UMKM Credit Interest Rates to Fall in February 2026, NPL Strengthens

JAKARTA, KOMPAS.com - The growth of financing for micro, small, and medium enterprises (UMKM) continues to attract attention from monetary authorities and the banking sector. On one hand, credit interest rates for this segment have been recorded as decreasing, providing space for business actors to access more affordable financing. On the other hand, credit quality shows pressure reflected in the rise of the non-performing loan (NPL) ratio. An assessment of the transmission of Bank Indonesia’s (BI) policy interest rates, quoted on Thursday (19/3/2026), indicates that UMKM segment credit interest rates experienced a monthly decline. In February 2026, UMKM credit interest rates were recorded to have fallen by 2 basis points to 10.55 per cent. This development occurred amid stability in the average banking credit interest rates across the industry. This policy is also in line with macroprudential strategies directed at increasing more inclusive banking intermediation, including through liquidity incentives provided to banks that channel credit to priority sectors and the UMKM segment. In the context of monetary policy transmission, the decline in UMKM credit interest rates indicates that the easing of banking liquidity conditions is starting to be reflected in credit pricing. Looser liquidity is supported by a decrease in funding costs and monetary operations policies aimed at maintaining the adequacy of bank funding. Although credit interest rates have decreased, the assessment also notes an increase in credit risk in the UMKM segment. The UMKM loan NPL ratio rose by 8 basis points to 4.68 per cent in February 2026. This increase occurred amid banking efforts to expand financing access and enhance financial service inclusivity. The rise in the problematic loan ratio indicates pressure on the credit portfolio quality in the small and micro business segment.