Equalising banking access could boost MSME financing

The Indonesian Micro, Small, and Medium Enterprise Industry Association (AKUMANDIRI) has stated that access to financing for MSMEs must be equalised to spur increased lending to the sector. “The treatment of banks towards MSMEs in Jakarta compared to Maluku, for example, is different, even though it is the same bank,” said AKUMANDIRI Chairwoman Hermawati Setyorinny when contacted in Jakarta on Wednesday. According to her, the obstacles faced by MSMEs in accessing financing are not the same between one region and another. She stated that findings and reports from MSMEs indicate their reluctance to access bank financing is due to a number of burdensome requirements. For this reason, Hermawati said the government must supervise the People’s Business Credit (KUR) programme run by several banks. Although the government has issued a policy waiving collateral requirements, she noted that some banks still ask MSMEs for collateral or guarantees when they seek to access KUR financing, even if the required guarantee is small. “The government must provide oversight. Banks that can implement the procedures agreed upon by regulations or policies should receive a reward, and vice versa,” she said. With such equalisation, she expressed hope that MSMEs who previously faced difficulties accessing financing would find it easier, thereby increasing MSME credit uptake from banks. Previously, the National Banks Association (Perbanas) stated that 88 per cent of informal MSMEs prefer using personal funds over bank credit. “Looking at the survey, they (MSMEs) prefer their own funds,” said Aviliani, Chair of Research and Banking Economic Studies at Perbanas, in Jakarta on Thursday (18/6). Aviliani said that the use of personal funds for financing by informal MSMEs also affects credit distribution from banks. She explained that Perbanas research over recent years shows a slowdown in MSME credit growth, which even experienced contraction at one point. According to her, the Perbanas survey showed that 88 per cent of MSMEs use personal funds, while 12 per cent use external funds, comprising 49 per cent from banks, 9 per cent from friends or relatives, 32 per cent from microfinance institutions, and 11 per cent from other sources.