Non-Bank Financing for MSMEs Continues to Rise

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Adi Ahdiat 07/08/2024 14:05 WIB

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According to OJK data, the disbursement of funds to MSMEs from non-bank financing companies continued to increase until 2023. However, its proportion of total financing remains low.

Total Value of Non-Bank Financing* and Proportion of Financing for MSMEs in Indonesia (2018-2023)

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Total Value of Non-Bank Financing* and Proportion of Financing for MSMEs in Indonesia (2018-2023)

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Disbursement of loans from non-bank financing companies to micro, small, and medium enterprises (MSMEs) has steadily increased in recent years.

This is recorded in the report, *Roadmap Pengembangan dan Penguatan Perusahaan Pembiayaan 2024-2028* (Roadmap for the Development and Strengthening of Financing Companies 2024-2028), released by the Financial Services Authority (OJK).

Financing companies are non-bank business entities that engage in loan disbursement, both to individuals and other businesses.

Their business scope includes leasing, factoring, consumer financing, and/or credit card operations.

Throughout 2018, financing companies in Indonesia disbursed Rp452.57 trillion, with 23.54% allocated to MSMEs.

In subsequent years, the portion of financing for MSMEs continued to rise, as shown in the graph.

"Financing for the MSME sector has tended to increase throughout the 2018-2023 period, but its proportion of total financing remains relatively low, reaching only 35.26% in December 2023," stated the OJK team in its report.

According to the OJK, MSMEs in Indonesia have significant funding needs that cannot be fully met by banks.

Therefore, the OJK believes that there is a need to increase the capacity of non-bank financing companies to fill the national MSME funding gap.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."