Economist: Gap between MSME and national credit growth signals structural issues

Economist from the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, stated that the gap between the growth of Micro, Small, and Medium Enterprises (MSME) credit and national credit indicates a structural problem. “The gap between MSME credit growth, which is only around 1 percent as of June 2026, and national credit growth at 12.6 percent points to a structural issue. In fact, MSMEs contribute around 60 percent of GDP and are the largest employment absorber,” he said in Jakarta on Saturday. According to him, besides access to financing, the main problem stems from weak demand due to the declining purchasing power of the lower-middle class, which pressures turnover and cash flow. On the other hand, banks still view MSMEs as a high-risk segment because many business actors do not yet have orderly bookkeeping, complete legality, or adequate financial track records. This explains why corporate credit growth is much higher, approaching 20 percent. Banks tend to channel credit to debtors with strong collateral, stable cash flow, and more transparent financial information. “Therefore, increasing MSME financing cannot rely solely on interest subsidies or chasing credit distribution targets. What is needed is strengthening the ecosystem so that MSMEs become more bankable,” he said. Regulations such as the Financial Services Authority Regulation (POJK) Number 19 of 2025 are considered to be heading towards ecosystem strengthening by opening the use of alternative data such as digital transaction history and intellectual property in the credit assessment process. However, this implementation must be accompanied by increasing the capacity of business actors, from simple bookkeeping, separating business and personal accounts, to transaction digitalisation, given that data quality will improve the accuracy of risk assessment by banks. At the same time, financing must be followed by market certainty. If demand has not recovered, additional credit could potentially increase the debt burden without encouraging productivity. “The experience of South Korea and Thailand shows that MSMEs connected to large corporate supply chains through long-term contracts have more stable cash flows, making it easier to obtain financing. This model deserves to be strengthened in Indonesia through incentives for corporations partnering with MSMEs,” said the CORE economist. In addition, the distribution of People’s Business Credit (KUR) is also considered necessary to remain focused on productive sectors so that its impact on investment and value-added creation is greater. From a policy perspective, Bank Indonesia is seen as able to strengthen credit distribution incentives through the Macroprudential Liquidity Incentive Policy and the Macroprudential Inclusive Financing Ratio. To achieve long-term success, collaboration between banks, financial technology (fintech), and institutions such as PT Permodalan Nasional Madani remains crucial. Fintech can improve the accuracy of credit scoring through machine learning, while PNM reaches business actors who are not yet bankable. “No less important is maintaining credit quality through data-based mentoring and monitoring so that the non-performing loan ratio remains under control. If all these policies are implemented in an integrated manner, the target of a 25 percent MSME credit share by 2029 will be more realistic while also strengthening the productive sector and creating more inclusive economic growth,” said Yusuf.