National Team for the Acceleration of Poverty Reduction (TNP2K)
Frequently Asked Questions (FAQs)

CREDIT FOR BUSINESSES PROGRAMME (KUR)

Credit for Businesses (Kredit Usaha Rakyat, or KUR) is a programme contained within the Small and Micro Enterprises-Targeted Poverty Alleviation Programme (Cluster III). Cluster III aims to increase access to capital and other resources by micro and small enterprises.

  1. What is KUR?
    KUR is credit/working capital and/or investment financing schemes specifically dedicated to micro, small and medium enterprises and cooperatives (usaha mikro kecil menengah dan koperasi, or UMKMK) in the productive enterprise sector, where enterprises are unable to meet certain requirements set by banks (not yet bankable). KUR is a credit/financing provision programme of less than Rp. 5 million with a maximum of 70 percent guaranteed by the government. The guarantor institutions are PT. Jamkrindo and PT. Askrindo.
  1. What are the objectives of KUR?
    The overall objective of KUR programme is to accelerate the development of economic activities in the real sector to alleviate poverty and expand work opportunities. The detailed objectives of the KUR programme are as follows:
    • Accelerate real sector development and empower micro, small and medium enterprises and cooperatives (UMKMK).
    • Increase access to finance of UMKMK and develop their access to financial institution.
    • As part of poverty alleviation efforts and measures to expand job opportunities.
  1. What do “productive enterprise”, “feasible enterprise” and “not yet bankable” mean?
    • Productive enterprise is the effort to produce goods or services to provide added value and increase entrepreneur income.
    • Feasible enterprise is the enterprise of a potential debtor that is profitable enough so as to allow for the repayment of interest/margins and the full repayment of debt/basic payment obligations within a time period that is agreed between participating banks and the KUR debtor.
    • Not yet bankable are UMKMKs that are not been able to meet a bank’s credit/financing requirements.
  1. Who is involved in implementing the KUR Programme?
    Three main groups (pillars) are involved in the implementation of the KUR programme. The first is government, through the Bank Indonesia (BI) and technical departments (e.g. Ministry of Finance, Ministry of Agriculture, Ministry of Forestry, Ministry of Maritime Affairs and Fisheries, Ministry of Industry, and State Ministry for Cooperatives and Small and Medium Enterprises). The function of the government is to assist and support with the implementation of credit provisions and guarantees. The second pillar is the guarantor institution that guarantees the credit distributed by the banks. Guarantor institutions: PT. (Persero) Asuransi Kredit Indonesia (PT. Askrindo) and Perusahaan Umum Jaminan Kredit Indonesia (Perum Jamkrindo). Third pillar are banks, as recipients of the guarantees that function as credit distributors to small and medium enterprises and cooperatives. These distributing banks consist of six commercial banks and 13 regional development banks (BPD). The six commercial banks distributing KUR at present are: Bank BRI, Bank Mandiri, Bank BNI, Bank BTN, Bank Syariah Mandiri and Bank Bukopin. The 13 regional development banks that distribute KUR include: Bank Nagari, Bank DKI, Bank Jatim, Bank Jateng, BPD DIY, Bank Jabar Banten, Bank NTB, Bank Kalbar, Bank Kalteng, Bank Kalsel, Bank Sulut, Bank Maluku and Bank Papua.

    Parties involved in KUR distribution at the regional level tailor to the presence of banks in the region. The six distributor commercial banks as generally present in all parts of Indonesia. For distributor BPDs, their availability varies regionally, in accordance with the previously mentioned KUR distributing function. In general, KUR programme coordination is carried out by the regional poverty alleviation coordination team through programme group for micro and small enterprise economic empowerment.
     
