Indonesia launches a $ 7 billion loan guarantee scheme for priority companies

JAKARTA, July 29 (Reuters) – Indonesia launched a 100 trillion rupee ($ 6.92 billion) loan guarantee scheme for businesses in priority sectors as part of efforts to help businesses stay afloat during the coronavirus pandemic, said the finance minister.

The program will offer a guarantee for working capital loans of between 10 billion rupee and 1 trillion rupee for a period of up to one year to help businesses with their cash flow.

“We hope that risk appetite from banks and businesses can be restored and will therefore translate into optimism in carrying out the activities,” said Finance Minister Sri Mulyani Indrawati on Wednesday at a streaming press conference, noting that banks had been cautious in lending despite having ample liquidity.

The government offers up to 80% of loans to companies in priority sectors such as tourism, automotive, textiles, clothing and electronics.

The Loan Guarantee Scheme is an expansion of a previously announced initiative to help small businesses recover from the impact of the pandemic.

The companies eligible for the latest program are those affected by the pandemic that employs at least 300 people and are considered potentially capable of supporting the country’s economic growth.

Firms in priority sectors needed 303.76 trillion working capital over the next six months to meet operating costs after cash flows dried up due to social restrictions to contain the virus, Rosan Roeslani, president of the Indonesia Chamber of Commerce and Industry Kadin), said Tuesday.

The largest economy in Southeast Asia has sought to increase lending by channeling liquidity to state and regional banks.

The financial regulator also loosened the restructuring rules to help banks manage their capital.

Indonesian lending growth in May grew only 3.04% year-on-year, the slowest pace since at least December 2002, when the pandemic had its toll on the economy. ($ 1 = 14.450,0000 rupee) (Reports by Tabita Diela; Editing by Fransiska Nangoy and Ed Davies)

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