Financing SMEs and Entrepreneurs 2026: Indonesia
Table of contents
Based on National Labour Force Survey (Sakernas), published by the Ministry of Micro, Small, and Medium Enterprises (MSMEs) of the Republic of Indonesia, the number of MSMEs reached 56,142,687 units in 2024, representing 99.90% of the total business population. MSMEs contributed 59.64% to the national Gross Domestic Product (GDP) in 2024, underscoring their significant and strategic role in Indonesia’s economic development.
Outstanding loans to MSMEs recorded a slight decline of 0.30% y-o-y in 2025, decreasing from IDR 1,506.29 trillion in 2024 to IDR 1,501.73 trillion in 2025. Furthermore, the share of MSME loans in total outstanding loans has shown a declining trend over the past five years, falling from 22.02% in 2021 to 17.49% in 2025, with an average yearly share of approximately 20,06%.
Over the last three years (2023–2025), non-performing loans (NPLs) for total businesses have declined from 2.19% to 2.05%. In contrast, NPLs from MSMEs have increased from 3.71% to 4.33%.
Outstanding loans granted by finance companies to all businesses increased slightly by 0.61% in 2025. However, financing to MSMEs declined significantly by 17.64%, falling from IDR 180.48 trillion in 2024 to IDR 148.65 trillion in 2025. Consequently, the MSME share of total financing decreased from 34.09% to 27.90%. The proportion of short-term MSME financing in total outstanding MSME financing by finance companies also declined sharply, from 16.23% in 2024 to 2.40% in 2025.
Interest rates of loans provided by finance companies to MSMEs increased from 20.35% in 2024 to 20.53% in 2025. In contrast, the financing rates to large firms declined from 14.45% to 13.67%. Consequently, the interest rate spread widened from 5.90% to 6.87%.
As an alternative source of MSME financing, apart from finance companies, venture capital companies can also play an important role in the growth and development of MSMEs. However, in Indonesia, venture and growth capital financing remained relatively stagnant over the past three years, with fluctuating amounts of IDR 17.03 trillion in 2023, IDR 16.48 trillion in 2024, then IDR 16.58 trillion in 2025, representing a decrease of 2.64% during those years.
Other non-bank finance indicators recorded a modest decline in 2025 compared to 2023. Leasing and hire purchases contracted by 1.49% over the period, while factoring activities also exhibited a similar trend, declining by 3.16%.
Access to finance remains a challenge for many SMEs in Indonesia. To address this issue, the Government of Indonesia continues to support SME financing through the People’s Business Credit Programme (Kredit Usaha Rakyat – KUR) and other financing schemes aimed at improving access to affordable credit and supporting SME growth.
Note: This table contains data from both bank and non-bank sources. Due to availability, post-2016 data includes non-bank data. Another table that includes only non-bank data can be found in the “Non-bank sources of SME financing” part of the full profile. Sources: See Table 5
Based on data published by the Ministry of Micro, Small, and Medium Enterprises (MSMEs) of The Republic of Indonesia, there were 56.142.687 MSMEs in 2024, which made up 99.90% of the total business population. They contribute 59,64% to national GDP in 2024, demonstrating that MSMEs have an important and strategic role in the national economy.
To respond to the challenges faced by MSMEs, the Indonesian government issued Government Regulation (PP) Number 7 of 2021 concerning Ease, Protection, and Empowerment of Cooperatives and Micro, Small and Medium Enterprises. This is a derivative regulation of the Job Creation Law which was validated in 2020. This regulation is expected to provide wider opportunity for MSMEs to grow and develop.
Note: Based on Government Regulation (PP) Number 7 of 2021 for the classification criteria for micro, small, medium, and large enterprises in Indonesia.
Source: Statistics Indonesia (Badan Pusat Statistik)
Based on data reported by commercial banks to Indonesia Financial Services Authority (Otoritas Jasa Keuangan / OJK), outstanding loans to all businesses increased by 9.69% year-on-year (y-o-y) in 2025 (IDR 8,585.83 trillion), with 17.49% of this amount (IDR 1,501.73 trillion) was allocated to micro, small, and medium-sized enterprises (MSMEs).
