World Bank backs $750m Indonesia small-business loans

The World Bank announced on Thursday that it was providing $750 million in financial guarantees for financing to Indonesia's Bank Mandiri, with the money to be channelled into a government low-interest loan programme for small businesses.

HSBC will provide the loan to Indonesia's largest state-owned commercial bank in two tranches over a three-year term. The financing is backed by the Multilateral Investment Guarantee Agency, an arm of the World Bank Group.

The funds will be used for Indonesia's Kredit Usaha Rakyat, or People's Business Credit, programme. The programme provides loans to micro, small and medium-sized businesses, which account for roughly 60% of Indonesia's $1.45 trillion GDP and employ most of the country's labour force.

The World Bank said proceeds from the loan would help finance and refinance loans to retail and service-sector businesses, street vendors, farmers and fishermen.

Indonesian finance ministry data showed the KUR programme had reached 2.65 million people and businesses and disbursed 169 trillion rupiah, or $9.4 billion, as of July 22 this year.

The World Bank said women own or manage an estimated 65% of Indonesia's micro, small and medium-sized businesses, and said Bank Mandiri had committed to a Gender Action Plan to expand lending to women-owned businesses.