Indonesia troubled by ailing loans from small businesses

Business-loan proportion dropped to 26.2%.

Over the last two years, small business numbers in Indonesia have grown by 6 million (to 42.5m).

According to a research note from Roy Morgan Research, however, the number with loans has not kept up, increasing by only 600,000 (to 11.1m). The data is from a process that interviews approximately 30,000 people p.a. across the country.

In 2013 there were 36.5 million small businesses in Indonesia with 10.5 million (28.7%) having some type of loan. The number of businesses in 2015 has grown to 42.5 million but the proportion with a loan has dropped to 26.2% (11.1 million).

Here's more from Roy Morgan Research:

Bank Rakyat Indonesia (BRI) dominates small business lending. Currently, BRI has the highest market share of loans to small businesses with 37.2%, well up on the 28.1% of two years ago. Being state owned, it is one of the banks that the government has decided to involve in its plan to boost business lending.

The second major lender, with 12.3% market share, is Koperasi, but their share has declined from 14.5% in 2013. After these two major lenders, the market is highly fragmented, with the only other significant players being FIF (Federal International Finance) with 7.4% and Adira Dinamika Multifinance (7.2%).

Debnath Guharoy, Regional Director Asia, Roy Morgan Research, says: “Recent Indonesian government announcement about encouraging lending to small businesses recognises that they play a major role in driving economic growth.

With over 42 million small businesses in Indonesia, of which only 11.1 million or 26.2% have a loan, there is a great deal of potential to increase lending.”