Over the past ten years (2016–2025), outstanding loans have generally shown positive growth with an average annual growth rate of 7.85% total loans and 6.83% MSME loans. However, a contraction occurred in 2020, which is likely contributed by the COVID-19 pandemic.
Outstanding loans to MSMEs recorded a slight decline of 0.30% y-o-y in 2025, decreasing from IDR 1,506.29 trillion in 2024 to IDR 1,501.73 trillion in 2025. Furthermore, the share of MSME loans in total outstanding loans has shown a declining trend over the past five years, falling from 22.02% in 2021 to 17.49% in 2025, with an average yearly share of approximately 20,06%.
Over the last three years (2023–2025), non-performing loans (NPLs) for total businesses have declined from 2.19% to 2.05%. In contrast, NPLs from MSMEs have increased from 3.71% to 4.33%.
During the 2016–2025 period, lending interest rates exhibited a downward trend. Interest rates declined by 3.07% for MSMEs (from 13.59% to 10.52%) and by 4.28% for large companies (from 12.16% to 7.88%). Despite the large decline in MSME interest rates, MSMEs continue to face higher borrowing costs compared to large companies. In 2025, interest rates for MSMEs stood at 10.52%, while those for large corporations were recorded at 7.88%, resulting in an interest rate spread of 2.64%. Over the past five years, the interest rate spread has averaged approximately 2.26%, widening from 1.53% in 2021. This spread shows an increasing trend, as it consistently remained below 2% during the 2016–2020 period.
Outstanding loans granted by finance companies to all businesses slightly increased by 0.61% in 2025. However, financing to MSMEs declined significantly by 17.64%, falling from IDR 180.48 trillion in 2024 to IDR 148.65 trillion in 2025. Consequently, the MSME share of total financing also declined, falling from 34.09% to 27.90%.
The proportion of short-term MSME financing in total outstanding MSME financing by the finance companies declined markedly, decreasing from 16.23% in 2024 to 2.40% in 2025.
The MSME NPL rate for finance companies increased to 2.83% in 2025, compared to 2.32% in 2024, 2.40% in 2023, and 2.14% in 2022. Nevertheless, this rate remained lower than the MSME NPL rate observed in commercial banks.
Interest rates of loans provided by finance companies to MSMEs increased from 20.35% in 2024 to 20.53% in 2025. In contrast, the financing rates to large firms declined from 14.45% to 13.67%. Consequently, the interest rate spread widened from 5.90% to 6.87%.
As part of the financing provided by the finance companies, leasing and hire purchases increased slightly from IDR 48.23 trillion in 2024 to IDR 48.63 trillion in 2025. Meanwhile, financing for factoring and invoice discounting declined from IDR 5.20 trillion in 2024 to IDR 4.14 trillion in 2025.
As an alternative source of MSME financing, apart from finance companies, venture capital companies can also play a role. However, venture and growth capital financing remained relatively stagnant over the past three years, with fluctuating amounts of IDR 17.03 trillion in 2023, IDR 16.48 trillion in 2024, then IDR 16.58 trillion in 2025, representing a decrease of 2.64% during those years. Over this period, the average growth rate was recorded at -2.09%.
Other non-bank finance indicators recorded a modest decline in 2025 compared to 2023. Leasing and hire purchases contracted by 1.49% over the period, while factoring activities also exhibited a similar trend, declining by 3.16%.
The People’s Business Credit programme (Kredit Usaha Rakyat – KUR) is a government-supported financing scheme aimed at expanding access to credit for micro, small, and medium enterprises, which is channelled through financial institutions under a credit guarantee scheme. The KUR programme is intended to strengthen the capital capacity of businesses in support of policies to accelerate the development of the real sector and empower MSMEs. The amount of KUR disbursement could contribute to increasing economic activity and productivity that would raise earnings and reduce poverty. KUR programme was started in 2007 by giving subsidies on the guarantee fee for micro-financing debtors. This kind of subsidy policy lasted for 7 (seven) years and was replaced with a measure that consisted of giving subsidies on the difference in the interest rate from the market until now, so the debtors only pay a 6% interest rate.
