OJK Urges Guarantee Industry Action on Rising UMKM NPL

Strategic Measures to Mitigate Financial Risk

The Financial Services Authority (OJK) has called upon the guarantee industry to implement strategic measures in response to the increasing non-performing loans (NPL) in the UMKM sector. As of July 2025, the NPL ratio for UMKM loans stood at 4.43%, up from 4.41% in the previous month and 4.05% in the same period last year. This rising trend in NPL poses significant risks to the guarantee industry as banking credit risks directly impact the claims that guarantee companies must cover.

Key Recommendations from OJK

To address these challenges, OJK has recommended several key measures to the guarantee industry:

1. Conservative Claim Provisioning: Establishing sufficient and conservative provisions for potential claims
2. Actual Income Recognition: Monitoring income recognition while considering future liabilities
3. Optimized Claim Recovery: Enhancing recovery processes through subrogation

These measures are crucial for maintaining the financial health of guarantee companies and the overall stability of the guarantee industry. Ogi Prastomiyono, OJK's Executive Head of Supervision for Insurance, Guarantee, and Pension Funds, emphasized that these steps are essential for industry resilience.

Credit Quality Trends Across Loan Categories

The OJK report also highlighted varying credit quality trends across different loan categories:

• UMKM Loans: While NPL increased to 4.43%, the loan at risk (LaR) metric showed improvement, dropping to 12.70% in July 2025
• Corporate Loans: Maintained the lowest NPL at 1.44%
• Consumer Loans: Showed the lowest LaR at 8.29% but experienced rising NPL to 2.31%

These trends indicate a mixed credit landscape where different segments face unique challenges. The OJK continues to monitor these developments closely to ensure financial system stability.