The Indonesian government, via the state financial authority OJK, has effectively extended the deadline and reduced the interest on loans for SMEs affected by the COVID-19 pandemic. The policy aims at supporting SMEs, which form the backbone of the Indonesian economy.
On March 16, 2020, the Indonesian Financial Services Authority (OJK) had issued OJK Regulation (POJK) No. 11/POJK.03/2020 concerning the National Economic Stimulus as a Countercyclical Policy Impact of the Spread of Coronavirus Disease 2019 (POJK Stimulus Impact COVID-19).
This regulation states that the development of the spread of the Corona virus disease 2019 (COVID-19) has a direct or indirect impact on the performance and capacity of debtors, including micro, small and medium business (MSME), which could potentially disrupt banking performance and the stability of the financial system, which may further affect economic growth. Therefore, in order to encourage the optimization of the banking intermediary function, maintaining financial system stability, and supporting economic growth, an economic stimulus policy is needed as a countercyclical impact of the spread of COVID-19.
The regulation effectively extends the deadline and reduces the interest rate of loans of debtors affected by the COVID-19 pandemic. Examples of such debtors include those who are affected by the closure of transportation and tourism routes to and from China or other countries that have been affected by COVID-19 and the travel warnings of several countries, or those who are affected by the significant decline in the volume of import and export due to supply chain and trade links with China or other countries that have been affected by COVID-19.
The method of credit / financing restructuring is carried out as stipulated in OJK regulations regarding asset quality assessment. Banks can provide credit/financing/provision of other new funds to debtors who have received special treatment in accordance with this POJK by determining the quality of credit/financing/provision of other funds carried out separately from the quality of credit/ financing/provision of other previous funds.
This POJK applies to Conventional Bank (BUK), Syariah Bank (BUS), Syariah Business Venture (UUS), Rural Credit Bank (BPR) and Syariah Rural Credit Bank (BPRS). Banks can implement policies that support economic growth stimulus for debtors affected by the spread of COVID-19, including MSME debtors, while still observing the precautionary principle. The policy has taken effect since March 16 and applies until March 31, 2021.
By OJK鈥檚 account, the banking sector is still holding well against the COVID-19 pandemic. The Head of the OJK Banking Supervisory, Heru Kristyana, said Indonesian banks have the support of a strong capital and quality credit lines.
鈥淭he capital adequacy [of our banks] is still good at 22.42%. The liquidity of major banks, as measured by the LCR [Liquidity Coverage Ratio] is still above 200%, which means that it鈥檚 still okay... the gross ratio of troubled credit is still at 2.79%, while net ratio is 1% per,鈥� he said, as quoted by Bisnis Indonesia.