Perbanas Reveals Structural Issues Behind Sluggish MSME Lending

The National Banks Association (Perbanas) has revealed that the sluggish growth in MSME lending is occurring because the majority of MSME players feel they do not need loans. Perbanas noted that MSME credit growth has shown weakening since the end of 2022 and entered negative territory at the end of 2025. As of February 2026, MSME credit was still contracting by approximately -0.47% year-on-year (yoy). This weakening differs from the general banking credit trend, particularly for working capital, investment, and consumer loans, which are still growing positively. Thus, the decline in MSME credit indicates a fundamental problem in the MSME segment. “Interestingly, our research found that the main challenge currently does not lie in the limited supply of credit from banks. On the contrary, the majority of MSME players have not applied for credit because they feel they do not yet need funding and still rely on their own capital,” said Perbanas Chairman Hery Gunardi during a press conference on the MSME study results at the Four Seasons Hotel, Thursday (18/6/2026). In fact, the approval rate for MSME credit applications at banks is relatively high. According to Hery, this shows that there is a structural problem that needs joint attention. Aviliani, Head of Economic and Banking Research at Perbanas, continued that the current weakening of MSME credit is more driven by the demand side or is demand-driven. The majority (nearly 90%) of formal and informal MSMEs do not apply for credit because they feel they do not need loans as the main reason. Almost 90% of their business financing comes from personal funds (self-funded). This indicates that the main problem of low access to MSME financing lies on the demand side. On the other hand, this research shows that the supply side of MSME financing is already very supportive. This is reflected in a survey finding that when formal MSMEs apply for credit, the approval rate is very high, at around 94.3%. “We don’t want it to be like this; as banks, we actually want to provide funding,” said Aviliani. In addition, Perbanas found that other reasons for the continued decline in MSME credit are shocks from costs and demand. The decrease in MSME credit is indicated by a combination of rising costs, weakening demand/sales, squeezed margins, and banks becoming more selective towards risk. As a form of support to strengthen the MSME sector, Perbanas launched the UMKM Center on Thursday (18/6/2026). Hery said he hopes the UMKM Center can become a bridge connecting MSME players with the ecosystem they need to develop sustainably. “We believe that MSMEs that are more productive, formal, and bankable will become an important foundation for more inclusive and sustainable economic growth in Indonesia,” said Hery.