Credit Relaxation Government Policy During The COVID-19 Pandemic

The impact of the coronavirus disease (COVID-19) pandemic towards the Indonesian economic sector cannot be understated. Multiple businesses have been trying to embrace the effects of the current pandemic through the implementation of several new policies from the government. Starting from March, the Financial Services Authority (OJK) had decided to extend loan payment deadlines for micro, small, and medium enterprises (MSMEs) for up to one year. This new directive was intended to relieve these enterprises from the increasing economic burden of the current pandemic.

 The Chairman of Indonesia Financial Services Association (APPI), Suwandi Wiratno, said that the current state of affairs had pushed the government to enact the work from home (WFH) policy from March. As a result, many workers who work without a stable source of income are prone to the lesser amount of income that they can receive in these months. To counter this undesirable result, OJK is now authorized to issue written orders to multifinance institutions to maintain their economic stability through merging.

Several methods have been taken to alleviate the financial impact of the current pandemic. For instance, OJK is now issuing an order for credit relaxation for MSMEs with a leasing value of less than Rp 10 billion. The government has projected that these MSMEs are some of the most vulnerable business ventures from the adverse effects of this pandemic. 

This is because many of these ventures rely on vehicular means such as cars, trucks, motorcycles, and other vehicles to support their daily jobs. Since these ventures usually rent these vehicles to a set of debtors, the government has decided to lessen the credit burden from these business ventures to prevent further damage and financial loss.

Based on the recently implemented policy, financial relaxation will take up 1 year until March 2021. During this period, multiple banks are ordered to provide relief such as deferred loan payment and reduced administrative fees. By doing so, the government expects that banks across Indonesia can maintain their performance and prevent the uncontrolled rise of non-performing finances (NPF) rate.

Nevertheless, even from all the relaxation and alleviation efforts, every business ventures need to be very selective and cautious with the recent credit relaxation policy. OJK spokesperson Sekar Putih Djarot said that all of the relief materials need to be used accordingly to prevent misuse from irresponsible parties. 

To emphasize this, Indonesian President Joko Widodo stated that all of the debt collecting activities would be punished accordingly. In his statement, the police force will be massed to monitor all banks to prevent any possibility of debt collecting activities during the pandemic. Furthermore, there are possibilities that the government will blacklist these companies should they continue their debt collecting activities in the near future.