Indonesia launches $ 7 billion loan guarantee program for ‘priority’ businesses

JAKARTA (Reuters) – Indonesia launched a 100,000 billion rupee ($ 6.92 billion) loan guarantee program targeting businesses in priority sectors as part of efforts to help businesses stay afloat during the coronavirus pandemic, the finance minister said.

FILE PHOTO: General view of a business district at sunset in Jakarta, Indonesia November 5, 2019. REUTERS / Willy Kurniawan

The program will provide a guarantee for working capital loans in the amount of between Rs 10 billion and Rs 1,000 billion for a period of up to one year to help businesses manage their cash flow.

“We hope that the risk appetite of banks as well as companies can be restored and thus lead to optimism in the conduct of business,” Finance Minister Sri Mulyani Indrawati said on Wednesday at a press conference in streaming, noting that banks had been cautious in granting loans despite abundant liquidity. .

The government guarantees up to 80% of loans to businesses in priority sectors such as tourism, automobiles, textiles and clothing, and electronics.

The loan guarantee program is an extension of a previously announced initiative to help small businesses recover from the impact of the pandemic.

Companies eligible for the latter program are those affected by the pandemic employing at least 300 people and considered to have the potential to support the country’s economic growth.

Companies in priority sectors needed $ 303.760 billion in working capital over the next six months to cover operating costs after cash flow dried up due to social restrictions to fight the virus, Rosan Roeslani, chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said Tuesday.

Southeast Asia’s largest economy has attempted to boost loan disbursements by funneling liquidity to state and regional banks.

The financial regulator has also relaxed restructuring rules to help banks manage their capital.

Indonesian loan growth in May rose only 3.04% year-on-year, the weakest pace since at least December 2002, as the pandemic wreaked havoc on the economy.

Reporting by Tabita Diela; Editing by Fransiska Nangoy and Ed Davies

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