Jakarta, CNBC Indonesia – Deputy Minister of BUMN Kartika Wirjoatmodjo said there are three aspects that can make MSME businesses successful so that they can advance in class and be sustainable. Among these aspects accessibility with low operating costs, capital and guarantee aspects, as well as aspects of access to competence through empowerment.

These three aspects are the concepts promoted by PT Bank Rakyat Indonesia (Persero) Tbk, Pegadaian, and Permodalan Nasional Madani (PNM) in the integration of Ultra Micro Holding (UMi). No wonder, to date there are more than 45 million ultra-micro actors who have received benefits and have the potential to advance to class.

Kartika also sees the importance of strengthening these three aspects by reaching out to much smaller business actors, even those that have been categorized as not yet worthy of credit. This is because the increasing number of new workers amidst a population surge is still a challenge in line with Indonesia's 2045 golden target.

“In the next 10 years, there may still be another 35 to 45 million to enter entrepreneurs who start at the pre-prosperous or pre-credit-worthy level. It is necessary to provide access to finance, provide business capabilities, and access to government guarantees. So the issue is “After a few years, we have entered a lower layer, less bankable and smaller in size. So we need a deeper reach, cheaper costs and broader guarantees,” explained Kartika at the Park Discussion event held by the BRI Research Institute on January 12 2023. by raising a theme “How Ultra Micro Holding Connects Finance to Millions in Indonesia”.

Kartika explained, in an effort to reduce operational costs (operating costs), UMi Holding can utilize agent networks such as BRI's AgenBRILink, PNM's Mekaar Group, and so on in every corner of the village so that they can accessibility closer, cheaper and easier than going to a branch office.

On the other hand, the application of concepts hybrid banking with digitalization it will cut servicing costs which is currently more expensive than the interest and loans obtained by business actors.

“People travel a long way to a branch or unit, but there is an agent in front of their house. So now our transactions have been moved starting from credit disbursement, credit installment payments, all transactions at the agent,” said Kartika.

Meanwhile, the function of branch offices/units will be transferred to strengthen the second aspect, namely coaching and empowering business actors. This place will be a center for courses, discussion rooms, and a community center for business actors to gain competency regarding how to develop their business so that it can rise to the next level.

“It is important that people have the competence to do business properly, starting from how to package products, logistics, managing their finances. You can't just give them money, give them guarantees, but they also need to be coached so that they know how to do business and manage their cash flow properly. Coaching “We are strengthening this so that they can move up in class, from previously only borrowing 2.5 million, one day they can move up to micro, retail and even medium,” he continued.

What is no less important is expanding the guarantee from the People's Business Credit (KUR) capital that has been provided by the government.

Kartika believes that banks need courage to provide KUR to beginners who are not yet bankable and even have a lot of experience. For this reason, the government is currently looking for an initial guarantee mechanism in the hope that these business actors can gradually rise to the next level.

“Our proposal to the government is that we expand and add to this guarantee so that people can enter the system with a guarantee from the government first. It doesn't have to be forever, the hope is that in two cycles, if it gets stuck, the government will provide insurance coverage through KUR, then in the third cycle it will ( “can) enter commercial. So, we are still defining the guarantee mechanism from ultra-micro to micro or even retail,” added Kartika.

According to Kartika, if this effort is carried out consistently over the next decade, it has the potential to add 30-40 million business actors to the system and create 80 million jobs in the future. Holding UMi could also be an engine to massively encourage community prosperity at the rural level.

“The community will become increasingly prosperous in welcoming a golden Indonesia 2045,” he said.

It is known that Holding UMi targets serving people who do not have access to formal financial services (unbankable) up to 45 million until 2024. The number of UMi Holding debtors also continues to increase.

As of September 2023, the number of holding debtors reached 36.6 million or grew 22% from the position in September 2021. This means that BRI, Pegadaian and PNM will still attract 8.4 million new ultra-micro debtors until 2024.

Total outstanding ultra-micro holding credit reached IDR 590.7 trillion as of the end of September 2023 or grew 11.6% annually. This figure increased by 27.38% when compared to the initial period of holding formation.

In detail, BRI's micro credit contribution as the holding company reached IDR 479.9 trillion, or an increase of 10.9% on an annual basis with 14.2 million debtors. Meanwhile, Pegadaian's credit portion reached IDR 65.6 trillion, or an increase of 17.3% with a total of 7.4 million borrowers. While pPNM financing reached IDR 45.3 trillion, or grew 14.3% with 15 million debtors.

[Gambas:Video CNBC]

(dpu/dpu)