Indonesia grapples with a pronounced financial inclusion deficit, particularly among Micro, Small, and
Medium Enterprises (MSMEs), as evidenced by a substantial financing gap. Many MSMEs struggle to
obtain financing due to the “missing middle” phenomenon, being too large for microfinance institutions
yet too small and risky for formal financial institutions. Indonesian MSMEs encounter a multifaceted
array of obstacles, including overreliance on traditional collateral, insufficient and fragmented credit
information, deteriorating credit scores exacerbated by FinTech lending and an overabundance of
credit rating agencies, and prevalent deficiencies in financial and digital literacy.
Research indicates that overcoming these challenges can improve MSMEs’ access to credit. For
instance, registering movable assets can enhance bank financing access. In Indonesia, the law on
fiduciary guarantees regulates the use of movable property as collateral for loans. Examples of
movable collateral include commodities, warehouse receipts, gold, and intellectual property. However,
implementation remains challenging due to a lack of supporting infrastructure and ecosystems. Sharing
credit information and innovative credit assessment methods have also proven crucial in facilitating
credit access.
To address MSME credit access, recommendations include diversifying collateral types, unifying credit
information, expanding credit information scope through Information System for Financial Information
Recording Application (SI-APIK), partnerships with large companies, registering Business Identification
Numbers, utilizing Quick Response Indonesian Standard (QRIS), and implementing Innovative Credit
Scoring (ICS). Revisions to rigid credit assessments and encouraging credit improvements are also
crucial to overcoming MSME limitations in obtaining financing. Additionally, promoting financial and
digital literacy related to credit, FinTech, financial management, and collateral is critical for enhancing
MSMEs’ financial and digital literacy.
Accordingly, regulatory reforms are imperative to establish a comprehensive and standardized
ecosystem facilitating the use of movable assets, such as commodities, warehouse receipts, gold,
and intellectual property, as collateral. This should involve integrating relevant credit information and
implementing comprehensive ICS regulations. Furthermore, developing SI APIK for recording MSME
financial reports and establishing a system utilizing QRIS for credit assessment is crucial. These will
facilitate financing recommendations through MSME-large company collaborations in supply chains.
Further, it is essential to encourage the creation of a unique digital ID for business actors, integrating
Business Identification Number (NIB) information with financial institutions. Relaxing credit rating
policies, extending structuring periods, and considering debt write-offs while accounting for moral
hazard factors are vital for improving MSME credit ratings.
Lastly, financial institutions should enhance their Corporate Social Responsibility (CSR) efforts to
improve MSME financial and digital literacy. These adjustments aim to improve MSME credit information,
encourage credit collateral diversification, and ultimately enhance financial access and promote
Indonesia’s financial sector development.
Download Full Paper Here: Policy Paper 2 – Increasing MSME Access to Credit Through Collateral Assets and Credit Information System