JAKARTA. The government will expand the allocation of KUR (People’s Business Credit) in 2017 to stimulate minor entrepreneurs to drive domestic economy.

Government is targeting to allocate Ro 105.95 trillion KUR, or higher than Rp 100 trillion in 2016. Deputy of Financing Affairs at Ministry of Cooperative and Small Medium Enterprises Braman Setyo said that the target of credit allocation was proposed by the banks and financing institutions. “The number may still increase, since some banks and financing institutions have not proposed the credit ceiling,” Braman told KONTAN, Wednesday (4/1).

The government may also cut the KUR’s interest rate from 9% per year in 2016 to 7% per year. However, the number has not yet been final, waiting for the decision of the meeting of KUR’s Policy Committee that will be held in an immediate time.

It is expected that the low interest rate may accelerate the credit allocation. Braman said, as of the end of 2016 the KUR allocation was 95% of the target of Rp 100 trillion. “Out of three state owned banks, only BNI failed to reach the target,” he said.

As information, as of 28 December 2016, the realization of KUR allocation of Bank Rakyat Indonesia (BRI) amounted to Rp 69.4 trillion, exceeded the target of Rp 67.5 trillion. Bank Mandiri allocated as much as Rp 13.3 trillion KUR, while the target was Rp 13 trillion. Meanwhile, BNI only realized as much as Rp 10.27 trillion of the target of Rp 11.5 trillion.

To date, BRI has not yet specified the target of KUR allocation for this year. Corporate Secretary of BRI Hari Siaga said that the banks will be facing larger challenges in allocating KUR, since the government will increase the allocation target, while also will reduce the subsidy of KUR’s interest rate.

The subsidy for KUR’s interest rate will drop by Rp 1.48 trillion in 2016 to Rp 9.02 trillion.

In order to compensate the reduction in KUR’s interest rate margin, Hari said that BRI will speed up the credit allocation. Furthermore, BRI will increase the cheap funds and boost the non-interest rate revenues. “The potentials of margin reduction will always exist,” Hari said.

Chief of Micro Small Medium Enterprises (MSME) Business of CIMB Niaga Sukarman Omar agreed that the margin will be eroded if the costs of funds remain the same. Thus, CIMB will try to develop the products of non MSME commercial credit. (Muhammad Farid/Translator)

Editor: Barratut Taqiyyah Rafie