September 23, 2025
JAKARTA – The Financial Services Authority’s (OJK) decision to simplify borrowing for micro, small and medium enterprises (MSMEs) is a calculated risk that requires stringent oversight to prevent a surge in bad loans.
Josua Pardede, chief economist at Permata Bank, noted that, while the policy aims for greater financial inclusion through faster, tech-driven processes, the regulator was simultaneously erecting a comprehensive defense system.
“The new rules mandate banks to set clear risk limits, rigorously evaluate their credit assessment methods at least every three years and ensure any third-party scoring partners are licensed,” he told The Jakarta Post on Tuesday.
He highlighted that operational risks from digital partnerships were addressed with requirements for data security, adequate customer information and regular fee evaluations.
Josua pointed to the banking sector’s current robust health, with a capital adequacy ratio (CAR) of 25.9 percent and a gross nonperforming loan ratio (NPL) of 2.28 percent, as a crucial buffer for this expansion.
However, he issued a note of caution: “Discipline is absolute. Banks must adhere to their risk management plans to ensure that easier access does not lead to systemic instability, particularly for smaller banks and nonbank lenders with thinner capital.”
Read also: New OJK regulation aims to ease MSME financing
The OJK’s regulatory change coincided with the government move to inject Rp 200 trillion (US$12.2 billion) into state-owned lenders to accelerate lending to the real economy.
The funds have been placed since Sept. 12 in time deposits at state-owned lenders Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, Bank Tabungan Negara and Bank Syariah Indonesia. The five banks are now expected to accelerate loan disbursement to reinvigorate private sector activity and boost economic growth.
Center of Economic and Law Studies (CELIOS) executive director Bhima Yudhistira cautioned that credit quality had to remain a priority, pointing to a massive Rp 2,400 trillion in approved but undisbursed loans as evidence that the core issue was not a lack of liquidity, but rather banks’ heightened selectivity.
He advocated for innovative assessment tools, like psychometric credit ratings, which evaluate a broader range of variables, including business location, supply chain links and consumer trends, beyond traditional analysis.
“Financing alone is insufficient. The key to reducing NPLs and scaling up businesses is sustained mentoring after disbursement,” he told the Post on Wednesday.
“This includes providing market intelligence, information on business prospects, bookkeeping and human resources training. Such comprehensive support is essential for helping micro-enterprises level up and ultimately reduces default rates.”
Stringent policies may hinder stimulus
Indonesian MSMEs Association (Akumindo) secretary general Edy Misero noted that banks required businesses to be operational for six months to two years before qualifying for ultra micro credit (KUR) loans.
This requirement, he argued, created a formidable barrier that could prevent the government’s Rp 200 trillion liquidity injection from reaching MSMEs.
Edy warned that banks’ stringent policies meant excluding the very businesses that needed support the most.
“This means MSMEs must already be established, already in business and only then will they receive support,” Edy told the Post on Wednesday.
This effectively excludes newly laid-off workers and aspiring entrepreneurs who lack initial capital but have viable business plans.
He warned that, without fundamental changes to these eligibility requirements, the government’s stimulus policy was a “dream” and the colossal funding would primarily benefit conglomerates, not small businesses crucial for job creation and economic growth.
The success of the new OJK regulation now hinges on whether state-owned banks will follow suit and loosen their restrictive lending practices.
Indah Iramadhini, the head of the OJK’s banking regulation and development department, encouraged MSMEs to utilize the massive Rp 200 trillion in liquidity available in the banking system, citing ample room for increased lending.
She pointed to the latest Loan-to-Deposit Ratio (LDR) figure as a key indicator of the banking sector’s capacity to extend more credit.
Data from the OJK showed the national LDR, which measures the proportion of bank deposits that have been loaned out, stood at 86.3 percent in August. A ratio between 85 percent and 95 percent is generally considered ideal, indicating banks are lending efficiently without being overexposed.
“If we look at the current LDR figure, it’s currently around 86 percent. This indicates there is still considerable room for maneuver within the system. We are, therefore, encouraging MSMEs to take advantage of this opportunity,” she said at a press conference on Friday in Jakarta.