Indonesia has reduced interest rates on micro-enterprise loans to 8%, a policy move designed to stimulate lending to micro, small, and medium enterprises (MSMEs) amid weakening economic momentum.
Finance Minister Purbaya Yudhi Sadewa confirmed the rate cut, signaling a direct government effort to ease financing constraints for the backbone of the Indonesian economy.
The decision comes as domestic economic indicators show signs of strain.
Indonesia’s manufacturing sector contracted in June, with the Purchasing Managers’ Index (PMI) falling to 46.9, a reading below the 50.0 threshold that separates expansion from contraction.
This downturn suggests that industrial activity is slowing, putting pressure on small businesses that rely on credit to maintain operations and inventory.
Financial institutions have also become more cautious in their lending practices.