Content area
Full Text
This paper analyses the first stage of the Kredit Usaha Raky at (KUR) programme, the guaranteed microcredit programme for supporting the development of SMEs in Indonesia. KUR is a partial credit guarantee programme that helps to fulfil the collateral requirement hindering SMEs from accessing credit. By gaining access to credit, SMEs are expected to develop while also creating employment and generating income for the poor and near poor. Based on KUR 's loan disbursement, its number of participating banks, and its number of borrowers, this paper shows that the implementation of the programme attracted millions of SMEs. This paper then highlights the ways in which KUR has or has not addressed market failures in the credit market for SMEs. This paper also shows that KUR's role in accelerating poverty reduction is still questionable as there are many poor households unable to access the programme. Hence, the main policy challenges are: first, improving the design of KUR to reduce information asymmetry; second, ensuring that KUR meets its anti-poverty objectives by reaching the right sectors and the right regions; and third, strengthening the KUR Policy Committee's oversight and ability to coordinate across key stakeholders.
Keywords: KUR, credit guarantee, loan access, SMEs, poverty alleviation, Indonesia
1.Introduction
Small and medium enterprises (SMEs) are an important part of the Indonesian economy. In 2013, they accounted for over 99 per cent of all enterprises, 97 per cent of employment, 58 per cent of GDP, and 16 per cent of Indonesian exports (Ministry of Cooperatives and SMEs 2015). SMEs play a vital role in the lives of the poor and near poor by providing job opportunities, sources of income, and also goods and services to meet their basic needs (Firdausy 2005, p. 261; P2E LIPI 2014, p. 33). Using economic and social indicators, around 67 per cent of employees in SMEs can be categorized as poor or near poor (P2E LIPI 2014, p. 21).
Despite occupying an important role, SMEs have not lived up to their full potential to contribute to the Indonesian economy. This can be seen from at least three indicators: (i) the number of SMEs formally registered as a start-up is much lower in Indonesia than those in both its ASEAN neighbours and global competitors;1 (ii) in comparison...