Indonesia Launches Loan Interest Support Program...Assistance for Real Estate and Auto Loans

6 Months Interest Subsidy
Up to 6% Support on Payments
Expecting Vitality in Industry and Banks

[Image source=AP Yonhap News]

[Asia Economy Jakarta Correspondent Sujin Choi] The Indonesian government has decided to launch an interest subsidy program for automobile and real estate loans to stimulate the economy. As companies and individuals face difficulties due to the spread of the novel coronavirus infection (COVID-19), the government has prepared a direct loan interest support plan.

According to local media such as The Jakarta Times on the 12th, the Indonesian Financial Services Authority (OJK) announced that it will subsidize interest on automobile loans under 500 million rupiah (approximately 41 million KRW) and real estate loans for properties under 231㎡.

Accordingly, eligible borrowers will receive interest support for six months until September. Borrowers with loans under 500 million rupiah will receive a 6% subsidy on interest payments for the first three months and 3% for the remaining three months. For loans exceeding 500 million rupiah up to 10 billion rupiah (approximately 810 million KRW), a 3% interest subsidy will be provided for the first three months and 2% for the remaining three months.

Peter Abdulla, an official at the Indonesian Economic Recovery Center, said regarding the loan interest support program, "It is expected to help maintain consumer purchasing power despite the impact of COVID-19 spread." He pointed out that although Indonesia recorded 5.2 million unemployed due to large-scale social restrictions, consumption levels remain unchanged. Especially, the automobile industry is breathing a sigh of relief due to the interest support. Jongki Sugiyarto, the inaugural chairman of the Indonesian Automotive Industry Association, said, "Most new car buyers finance about 70% of the car price through loans or leases," adding, "This support policy will be a great help to the automotive industry."

The loan interest subsidy policy is also expected to benefit financial institutions such as banks, which have to bear concerns about non-performing loans. The non-performing loan ratio in Indonesia’s financial sector reached 2.8% in February, the highest level since May last year. However, OJK stated that the risk of non-performing loans is at a "manageable level." Paul Sutaryono, senior researcher at Bank Negara Indonesia, said the government's loan interest support policy will alleviate banks' loss burdens caused by non-performing loans.

OJK emphasized that Indonesian banks have good liquidity and fund circulation. The ratio of liquid assets to non-core assets stands at 112.90%, far exceeding the 50% threshold. The capital adequacy ratio, which measures banks' financial strength, was recorded at 21.77%.

In Indonesia, large-scale social distancing has been implemented since the 10th of last month to prevent the spread of COVID-19. The cumulative number of confirmed COVID-19 cases reached 14,000 as of the 10th, with deaths nearing 1,000. The government has banned homecoming during the Indonesian holiday 'Lebaran,' which begins on the 21st.

This content was produced with the assistance of AI translation services.