Indonesia considers changing rules on micro loans

JAKARTA: Indonesia is reviewing rules in a government programme to subsidise micro loans, a senior minister said on Thursday, after the nation’s banking regulator signalled it would possibly maybe well flip down the federal government’s put a query to of to chill out rules on mortgage restructuring.

President Joko Widodo closing month proposed reinstating until 2025 a COVID-generation mortgage restructuring policy, which allowed banks to retain far off from making provisions for corrupt loans, to back shore up liquidity in the banking system amid capital outflows.

Airlangga Hartarto, Widodo’s chief economic affairs minister, said on Thursday the president made the proposal amid a rising ask for credit ranking security insurance protection, which would maybe even translate to increased corrupt loans.

The restructuring policy, overseen by the Monetary Companies Authority (OJK), had lapsed in March. Nonetheless the OJK this week said Indonesian banks respect ample buffers to face world dangers and big liquidity to carry out bigger their lending, indicating it would possibly maybe well reject the president’s proposal.

“We’re conducting overview on what else to cease, and we’re reviewing rules for KUR (a government programme),” Airlangga said, responding to feedback by the OJK.

KUR refers to a programme to subsidise interests on micro and dinky loans below 500 million rupiah (US$30,883).

Airlangga did no longer instruct extra crucial features.

OJK Chief Mahendra Siregar said earlier this week that the banking sector became once resilient to face doable headwinds.

“The banking alternate on the entire has simply efficiency, supported by excessive capital ranges,” Mahendra said, noting mortgage growth exceeded 12 per cent on an annual foundation in Might maybe maybe maybe and nasty non-performing mortgage (NPL) ratio stood at 2.34 per cent, under the 5 per cent threshold the OJK considers unhealthy.

Banks respect moreover hassle aside provisions against corrupt loans with a protection ratio of 33.84 per cent, Mahendra said, describing this as “very ample”.

Tranquil, the nasty NPL ratio for loans to micro, dinky and medium alternate rose to 4.27 per cent in Might maybe maybe maybe, compared with 3.65 per cent in March, OJK data showed.

Just a few bankers respect said Widodo’s proposal can even carry out a simply hazard for debtors, while moreover noting the NPL ratio has been repeatedly low.