The KUR programme consists of several schemes that differ according to the amount of financing and its purposes: there are KUR Super Micro (KUR Super Mikro), KUR Micro (KUR Mikro), KUR Small (KUR Kecil), KUR Cluster (KUR Klaster) and KUR for Migrant workers. KUR Super Micro is intended for ultra-micro entrepreneurs and new business actors, including productive housewives and workers affected by layoffs during the COVID-19 pandemic. This scheme also supports businesses that have been operating for less than six months. KUR Micro supports micro enterprises seeking to expand their operations, while KUR Kecil is aimed at more established small businesses with larger financing needs. Special KUR (KUR Khusus) focuses on MSMEs operating within production clusters or integrated value chains in sectors such as agriculture, fisheries, plantations, and livestock. Meanwhile, KUR for Indonesian migrant workers provides financing to support the costs associated with overseas employment.
In terms of loan ceilings, KUR Super Micro provides financing of up to IDR 10 million, while KUR Micro ranges from above IDR 10 million to IDR 100 million and KUR Kecil ranges from above IDR 100 million to IDR 500 million. KUR for Indonesian migrant workers (PMI) provides financing of up to IDR 100 million to support placement and related costs. Special KUR can also provide financing of up to IDR 500 million, depending on the characteristics of the cluster and business needs. The implementation of the Kredit Usaha Rakyat (KUR) programme has shown a generally increasing trend since 2015. KUR disbursement increased steadily from IDR 22.75 trillion in 2015 and reached its peak realisation of IDR 365.5 trillion in 2022. This upward trajectory was driven by policy measures aimed at strengthening MSME financing and supporting economic recovery during the COVID-19 pandemic.
Following the peak in 2022, KUR disbursement gradually normalised in line with adjustments to programme policies. In 2025, the realisation of KUR disbursement reached IDR 270.08 trillion, equivalent to 96.4 per cent of the annual target of IDR 280.15 trillion, benefiting approximately 4.59 million borrowers.
As of 31 December 2025, the total outstanding KUR portfolio reached IDR 460 trillion, serving 53.90 million cumulative borrowers since the programme’s expansion. The non-performing loan (NPL) ratio remained relatively low at 2.19 per cent, indicating that the programme has maintained sound credit quality while continuing to expand financial access for MSMEs across Indonesia.
Source: Statistics Indonesia (Badan Pusat Statistik)
During the period 2020–2024, disbursement under the People’s Business Credit Programme (Kredit Usaha Rakyat – KUR) increased significantly, reflecting the government’s efforts to support MSMEs during and after the COVID-19 pandemic. KUR disbursement rose from IDR 198.53 trillion in 2020 to IDR 282.20 trillion in 2021, and further increased to IDR 365.50 trillion in 2022, marking the highest level in the period. This sharp increase was largely driven by government stimulus measures, including expanded KUR quotas and additional interest subsidies introduced to support MSMEs during the economic recovery. Disbursement declined to IDR 260.09 trillion in 2023, before recovering to IDR 282.44 trillion in 2024.
Meanwhile, KUR outstanding loans increased significantly from IDR 231.22 trillion in 2020 to IDR 344.80 trillion in 2021, reaching a peak of IDR 490 trillion in 2022. After this peak, outstanding loans slightly declined to IDR 482 trillion in 2023 and IDR 481 trillion in 2024, indicating a stabilisation of the KUR portfolio in recent years.
Following the directive of the President of the Republic of Indonesia, the Government set a 2025 target of IDR 298.92 trillion for the Government Credit Programme. The allocation comprised IDR 280.15 trillion for People’s Business Credit (KUR). By the end of 2025, disbursement for KUR consisted of IDR 270.08 trillion, demonstrating strong performance, accounting for the majority of the credit programme.
