OJK Strategy to Expand MSME Financing Access via Alternative Credit Scoring

The Financial Services Authority (OJK) is strengthening its strategy to expand financing access for micro, small, and medium enterprises (MSMEs), particularly the ultra-micro segment, through the utilisation of an alternative credit scoring system. Adi Budiarso, Chief Executive of the OJK’s Financial Sector Technology Innovation, Digital Financial Assets, and Crypto Assets Supervisor, stated that MSMEs in Indonesia require reinforcement, especially regarding financial access and productivity improvements that drive public welfare, while simultaneously increasing their contribution to national economic growth. “Approximately 60 per cent of GDP is contributed by MSMEs. When we discuss MSMEs and gender in Indonesia, it turns out 65 per cent are women entrepreneurs. If we talk about ultra-micro enterprises, the numbers are also very large,” Adi said during a discussion on alternative credit scoring in Jakarta on Thursday. He noted that the challenge of limited access to formal financing is most prevalent among ultra-micro business operators, the majority of whom are women. Adi explained that alternative credit scoring utilises various data sources outside of traditional banking credit histories, allowing business operators who do not yet have a financing track record to be assessed for eligibility by financial institutions. “Many MSMEs and ultra-micro business operators still do not have data in the Financial Information Service System (SLIK). Therefore, we are introducing alternative credit scoring so they have a greater opportunity to obtain financing access,” he stated. The OJK, together with several partners, has also developed a pilot project for the utilisation of alternative credit scoring. One such project was implemented for dairy farmers in Malang through the application of an Enterprise Resource Planning (ERP) system that connects the farmers’ business data with Rural Banks (BPR), Sharia Rural Banks (BPRS), and cooperatives. “As per the government’s target for economic growth towards an advanced Indonesia, it must reach 8 per cent by 2029, meaning we must double productivity from current levels. That means productivity and innovation, better access, and better mentoring,” he said. The scheme is expected to open financing access for business operators who have so far lacked credit history or collateral.