Indonesian Government to Probe Alleged Irregularities in KUR Distribution

Investigation into Banking Practices

Finance Minister Purbaya Yudhi Sadewa has announced an investigation into the distribution of People's Business Credit (KUR) following reports of improper practices by banks. The alleged irregularities include banks demanding collateral from prospective borrowers applying for loans not exceeding Rp 100 million, contrary to program guidelines.

Background and Implications

KUR is a government-backed credit program designed to support Micro, Small, and Medium Enterprises (UMKM) by providing access to capital without requiring collateral for loans up to Rp 100 million. The program is subsidized by the Ministry of Finance through interest rate subsidies to participating banks. However, reports suggest that some banks are deviating from these guidelines, potentially hindering the program's effectiveness in reaching UMKM.

Minister's Statement and Planned Actions

Purbaya expressed concern over the alleged practices, stating that they would be irresponsible and contrary to the program's objectives. He emphasized the Ministry's intention to investigate these claims thoroughly. "If they're just doing as they please, they should be careful," Purbaya warned. The Minister also highlighted that the Ministry of Finance had been cautious about intervening directly as KUR falls under the purview of the Coordinating Ministry for Economic Affairs.

Financial Impact and Current Status

The Finance Minister clarified that contrary to circulating reports that the KUR allocation had been exhausted, there remained approximately Rp 60 trillion in unallocated funds out of a total of Rp 284 trillion allocated for KUR. This clarification aims to reassure UMKM and stakeholders that the program continues to have substantial resources available.

Collaborative Follow-Up

Purbaya indicated that the investigation would be conducted in coordination with the Coordinating Ministry for Economic Affairs, given their oversight of the KUR program. This collaborative approach is expected to ensure a comprehensive examination of the distribution practices and address any identified irregularities effectively.