Economist: KUR Interest Rate Policy Needs to Consider Targeting Accuracy

Jakarta (ANTARA) - Economist from the Center of Reform on Economics (CORE), Yusuf Rendy Manilet, opines that the interest rate policy for Kredit Usaha Rakyat (KUR) needs to consider targeting accuracy.

Yusuf, when contacted by ANTARA in Jakarta on Friday, stated that President Prabowo Subianto’s initiative to lower the KUR interest rate to 5% per year, from the previous flat 6%, aims to reduce small communities’ dependence on high-interest loans, such as from loan sharks or illegal online loans.

However, he reminded that KUR and informal loans target different segments.

Generally, very high interest rates are charged to groups that are untouched by banking (unbankable), who lack business documents, credit history, or even bank accounts.

Meanwhile, KUR still requires certain administrative eligibility, such as passing credit assessments and having business legality.

In fact, the main barrier for micro, small, and medium enterprises (MSMEs) is usually initial access to financing.

Therefore, he assesses that if the main goal of the policy is to reach groups that have been trapped in informal loans, a more effective approach is to expand access to ultra-micro financing with simpler requirements.

At the same time, strengthening financial literacy and integrating data for small business actors is key to enabling them to enter the formal system.

Yusuf also warned of debtor behaviour risks. “When the public message that emerges is that the state will continue to be present to lower the credit burden, there is a possibility that some debtors become less disciplined in payments. Such risks are not always large, but they need to be anticipated,” he explained.

President of the Republic of Indonesia Prabowo Subianto, in his speech at the International Labour Day commemoration at the National Monument (Monas), Jakarta, on Friday, emphasised that the government will soon disburse KUR with a maximum interest rate of 5% per year to improve the welfare of small communities.

“I have already instructed the state-owned banks that shortly we will disburse KUR at a maximum of 5% per year,” said President Prabowo.

The President explained that the policy is taken because small communities, including workers, farmers, and fishermen, have often been ensnared by very high loan interest rates.

According to him, people’s income should not be exhausted just to pay burdensome loan interest.