MSMEs and Financing Constraints
In Indonesia’s financial system, banks play a large role in providing 77 percent of total loans, with the rest coming from pension funds, insurance, financial institutions, cooperatives, and others.
Micro, small and medium enterprises (MSMEs) are always an interesting topic of discussion. Moreover, for politicians, the MSME issue is quite important because they are of interest to their constituents. According to data from Statistics Indonesia (BPS), MSMEs contribute about 60 percent of gross domestic product (GDP). However, based on banking data, MSME loans amount to only Rp 1 quadrillion (US$70.50 million), or just 20 percent of all bank loans.
In Indonesia’s financial system, banks play a large role in providing 77 percent of total loans, with the rest coming from pension funds, insurance, financial institutions, cooperatives, and others. However, banks are not the largest funding source because overseas financing remains quite a significant component.