KUR Distribution to Production Sector Provides Economic Added Value to MSMEs

The Deputy for Entrepreneurship at the Ministry of MSMEs, Riza Damanik, stated that the allocation of People’s Business Credit (KUR) to the production sector is a crucial point in the government’s economic strategy to improve the economic standing of MSME players. He said that distribution to production sectors such as agriculture, fisheries, livestock, plantations, and the processing industry has a much larger multiplier effect on job creation, impacting the national economy. “If this is channelled to the production sector—agriculture, fisheries, livestock, plantations, the creative economy, food processing and so on—it will certainly create more jobs and also provide much greater economic added value to our MSMEs,” Riza said at the Islamic Financial Dialogue event in Jakarta on Wednesday. Riza stated that the Ministry of MSMEs, together with 47 financing institutions including sharia-based financing institutions, is disbursing KUR amounting to Rp297 trillion this year. Of this total, Rp149 trillion, or more than 50.5 percent, has been distributed to 2.34 million MSMEs across Indonesia for the period from January to 1 July 2025. Meanwhile, of the Rp149 trillion already disbursed, 64.3 percent was received by MSME players in the production sector, amounting to Rp95.8 trillion. According to Riza, MSME financing has traditionally been dominated by the trade (retail) sector, where business players simply buy goods and resell them. By directing KUR to the production sector, the government is making a long-term investment in the economic structure and building a foundation to create jobs for the surrounding environment. Looking at the financing aspect for sharia MSMEs, Riza said the government has distributed around Rp8.51 trillion from the total budget, or about 5.7 percent. “Quantitatively, I would say this is relatively small compared to others. This is certainly our homework on how we can encourage more of our MSMEs,” Riza said. He noted that with Indonesia’s Muslim population reaching 90 percent in 19 provinces, financing institutions need to pay attention to providing more convenience and literacy, so they can eventually offer easier financing to Indonesian MSMEs. The government has set a target for financing volume to support the people’s economy through micro, small, and medium enterprises, with a target of Rp1,500 trillion to be distributed to priority sectors such as food self-sufficiency, energy, and the Free Nutritious Meals Programme (MBG).