OJK Urges Prudent Underwriting Amid Plans to Lower Microcredit Interest Rates

Jakarta (ANTARA) - The Financial Services Authority (OJK) has reminded the guarantee industry to maintain a balance between business expansion and prudential principles, even as plans are underway to lower microcredit interest rates for small business actors to 8 percent. Ogi Prastomiyono, Chief Executive of Insurance, Guarantee, and Pension Fund Supervision at OJK, stated that this prudent approach can be achieved through strengthening underwriting, portfolio monitoring, and setting pricing that aligns with risk profiles. “The plan to lower microcredit interest rates has the potential to broaden financing access for MSMEs, but the industry must still maintain a balance between business expansion and prudential principles,” he said in a written response on Wednesday. Overall, OJK views that the still-dynamic economic conditions need to be anticipated by the credit insurance and guarantee industry through strengthened risk management, underwriting, and stricter portfolio quality monitoring. Therefore, OJK continues to encourage the use of data, including access to the Financial Information Service System (SLIK), strengthening governance, and implementing healthy risk-sharing mechanisms so that financing and guarantee growth can proceed sustainably. He added that the target of distributing Rp320 trillion in KUR this year also presents a significant opportunity for the guarantee industry to increase business volume and guarantee fee income. However, this opportunity must be balanced with adequate risk management, particularly concerning potential increases in claims, risk concentration, and debtor credit quality.