REPUBLIKA.CO.ID, PURWOKERTO -- President Joko "Jokowi" Widodo has vowed to slash the interest rate on smallholder business credits (KUR) to 9 percent next year from 22 percent this year.

"Interest on KUR will be set at 12 percent per year from July and will be further reduced to 9 percent next year," President Jokowi said while launching a program to revitalize a thousand traditional markets at Manis Market in Kedung Wuluh village, Banyumas district, on Tuesday.

The interest rate on KUR will decline because the government will subsidize it, he added.

"What interest will be owed to usurers? It will be about 20 to 30 percent. However, it (the interest on KUR) is 1 percent per month now," he stated.

Furthermore, Jokowi emphasized the need for micro-, small-, and medium-scale businesses to have permits so they can have easy access to funding from banks.

This year, the government will allocate Rp900 billion to subsidize interest on KUR.

"Next year, we will increase the subsidy to Rp7 trillion to ensure that the interest rate does not burden micro, small, and medium businesses," the president affirmed.

Earlier, the government had assured the public that interest on micro credits, which is part of the KUR scheme, will be lowered from 22 percent to 12 percent from July 1.

"We want banks to be more efficient. Therefore, the interest rate will be lowered to 12 percent. To make banking comfortable, they will be given a subsidy of 7 percent, including yield on insurance," Coordinating Minister for Economic Affairs Sofyan Djalil said here on June 25.

He added that the new scheme of distributing KUR will make the banking industry and insurance companies efficient and ease customers' access to financial assistance.

In addition, the government has allocated nearly Rp1 trillion to subsidize the interest on KUR. The subsidy is expected to support the distribution of up to Rp30 trillion in KUR to the real and retail sectors in 2015, Djalil pointed out.

"This KUR also applies to the non-trade and non-service sectors. If all firms switch to it, the subsidy will not be sufficient. This new program is being tried out and will be evaluated. We will assess it next year. The amount of subsidy that will be provided will probably be larger," the minister noted.

KUR is a program aimed at expediting economic growth through the empowerment of feasible micro, small, and medium enterprises and cooperatives. However, it is not bankable yet and is only partially guaranteed by the guarantor institution.

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