(12 June 2015 – Indonesia) As Indonesia’s economic growth sits at a five-year low, the nation’s state-owned banks have agreed to halve lending rates to small businesses in an effort to revive the economy.
Rates will be lowered from 22 percent to 12 percent, according to Indonesian vice president Jusuf Kalla.
The government will subsidize interest payments received by state-owned banks and provide cheaper funding to them to lend to small firms, he said.
“We realize there’s a mismatch in banking principles in the last few years,” Kalla said.
“Small business loans have much higher interest rates compared with bigger loans.
“This is one thing that needs to be straightened up.”
Southeast Asia’s largest economy expanded 4.71 percent in the first quarter, the least since 2009, while inflation accelerated for a third month in May, to 7.15 percent.
Price pressures limit the scope for Bank Indonesia to cut its policy rate of 7.5 percent when it next meets on 18 June.