Flood of Illegal Goods from China Exacerbates UMKM Credit Defaults

Jakarta, CNBC Indonesia — The Minister of Micro, Small and Medium Enterprises (UMKM), Maman Abdurahman, has attributed the poor credit quality in the UMKM segment to a flood of illegal imported goods from China.

This situation prevents UMKM debtors from selling their merchandise, which ultimately hampers their ability to repay loans. This is reflected in the ratio of problem loans or non-performing loans (NPL).

“Why can NPL be so high? Because the UMKM entrepreneurs who gained access to financing are unable to sell their goods. Because the market is flooded with imported goods from China that are incredibly cheap, and the prices don’t make sense,” said Maman following the Indonesia Economy Outlook event at CNN Indonesia, Bank Mega Tower, Monday (2 March 2026).

He stated that his ministry intends to sterilise the market from the flood of illegal imports from China by coordinating with relevant institutions. According to data he possesses, the gap between exports to China and imports from China is substantial.

“So this is what we want to raise and coordinate with several relevant institutions. Because this problem is no longer just a simple matter; the impact from this market is muddy, flooded with illegal imports, and as a result our UMKM entrepreneurs, who have already received financing top-ups, assistance, stimulus and incentives of all kinds, are unable to sell their goods,” Maman explained.

Furthermore, this situation has an impact on loan defaults, which ultimately creates social problems for UMKM debtors.

“So this is what we want to protect as well, which is why I always say that if you want to look at UMKM, you cannot only look at one side; you have to look at it from upstream to downstream. Because even if the upstream side is good, but if the downstream side is not good, these are interconnected. That is why NPL becomes high,” Maman clarified.

For information, credit quality in the banking sector’s UMKM segment has deteriorated further at the start of this year. Bank Indonesia (BI) recorded UMKM NPL at 4.6% as of January 2026, an increase from December 2025 at 4.33%.

This figure is well above average. The banking industry’s NPL rate stands at approximately 2%.