PP No. 47/2024 on MSME debt cancellation entered into force on November 5. According to the president, specific guidelines will be provided in the implementing regulations of relevant ministries and institutions. Before its release, State Enterprises Minister Erick Thohir said the new policy aimed to boost economic activity that had been hampered by unresolved debts.

According to MSME Minister Maman Abdurrahman, debt forgiveness is being provided to agricultural, fishing and plantation MSMEs whose bank loans have been waived over the past decade. He noted that the debt relief ceiling was set at Rp 500 million ($32,120) for MSMEs and Rp 300 million for individuals, and would only be granted to borrowers unable to repay their debts. due to unforeseen events, such as natural disasters and natural disasters. the COVID-19 pandemic. Maman estimated that one million MSMEs with a combined debt waiver of Rs 10,000 billion would qualify for the new policy, which would have no impact on the state budget.

The debt cancellation policy emerged into the public spotlight on October 23, 2024, when Hashim Djojohadikusumo, Prabowo’s younger brother, highlighted the problem affecting millions of borrowers in debt cancellation. These borrowers were subsequently unable to access new loans due to their credit status on the Financial Services Authority’s (OJK) Financial Information Services System (SLIK) and, as a result, many turned to online lenders or loan sharks. The new regulation allows state-owned banks to legally write off bad debts, a measure that was previously banned to prevent write-offs from being recorded as state losses, potentially subject to corruption charges.

Despite the expected benefits, some concerns remain. Small and medium-sized businesses could benefit more from this policy than microbusinesses and individual borrowers, who often have less access to banking information and loans. According to a survey conducted by the Indonesian Seed Bank and the Indonesian Agricultural Technology Association (AB2TI), only 1 percent of microloan debtors (KUR) are farmers, while the remaining 99 percent are agricultural MSMEs. Another concern is that state-owned banks could impose additional criteria that could exclude individual borrowers and micro-businesses.

Economically, the debt cancellation policy is expected to promote growth and potentially increase tax revenues by allowing MSMEs and individuals in relevant sectors, particularly agriculture, fishing and plantations, to expand their activities. . Politically, this is an easy victory for the Prabowo administration, as it requires no direct spending from the state budget and allows greater flexibility among state-owned banks. However, the government must be vigilant to avoid moral hazard and ensure that banks execute this policy fairly. Extending similar debt relief to non-MSMEs in the agriculture and fisheries sectors could benefit the economy as a whole.

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