Help for Small Traders: Understanding the Differences Between Umi and KUR Facilities

The Ministry of Finance (Ministry of Finance) has an Ultra Micro (UMI) financing program that focuses on small traders.

This program is a development of social assistance (bansos). Through its website, the Ministry of Finance states that this program is provided for the lowest strata of society who cannot be facilitated by banks through the People's Business Credit (KUR) program.

UMI provides a maximum loan of Rp 10 million per customer and is channeled through Non-Bank Financial Institutions (LKBB).

"Funding sources come from the State Budget (APBN), contributions from regional governments and financial institutions, both domestic and global," the Ministry of Finance writes on its website.

In 2023, the target for UMI debtors is 2.2 million, which will be disbursed by the Public Service Agency (BLU) of the Government Investment Center (PIP).

This figure is an increase from the realization of UMI financing disbursement during 2022, which reached 2.01 million debtors with a value of Rp 8.13 trillion, as reported by *Berita Satu*.

So, what is the difference between UMI and KUR?

UMI is channeled through LKBB. The maximum financing ceiling is Rp 10 million. The UMI loan tenor is short-term, no more than 52 weeks.

UMI requires no collateral. However, in practice, recipients are required to participate in training and receive mentoring.

PIP will provide loans to LKBB with an interest rate of 2%-4%. The loan procedure is through the LKBB mechanism.

Meanwhile, KUR is channeled through banks and financial institutions. There are two types of ceilings in the KUR scheme.

First, a maximum of Rp 25 million for micro businesses. Second, Rp 25 million to Rp 500 million for retail. Recipients in the micro and small business categories are given long-term loan tenors, more than one year.

Collateral for KUR for small businesses is regulated in banking regulations. Recipients do not receive mentoring and training.

There is interest subsidy from the government. Meanwhile, the loan procedure is through the banking mechanism.

Requirements for obtaining UMI:

* Not currently financed by a financial institution/cooperative.
* Indonesian citizen (WNI) proven with an Electronic Identity Number.
* Possessing a business license/business statement from a government institution and/or a business certificate from the distributor.

UMI distributing institutions:

* Kreasi UMI (PT Pegadaian)
* Mekaar (PT Permodalan Nasional Madani)
* Cooperatives (PT Bahana Artha Ventura)