  2. If KUR has been guaranteed by a guarantor company, does the credit need to be repaid by the UMKMK?
    KUR guarantor companies provide part of the guarantee to participating banks for KUR credit given to UMKMK. Nevertheless, the UMKMK debtor is still obliged to repay the KUR credit received from the participating bank. The government acts as the underwriter (IJP) for KUR compensation.
  1. Who is the target of the KUR programme?
    The KUR programme targets trained community groups whose capacities and independence were increased in Cluster II programmes. The expectation is that these community group are able to make use of financing available from formal financial institution, such as banks, cooperatives, public credit banks (BPR), etc. From an institutional perspective, KUR targets is micro, small and medium enterprises and cooperatives. All productive businesses can access KUR funds.
  1. What does Micro, Small and Medium Enterprises and Cooperatives mean?
  1. Micro Enterprises are productive businesses owned by an individual and/or group of individuals that have net assets worth a maximum of Rp.50 million (not inclusive of land and buildings where the business is located) or an annual sales revenue that do not exceed Rp. 300 million.
  2. Small Enterprises are standalone productive businesses, managed by an individual and/or group of individuals that are not subsidiaries or branches, nor are they fully or partially owned, controlled, neither directly nor indirectly, by a medium or large enterprise. They must have a net worth of between Rp. 50 million and Rp. 500 million (not inclusive of the land and buildings used for the business) or an annual sales revenue of between Rp. 300 million and Rp. 2.5 billion.
  3. Medium Enterprises are standalone productive businesses, managed by an individual and/or group of individuals that are not subsidiaries or branches, nor are they fully or partially owned, controlled, neither directly nor indirectly, by a medium or large enterprise. The criteria is: having net worth more than Rp. 500 million to Rp. 10 billion (not inclusive the land and building used for business venture) or having annual sales revenue exceeding Rp. 2.5 billion to Rp. 50 billion.
  4. Cooperative is a business entity that has individual members or cooperative legal entity that bases its activities on cooperative principles as well as public economic movements based on the principle of family.
  1. Where are KUR programmes implemented?
    KUR programme is implemented across all 33 provinces.
  1. How do UMKMK obtain KUR from participating banks?
    UMKMK can obtain KUR from participating by:
    • Submitting a KUR application letter to a bank, attaching supporting documents such as business legality statement, business permits, financial statements, etc.
    • The bank will then evaluates/analyses the UMKMK’s business feasibility, based on the application letter.
    • If a Bank considers a UMKMK feasible, then it will approve the KUR request. The decision to approve KUR is fully under a bank’s authority.
    • The Bank and UMKMK sign a credit/financing agreement.
    • The UMKMK is obligated to repay (including through instalments) the credit to the bank.
  1. What are the general requirements for UMKMK to access KUR? Who makes the decision regarding KUR distribution?
    For UMKMK to access KUR, they must:
    • Not be receiving credit/financing from banks and/or not receiving funds through government credit programmes.
    • Be permitted to receive consumptive credit (e.g. mortgage loans, vehicle loans, credit cards, etc.).
    • Have a repayment certificate (Surat Keterangan Lunas) from the bank, if an UMKMK is listed on the BI Debtor Information System but has already paid off the loan.
    • For Micro KUR, it is not necessary to check BI Debtor Information System.

The decision to give KUR is under the full authority of participating banks, as per the feasibility analysis of a potential KUR recipient.

  1. What are the general requirements for UMKMK to receive KUR?
    Legal documents and permits that UMKMK must submit to banks distributing KUR include:
    1. Identification documents (e.g. identity card, driving license and family card)
    2. Business/venture legal documents (e.g. deed of establishment, deed of alteration)
    3. Business permit (e.g. venture permit/SIU, company registration document/TDP, certificate of domicile/SK Domisili)
    4. Accounting records or financial statements
    5. Proof of collateral
  1. Can debtors who have received and paid off KUR submit a new request for KUR?
    KUR debtor who had received and paid off KUR are allowed to submit a new KUR request, as long as the debtor is not yet bankable.
  1. What are the mechanisms for KUR implementation?
    KUR implementation mechanisms are shown below:

       Mekanisme Pelaksanaan Program KUR

14. What are the mechanisms of KUR distribution?

       KUR distribution mechanisms system:

  • Directly to UMKMK from participating banks.
  • Indirectly through linkage institutions by executing patterns.
  • Indirectly, through linkage institutions by channelling patterns.

       KUR distributing schemes provided directly to UMKMK are shown below:

        Skema Penyalur KUR

           Note:

a =    Bank carried out individual assessment on prospective KUR debtor. When debtor is assessed as feasible and    approved by the participating bank, the KUR debtor signs a credit agreement

b =    Bank applies for a guarantee to guarantor company

KUR distributing scheme carried out indirectly through linkage institution by “executing” patterns are shown below:

        

Note:

a =    Linkage institution applies for credit/financing to participating bank

b =    Participating bank checks debtor information system and conducts feasibility analysis. When considered feasible and approved, the participating bank signs credit/financing agreement with linkage institution.

c =    Participating bank applies request for credit/financing guarantee to guarantor company.

d =    Linkage institution distributes credit/financing received from participating bank to UMKMK from linkage institution.

e =    UMKMK debtor repays credit/financing obligation to linkage institution.

f =    Linkage institution is responsible for the KUR repayment to the participating bank.

