Indonesia Expands KUR Credit Access with Enhanced Terms

Significant Policy Shift in Microfinance Support

The Indonesian government has announced a major expansion of the Kredit Usaha Rakyat (KUR) program, increasing the maximum credit limit from Rp500 million to Rp1 billion and introducing a uniform 6% flat interest rate. This policy change, coordinated with the Coordinating Ministry for Economic Affairs, represents a significant shift in the country's microfinance support structure.

Simplified Interest Structure

The new policy eliminates the previous tiered interest rate system where rates increased with loan duration - previously 6% in the first year, 7% in the second, and 8% in the third. The flat rate structure is designed to provide more predictable financing costs for small business owners. Aminuddin Ma'ruf, Deputy Head of BUMN Regulation, explained that this decision was made during a meeting with Airlangga Hartarto, the Coordinating Minister for Economic Affairs.

Economic Rationale

The policy adjustment aims to enhance credit accessibility for small enterprises while maintaining affordable financing costs. By maintaining a consistent interest rate throughout the loan period, the government seeks to reduce the financial burden on KUR recipients and encourage more businesses to participate in the program.

Implementation Details

The new KUR terms became effective immediately, applying to both new and potentially existing loan structures. The expanded credit limit and simplified interest rate structure are expected to have a positive impact on Indonesia's microfinance landscape by making credit more accessible to small business owners.