Approximately 60.71% of KUR disbursements were directed towards the production sector. The scheme reached 2.4 million new borrowers, supported the graduation of 1.3 million MSMEs to higher financing tiers, and contributed to the employment of approximately 13.77 million workers.
The number of borrowers under the Kredit Usaha Rakyat (KUR) programme has shown a significant expansion since the programme’s scaling-up in 2015. The total number of borrowers increased from around 1 million in 2015 to a peak of 7.62 million in 2022.
This upward trend reflects the government’s continued efforts to expand financial access for Micro, Small, and Medium Enterprises (MSMEs), supported by various policy measures aimed at strengthening KUR distribution. In particular, during the COVID-19 pandemic, the programme played an important role in supporting business resilience and economic recovery by widening access to subsidised credit for small businesses.
Following the peak in 2022, the number of KUR borrowers adjusted to around 4.6–4.9 million borrowers annually during the 2023-2025 period. This adjustment reflects the normalisation of KUR policies after the pandemic stimulus period, as well as an increase in the average loan size per borrower. As a result, while the total number of borrowers moderated, the programme continues to support MSMEs through more productive and sustainable financing.
In terms of distribution by scheme, the majority of borrowers in 2025 were concentrated in the KUR Micro scheme, accounting for 4,213,076 borrowers or approximately 69.83% of the total borrowers. This highlights the programme’s strong focus on micro-scale enterprises, which constitute the largest segment of MSMEs in Indonesia.
Meanwhile, the KUR Small scheme accounted for 326,923 borrowers (29.98%), indicating the presence of enterprises that have expanded their financing needs as their businesses grow. Other schemes—including KUR Super Micro, KUR for Indonesian Migrant Workers (PMI), and KUR Special—represented a relatively small share of borrowers, collectively accounting for less than one per cent of total beneficiaries, as these schemes are designed to target more specific segments of borrowers.
Efforts to increase MSME access to finance is promoted form both supply and demand side through MSMEs financial literacy. The low awareness of MSMEs financial records causes asymmetric information between banks and MSMEs, which affects the lending to MSMEs. One effort is by promoting MSMEs financial management capacity through utilisation of digital applications for transaction recordings. Financial literacy in general is also promoted, education programmes are conducted covering various areas such as digital payments, increasing awareness for non-cash transaction, and general financial education including financial knowledge, financial and investment planning, and consumer protection.
Based on the Government Regulation Number 7 of 2021 Concerning Ease, Protection, and Empowerment of Cooperatives and Micro, Small and Medium Enterprises, SMEs/MSMEs are defined as enterprises with a maximum turnover of IDR 50 billion or maximum assets (excluding building land asset) of IDR 10 billion. The detailed classification is:
Micro-enterprise: business with maximum turnover of IDR 2 billion or assets (excluding land and building assets) maximum of IDR 1 billion
Small enterprise: business with a turnover more than IDR 2 billion up to the most IDR 15 billion or assets (excluding land and building assets) more than IDR 1 billion up to the most IDR 5 billion.
Medium enterprise: business with a turnover more than IDR 15 billion up to the most IDR 50 billion or assets (excluding land and building assets) more than IDR 5 billion up to the most IDR 10 billion
Large enterprise: business with a turnover above IDR 50 billion or assets (excluding land and building assets) above IDR 10 billion
Data covering the 2007-2009 period are not comparable with the 2010-2019 period because the methodology used to define MSMEs changed. The data used in 2007-2009 uses ceiling loans.
At the Coordination Meeting of the Committee for MSME Financing Policy held on 17 November 2025, and taking into account the available fiscal envelope for interest subsidies/margin subsidies, the 2026 target for Government Credit Program was set at IDR 332 trillion. The allocation comprises a ceiling of up to IDR 295 trillion for People’s Business Credit (KUR), up to IDR 300 billion for Agricultural Machinery and Equipment Credit (Kredit Alsintan), up to IDR 500 billion for Labour-Intensive Industry Credit (KIPK), and up to IDR 36 trillion for the Housing Credit Program.