KUR distributing scheme carried out indirectly through linkage institution by channelling pattern is as following:

        

Explanation:

a =    To obtain credit/financing from a participating bank, UMKMK authorises the board of linkage institution to submit a credit request and offers collateral to the participating bank.

b =    Linkage institution representing UMKMK submits credit request to the participating bank.

c =    Participating bank checks debtor information system and conducts feasibility analysis. When UMKMK is considered feasible and approved by the participating bank:

        1. Based on the authority of the participating bank, the linkage institution signs Credit/ Financing Agreement with UMKMK.
        2. Based on the authority of the UMKMK, the linkage institution signs a credit/financing agreement with the participating bank.

d =    Bank submits guarantee request to guarantor company.

e =    Linkage institution forwards the credit/financing loan received from the participating bank to UMKMK debtor. UMKMK debtor pays the payment obligations to the participating bank through the linkage institution. UMKMK is responsible for the KUR payments to the participating bank.

15. Which institutions are linkage institutions?

Linkage institutions are secondary cooperatives, primary cooperatives (savings and loan cooperatives, savings and loan cooperative units), village credit agencies (BKD), Baitul Mal Wa Tanwil (BMT), Syariah/people’s credit banks (BPR/BPRS), non-bank financial institutions, venture groups, micro finance institutions.

16. What are the conditions of KUR distribution to linkage institutions by executing patterns?

The conditions of KUR distribution to linkage institutions by executing patterns are as follows:

  • Linkage institutions must not be receiving credit/financing from banks.
  • Linkage institutions must not be receiving credit/financing from government credit programmes.
  • A maximum of Rp. 1 billion can be given by participating banks to linkage institutions, with maturities in accordance with KUR provisions.
  • KUR interest rate from participating banks to linkage institutions is a maximum of 14 percent per annum.
  • The interest rate and credit/financing limit from linkage institution to UMKMK is set at a maximum of 22 percent per annum, and a maximum of Rp 100 million per debtor.
  • Linkage institutions are responsible for KUR repayments received from participating banks.
  • KUR guaranteed by a guarantor company constitutes as KUR received by linkage institutions included in the guaranteed criteria, in accordance with the cooperation agreement between the participating bank and guarantor company.

17. What are the conditions of KUR distribution to linkage institutions by channelling patterns?

The conditions of KUR distribution to linkage institutions by channelling patterns are as follows:

  • Linkage institutions are allowed to obtaining credit/financing from banks and government credit programmes.
  • The amount of KUR distributed by participating banks is in accordance with a prospective debtor’s nominative list, as submitted by the linkage institution.
  • KUR credit limits, interest rates and duration through linkage institution to the debtor must comply with conditions for retail KUR and micro KUR.
  • Following KUR distribution, linkage institutions have the right to obtain fees from the participating banks, the amount of which is decided based on the agreement with the participating banks.
  • KUR debtors are responsible for KUR repayments.
  • The amount of credit guaranteed by guarantor company is in accordance with the amount received by KUR debtor.

18. What are the KUR credit limits for UMKMK?

KUR credit limits for UMKMK are:

  • Micro KUR: a maximum of Rp. 5 million.
  • Retail KUR: Rp. 5 million to Rp. 500 million.

19. How long is the period given over KUR facility that is received by debtor? Can the already existing KUR be extended or be given additional loan limit?
KUR debtor can be given KUR funds for a maximum of three years for working capital and five year for investments. Extensions can be given before a loan is repaid, under the following conditions:

  • Debtor cannot be categorised as bankable.
  • Total loan amount, after any additions, does not exceed Rp. 5 million for micro KUR and Rp. 500 million for retail KUR, or Rp. 1 billion for KUR given to linkage institutions by executing patterns.
  • Other conditions for micro KUR, retail KUR or KUR through linkage institutions.

20. What is the interest rate for KUR?

The interest rate for micro KUR is a maximum of 22 percent per annum, and a maximum of 14% per annum for retail KUR.

