BNP Paribas Banking - new scheme for micro KUR. (Tjandra Lienandjaja)

The government has changed the scheme for the People's Business Loan (Kredit Usaha Rakyat - KUR) as follows:
1. Credit limit for the micro KUR is raised to IDR20m from IDR5m.
2. Credit risk guaranteed by the government is increased to 80% for certain industries, such as agribusiness and fishery, from 70%.
To recap KUR is the government-sponsored loan to the unbankable small to medium sized enterprises with feasible business. The bulk of the credit risk is born by two state insurance companies while borrowers are not required to provide collateral for the loans. There are two types of KUR: one is the micro KUR, which now up to IDR20m and second retail KUR with maximum credit of IDR500m.

Interest rate for micro KUR is set at 22% with a plan to reduce it so 21% while for retail KUR is at 14%, However, for those who had taken retail KUR between IDR5-20m will see their lending rate increase to 22% from 14%. The government indicated there are only 2,000 borrowers out of m affected by the new interest rate. Currently, KUR is distributed by 19 banks with BRI account for around 70%, Bank Mandiri and BNI 10% each, Bukopin 5%, BTN 3% and others. As a % of total loans in BRI, KUR account for 2.7%.

Comment:
Currently, KUR is distributed by 19 banks with BRI account for around 70%, Bank Mandiri and BNI 10% each, Bukopin 5%, BTN 3% and others. As a % of total loans in BRI, KUR account for 2.7%. The government will inject IDR1.8t new capital to the two insurance companies, Jamkrindo and Askrindo, so that they can guarantee up to IDR18t new KUR loans this year. With the new limit, banks like Mandiri and BNI will likely to increase their KUR lending as it is more reasonable for them to process it (BRI has been specialising in micro lending so not much a problem for them to extend micro KUR). Average NPL in KUR was 4.9% in December 2009 which has been on the decline from the peak of around 6%. The banks have so far been able to claim back the written off loans which are part of the government's portion (70% risk) with the time lag of around nine months after the write off.