The policy direction for KUR in 2026 is focused on generating tangible economic impact while ensuring the sustainability of MSME financing. These policy measures are stipulated under Regulation of the Co-ordinating Minister for Economic Affairs No. 1/2026. Key policy measures include:
Prioritisation of production and export-oriented trade sectors. Production activities and export-oriented trade are designated as primary priorities under the 2026 KUR policy, reflecting their strategic role in driving economic growth and employment creation.
Regulatory relaxation to enhance financing flexibility. KUR 2026 introduces policy relaxations through maintaining affordable interest rates, removing limits on the frequency of loan agreements, and eliminating cumulative withdrawal ceilings. These measures aim to provide greater certainty and financing flexibility for productive enterprises to scale up operations and expand market access, including export markets.
Interest rate policy and sectoral allocation targets. The interest rate/margin for Micro and Small KUR is maintained at 6% per annum (effective rate). In addition, restrictions on repeated access to KUR are lifted for production and export-oriented trade sectors. The minimum share of KUR disbursement allocated to the production sector is increased from 60% to at least 65%.
Strengthening graduation and portfolio quality. To maintain lending quality, the Government continues to promote enterprise upgrading and graduation. For 2026, the programme sets a minimum target of 1.37 million new KUR borrowers and at least 1.1 million graduating borrowers. Expansion of eligible collateral through Intellectual Property (IP). In line with Indonesia’s economic transformation towards an innovation and creativity based economy, KUR 2026 recognises Intellectual Property (IP) as eligible additional collateral. This policy is expected to support KUR disbursements to the creative economy sector of up to IDR 10 trillion in 2026.
In 2025, a tropical cyclone brought heavy rainfall, strong winds, and high tides to parts of Indonesia, particularly Sumatra, leading to floods, flash floods, and landslides that disrupted economic activities and community livelihoods. The provinces of Aceh, North Sumatra, and West Sumatra were among the areas experiencing significant impacts, prompting authorities to implement response and recovery measures.
In line with the national KUR policy framework, the Government has also responded to the need for targeted measures in disaster-affected regions. At the Co-ordination Meeting of the Committee for MSME Financing Policy on 16 December 2025, a Post-Disaster KUR policy was established for the Provinces of Aceh, North Sumatra, and West Sumatra. The policy is stipulated under Regulation of the Co-ordinating Ministry for Economic Affairs No. 2/2026 on the Implementation Guidelines for Post-Disaster KUR. The Post-Disaster KUR framework is structured into three phases.
First phase – Impact assessment period (24 November 2025 to 31 March 2026)
During this period, KUR borrowers in the three provinces are temporarily exempted from principal and interest repayments. Participating financial institutions and guarantee companies do not receive repayments nor submit claims. The Government continues to provide regular interest/margin subsidies, while borrowers’ loan collectability status is maintained at the pre-disaster level.
Second phase – Relaxation period (1 April 2026 to 31 December 2027)
The Government provides restructuring measures, including tenor extension and/or supplementary financing, grace periods, and a reduced interest/margin rate of 0% in 2026 and 3% in 2027 through additional interest/margin subsidies. In cases where business activities cannot be resumed, proposed write-off of outstanding KUR obligations.
Third phase – Recovery acceleration period for new KUR lending
Effective from the enactment of the Post-Disaster KUR Regulation until 31 December 2027, the policy facilitates new KUR disbursements through grace periods, relaxed application requirements, eased additional collateral requirements, relaxation of participation requirements in the national employment social security scheme, and/or interest/margin relief.
References
Ministry of Micro, Small and Medium Enterprises (MSMEs), Republic of Indonesia, Database from Ministry of MSMEs
The Coordinating Ministry for Economic Affairs Republic of Indonesia, Database from Coordinating Ministry for Economic Affairs Republic of Indonesia
Indonesia Financial Services Authority (OJK), Database from Indonesia Financial Services Authority (OJK)
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Please cite this publication as: OECD (2026), Financing SMEs and Entrepreneurs 2026: An OECD Scoreboard, OECD Publishing, Paris, https://doi.org/10.1787/075d8058-en
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