21. What proof of collateral must UMKMK submit to banks?

UMKMK can submit collateral to banks in the form of:

  • Principal collateral, namely business feasibility and financed objects.
  • Additional Collateral, in accordance with the conditions of participating banks, such as land certificates, car registrations, etc.

22. What are the obligations of KUR debtors, and what are the consequences if they do not meet the KUR  obligations?

KUR debtors have the following obligations:

  • Fulfil KUR requirements with the participating bank.
  • Submit collateral to the bank.
  • Pay the KUR obligations (loan principal and interest) as agreed with the bank, and until the credit is fully repaid.
  • If a UMKMK debtor does not repay the KUR obligation, then:
    • The participating bank will carry out a collateral sale. If the collateral sale value is insufficient, then the debtor must still repay the KUR.
    • The UMKMK will be registered by the Bank of Indonesia as a blacklisted debtor.

23. What roles do technical ministries play in KUR distribution?
The roles of technical ministries in KUR distribution are as follows:

  • Fulfil KUR requirements with the participating bank.
  • Submit collateral to the bank.
  • Pay the KUR obligations (loan principal and interest) as agreed with the bank, and until the credit is fully repaid.
  • If a UMKMK debtor does not repay the KUR obligation, then:
    • The participating bank will carry out a collateral sale. If the collateral sale value is insufficient, then the debtor must still repay the KUR.
    • The UMKMK will be registered by the Bank of Indonesia as a blacklisted debtor.
  • Prepare UMKMK that are eligible for KUR financing.
  • Establish policies and priorities for businesses that will receiving KUR guarantees.
  • Carry out guidance and assistance to UMKMK that have been rejected by participating banks.
  • Facilitate relationships between UMKMK and other parties, such as the core companies/off-takers that contribute and support the smooth running of businesses.
  • Steps that need to be taken include:
    • Prepare work plans to support KUR implementation (preparation of prospective KUR recipients, guidance and advice during the credit/financing period, and provision of facilitation with other parties, particularly the regional governments that support the smooth running of UMKMKs).
    • Incorporate work plans that support KUR implementation, in accordance with the main duties and functions of ministries/institutions, as per draft work plan designs and proposed budgets.
    • Further regulations regarding planning activities related to KUR implementation can be formulated in separate SOP by ministries.

24. Can UMKMK that have been guided or recommended by technical ministries obtain KUR approval immediately?

If a UMKMK is declared by the participating bank as feasible and having fulfilled all KUR provisions and requirements, the KUR can be given to the UMKMK.

25. Is KUR a grant from the government to the community? Where do the funds come from?

KUR do not constitute as government grants to communities. As previously defined, KUR is a credit/financing facility for micro, small and medium enterprises and cooperatives (UMKMK). UMKMK’s are obliged to repay KUR to the bank providing the KUR. KUR money does not come from the government, but from banks. As such, it is distributed through banking mechanisms and must be repaid in accordance with banking conditions. KUR funds stem 100 percent from participating banks, accumulated from public funds in the form of current account, savings and deposits.

26. What are the benefits of KUR?

UMKMK benefit from KUR as it provides them with funding needed to expand their business venture. For the government, KUR is a mark of real sector development and UMKMK empowerment to alleviate poverty and expand job opportunities and economic growth.

27. How is KUR implementation supervised?

The government, through the Financial and Development Supervisory Agency (BPKP), will provide preventative supervision and implement selective verification, while the Bank of Indonesia will supervise participating banks in their capacity as bank supervisors.

28. What are the challenges in implementing the KUR programme?

The challenges faced in implementing the KUR programme are:

  1. There is still room to increase the credit absorption by UMKMKs. For example, out of a total amount of Rp. 17.23 trillion, only around 46.7 percent, or about Rp. 8.05 trillion, was absorbed by December 2010. The total number of debtors (business units) receiving KUR was 1,437,650. Although this figure improved in 2011, it still remains a challenge.
  2. There is still room to increase credit distribution among different sectors. The agricultural sector and processing industry are sectors with the potential for greater credit distribution. So far, the trade, hotel and restaurant sectors have been dominant in obtaining financing.
  3. Increasing the role of regional poverty alleviation coordination teams (TKPKD) in implementing coordination and control for poverty alleviation programmes is very important, considering that the implementation of such programmes involves several related ministries and institutions.

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