Indonesia Issues Implementing Regulation for Interest Subsidies Program

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  • Indonesia’s Ministry of Finance issued implementing Regulation 65/2020, which addresses the criteria for which micro, small, and medium-sized enterprises (MSMEs) can receive interest subsidies.
  • Under Reg 65/2020, eligible businesses can receive interest subsidies of between two to six percent.
  • The program is part of the government’s US$45 billion National Economic Program, which aims to mitigate the impact of the pandemic through tax breaks and other incentives.

On June 5, 2020, Indonesia’s Ministry of Finance issued Regulation 65/PMK.05/2020 (Reg 65 /2020), an implementing regulation to Reg 23/2020, also known as the National Economic Program (NER).

The NER was issued in May 2020 and provides the latest stimulus policies aimed at mitigating the economic impact of the virus pandemic. Valued at more than US$45 billion, the NER comprises of tax breaks, capital injections for state-owned banks, and interest subsidies for micro, small, and medium-sized enterprises (MSMEs).

Reg 65 /2020 addresses the criteria for debtors and lenders participating in the interest subsidies program. Under this program, the government has allocated 35 trillion rupiah (US$2.4 billion) to provide interest subsidies ranging from two to six percent and help ease the cashflow problems of more than 60 million MSMEs in the country as well as encourage more banks to increase their lending capacity to businesses.

Investors should seek the advice of registered local tax experts to better understand how they can benefit from this incentive.

What are the criteria for debtors to join the program?

To be eligible for interest subsidies, businesses must qualify under these requirements:

  • The business is classified as an MSME with a credit ceiling of no more than 10 billion rupiah (US$703,000) as of February 29, 2020;
  • Must have a tax identification number (NPWP);
  • Has not been blacklisted by the Financial Services Authority (OJK), the government agency that regulates and supervises the financial services sector; and
  • Must have a bank collectability status of 1 or 2 (Col 1 or Col 2) as per February 29, 2020. Debtors classified as Col 1 means they have a good track record of paying their installments whereas Col 2 debtors are those that are late in payments by up to 60 days.

How are commercial banks appointed for the program?

Commercial banks who wish to participate in the program must meet the following criteria:

  • Must be a member of the state-owned Banks Association;
  • The bank must possess adequate technological facilities to cater to the requirements of the program; and
  • The bank must adhere to the provisions set out in Reg 65/2020.

Subsidy duration and scope

The amount of subsidy issued will vary depending on the loan amount taken by the debtor as well as the type of financial institution the loan was approved from.

Some 36 million MSMEs have taken loans from 102 commercial banks, 1,570 rural banks, 176 rural shariah banks, and 110 funding companies registered with the OJK. Additionally, about 23 million MSMEs have borrowed loans from state-owned financial institutions.

For businesses that have taken a loan of less than or up to 10 million rupiah (US$703) from a government-run credit program, the interest subsidy rate is set at 25 percent, effective for six months. However, if businesses take a loan worth less than or up to 10 million rupiah (US$703) from banks or financing companies, then the interest subsidy rate is set at six percent for the first three months and three percent for the following three months.

If the business has taken a loan of more than 10 million rupiah (US$703) but less than or up to 500 million rupiah (US$35,000) from a government-run credit program, then the interest subsidy rate is set at six percent for the first three months and three percent for the following three months. This is the same rates if the business has borrowed from a bank or financing company.

Businesses with loans that are between 500 million rupiah (US$35,000) and 10 billion rupiah (US$703,000) taken from either a government-run credit program or a bank or financing company are eligible for interest subsidies of three percent for the first three months and two percent for the next three months.


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