Economist: 5% KUR Interest Rate Maintains Credit Access Amid Weakening Purchasing Power

Jakarta (ANTARA) - The Head of the Macroeconomics and Finance Centre at the Institute for Development of Economics and Finance (INDEF), M Rizal Taufikurahman, assesses that the 5% interest rate for Kredit Usaha Rakyat (KUR) can maintain financing access amid weakening consumer purchasing power. “The 5% KUR interest rate is still quite effective for micro, small, and medium enterprises (MSMEs) because it is far below commercial credit rates of around 10-14%, thus maintaining financing access amid weakening purchasing power,” Rizal said when contacted by ANTARA in Jakarta on Friday. As a note, the previous KUR interest rate was set at 6% for the first application and increased by 1% for subsequent applications, with a maximum of 9%. By 2026, the government has set the KUR interest rate to a flat 6%. Historically, KUR has driven MSME credit expansion with relatively controlled risks, where the non-performing loan (NPL) ratio for KUR is generally below 2%. “This means that cheap credit alone is not enough to drive business scale,” he added. From the banking perspective, Rizal opines that the 5% KUR interest rate scheme is highly dependent on government subsidies, as the rate does not follow market prices. Amid tightening liquidity and rising funding costs, where the yield on Government Securities (SBN) is around 6.8%, this policy could pressure bank margins if not balanced with optimal government compensation.