, 2015 “After Suspension Due to Low Repayment Rates, Bank Rakyat Indonesia, Bank Negara Indonesia, Bank Mandiri Resume Government’s $1.5b Kredit Usaha Rakyat (KUR) Microloan Program,” https://www.microcapital.org/microcapital-brief-after-suspension-due-to-low-repayment-rates-bank-rakyat-indonesia-bank-negara-indonesia-bank-mandiri-resume-governments-1-5b-kredit-usaha-rakyat-kur-microloan-progra/
MicroCapital Universe Profile: Kredit Usaha Rakyat
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