Indonesia Gov’t to Offer Microloans to Tourism Sector SMEs
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The government will start disbursing subsidized loans to micro, small and medium enterprises by end of this month to increase revenue from the sector and boost the country’s foreign exchange reserves.
The government previously only allocated such loans towards migrant workers and SMEs in the trade, agricultural, service, manufacturing and fisheries sectors. It has earmarked Rp 120 trillion ($8.3 billion) for SMEs this year, or 12 percent more than last year.
“We expect SMEs in tourism to encourage optimization of the development of the sector, especially in the 10 priority tourist destinations and 88 national tourism strategic areas,” Iskandar Simorangkir, deputy for macro-economic coordination and finance at the Coordinating Ministry for Economic Affairs, said at a press conference in Jakarta on Wednesday (08/08).
Tourism contributed around $16.8 billion to Indonesia’s foreign exchange last year, second only to the palm oil sector. The government seeks to increase this by 20 percent to around $20 billion this year.
President Joko “Jokowi” Widodo’s administration has been promoting new tourist destinations in Indonesia, known as the “Ten New Balis.” These include Borobudur Temple in Central Java; Jakarta’s Thousand Islands; Lake Toba in North Sumatra; Tanjung Kelayang in Bangka Belitung; Tanjung Lesung in Banten; Mandalika in West Nusa Tenggara; Bromo-Tengger-Semeru National Park in East Java; Labuan Bajo in East Nusa Tenggara; Wakatobi in Southeast Sulawesi; and Morotai in North Maluku.
The loans will be disbursed by 41 banks and nonbanking institutions and carry an interest rate of 7 percent. In comparison, state-controlled lender Bank Rakyat Indonesia charges 17.5 percent interest on unsubsidized microloans, while its peer, Bank Mandiri, charges 18.75 percent.
“The loans will be disbursed by 41 banks and nonbanking institutions and carry an interest rate of 7 percent.”
Businesses such as travel agencies, art studios, souvenir centers, tour guides, tourism transportation services, food and beverage providers, accommodation establishments and handicraft industries can apply for loans of up to Rp 500 million under the program.
The Ministry of Tourism is optimistic that it will meet its target of attracting 17 million foreign visitors to Indonesia this year, especially with international events such as the 2018 Asian Games and the annual meetings of the World Bank and International Monetary Fund.
Jokowi asked ministers last month to seek ways to develop the tourism sector across the archipelago as part of efforts to narrow the country’s current-account deficit and bolster the rupiah.
The currency has lost 6.21 percent of its value against the greenback since the beginning of the year as investors leave emerging markets due to higher US interest rates and a looming trade war between the United States and China.
Bank Indonesia has spent approximately $13.6 billion of its foreign exchange reserves between February and June to defend the currency. Its foreign exchange reserves stood at $118.3 billion in July.
Questions & Answers
Q.Why is the government specifically targeting the tourism sector for these microloans now?
Why is the government specifically targeting the tourism sector for these microloans now?
The government aims to boost the sector's revenue and increase the country's foreign exchange reserves. Tourism contributed significantly last year, and the government seeks a 20 percent increase this year.
Q.What kind of businesses within the tourism sector are eligible for these new microloans?
What kind of businesses within the tourism sector are eligible for these new microloans?
Eligible businesses include travel agencies, art studios, souvenir centres, tour guides, and food and beverage providers. Accommodation establishments and handicraft industries can also apply.
Q.How much funding has the government allocated for SME microloans this year, and how does this compare to last year?
How much funding has the government allocated for SME microloans this year, and how does this compare to last year?
The government has earmarked Rp 120 trillion ($8.3 billion) for SMEs this year. This represents a 12 percent increase compared to the previous year's allocation.
Q.What is the interest rate for these new government-subsidised microloans compared to standard unsubsidised options?
What is the interest rate for these new government-subsidised microloans compared to standard unsubsidised options?
The new loans carry a 7 percent interest rate. In contrast, unsubsidised microloans from Bank Rakyat Indonesia charge 17.5 percent, and Bank Mandiri charges 18.75 percent.
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