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The Government Investment Center of the Ministry of Finance and PT Pegadaian signed a cooperation document for an Rp400-billion ultra micro financing scheme (UMi) in Jakarta on Thursday (June 25, 2020). (ANTARA/Finance Ministry Information Services and Communication Bureau)

The Government Investment Center of the Ministry of Finance has launched a Rp400-billion ultra micro financing scheme (UMi) to help sustain Micro, Small and Medium Enterprises (MSMEs) in wake of the COVID-19 pandemic.

The scheme will be carried out in cooperation with PT Pegadaian, which will extend the UMi facility to micro businesses.

The distribution of ultra microcredit would serve to demonstrate the government’s commitment and its role in supporting the National Economic Recovery Program, said Ririn Kadariyah, managing director of the Government Investment Center, Ministry of Finance, on Thursday in Jakarta.

"We have gone all out as a Public Service Agency (BLU) and State-Owned Enterprise, which are micro-business actors, (to) collaborate and support the National Economic Recovery Program," Kadariyah said after signing the collaboration document with the president director of Pegadaian.

She said the distribution of Rp400 billion in UMi funding will be carried out by Pegadaian to support micro businesses, which are yet to have full access to the banking sector, with a grace period of six months offered for loans.

"Of the Rp400 billion, Rp100 billion will be in the form of sharia financing, which is the first handover from the Government Investment Center to Pegadaian. I really appreciate Pegadaian's cooperation in this program," she said.

The policy of supporting MSMEs is deemed a strategic step as the sector has been one of the most affected by COVID-19 and contributes significantly to the national economy — around 57 percent of the Gross Domestic Product (GDP).

The government has formulated several policies to help support MSMEs amid the COVID-19 pandemic, including provision of tax incentives, credit restructuring and relaxation, interest subsidies, and business capital credit assistance.

Meanwhile, president director of PT Pegadaian, Kuswiyoto, said he is committed to reviving micro businesses affected by COVID-19 through the distribution of UMi alongside other parties, including PT PNM and PT Bahana Artha Ventura.

"Pegadaian is carrying out the Government Investment Center program through its UMi Creation program to provide loan facilities to micro businesses that have difficulty accessing financing from banks," he elaborated.

Pegadaian also plans to start other financing schemes for MSMEs in 2020, including distribution of UMi through KCA-UMi pawn products under conventional schemes and Rahn-UMi under Sharia schemes, he added.

As of June 24 this year, Pegadaian has provided Rp618.36 billion in UMi to more than 93,604 debtors, he stated. Through funding of Rp400 billion under the first phase, in the remaining months of 2020, the company is expected to be able to pursue a distribution target of Rp1.2 trillion by the end of the year.

Pegadaian, a non-banking financial institution that provides UMi financing, has a significantly wide network of 4,000 operational outlets and a customer base of 14 million across Indonesia. (ANTARA)