REPUBLIKA.CO.ID, PRAYA -- Bank Indonesia (BI) has ruled that all banks in Indonesia are required to set aside 20 percent of their credits for small and medium sized businesses (UMKM) to boost economic growth.

The regulation would be implemented by phases from 2015 to 2018, Senior Deputy Governor of the central bank Mirza Adityaswara said in this Central Lombok municipal city on Saturday.

"Starting next year all Indonesian banks are required to set aside 5 percent of their credit for small and medium sized enterprises (UMKM) and in the following year the percentage is raised to 10 percent and in to 20percent in 2018," Adityaswara said.

Banks failing to comply with the regulation would be sanctioned, he said. Some banks already offered credits for UMKM but the percentages were varying, he said.

Some had even provided up to 50 percent of their credits for UMKM but some only 1 percent, Adityaswara added. The interest rate on loan for small and medium sized enterprises would follow the market level as the bank funds also come from the market, he said.

Adityaswara said the central bank encourages banks to offer larger credits for UMKM but must remain prudent in preventing non performing credits (NPL). He added that  the NPL of UMKM is now higher than the national average. 

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