The government’s plan to write off books and write off bad credit claims for MSMEs could be inviting moral hazard for debtors.
Paul Sutaryono
Assistant Vice President BNI (2005-2009)
A breath of fresh air soon blew in the banking industry. The government will write off books and write off bad debts on micro, small and medium enterprises (MSMEs). What are the benefits? What factors must be met so that the effort runs smoothly?
Indonesian Banking Statistics (SPI) published by the Financial Services Authority (OJK) on November 3 2023 showed that MSME credit increased by 8.9 percent, from IDR 1,296.93 trillion as of August 2022 to IDR 1,412.39 trillion as of August 2023. This growth figure increased 7.6 percent compared to the previous month, July 2023.
The total MSME credit amounting to IDR 1,412.39 trillion includes working capital credit which rose 5.06 percent, from IDR 983.16 trillion to IDR 1,032.93 trillion. Investment credit also increased significantly by 20.93 percent, from IDR 313.77 trillion to IDR 379.45 trillion. Non-performing loans (NPL) improved, from 4.09 percent to 3.99 percent, which is still below the safe threshold of 5 percent.
It is appropriate that MSME credit, which will be written off and written off, is bad credit. Unfortunately, SPI does not provide data on the number of bad loans for MSMEs. According to Coordinating Minister for the Economy Airlangga Hartarto, the number of MSMEs with bad credit is 246,324 debtors. So what key success factors must be met so that the write-off and write-off of bad debts for MSMEs can run smoothly?
OJK Regulation Number 40/POJK.03/2019 concerning Commercial Bank Asset Quality Assessment which is effective as of January 1 2020 only regulates write-offs, excluding write-offs. This regulation stipulates that bad debts (bad credit) must previously be restructured and optimal collection efforts must be made. Banks can only carry out credit restructuring for debtors who experience difficulties in paying principal and/or interest on credit. Apart from that, the debtor still has good business prospects and is considered capable of fulfilling its obligations after the credit is restructured.
Banks are prohibited from restructuring credit with the aim of improving credit quality and/or avoiding increasing the formation of asset quality assessment allowances (PPKA). Banks are also required to pay attention to five principles, including objectivity, independence, avoiding conflicts of interest and fairness. All these conditions must be met before write-offs and write-offs on bad credit are carried out. This is important and urgent.
Fortunately, there is Law Number 4 of 2023 concerning Development and Strengthening of the Financial Sector (P2SK) which is effective on January 12 2023. This regulation states that bad debts from banks and/or non-bank state-owned enterprises (BUMN) financial institutions can be paid to MSMEs. write-offs and write-offs to support the smooth provision of access to financing to MSMEs. The law confirms that losses by banks and/or non-bank state-owned financial institutions in carrying out write-offs and write-offs for receivables are losses of the bank and/or non-bank state-owned financial institutions concerned.
These losses are not state financial losses as long as it can be proven that the action was carried out in good faith and in accordance with statutory regulations, articles of association and principles of good corporate governance. The Board of Directors, in carrying out the write-off and write-off of receivables, cannot be held responsible for any losses incurred.
In this way, banks and non-bank state-owned financial institutions have the courage to write off and write off bad credit claims for MSMEs. So far, they have not been brave enough because this could be considered a loss to the state.
What are the benefits of writing off and writing off bad debts for debtors and banks? These efforts will have a positive effect on debtors in doing business so they will be more careful. Debtors’ reputations in the eyes of financial sector regulators will be better because their names are no longer listed in the OJK’s Financial Information Services System (SLIK). SLIK is an information system managed by OJK to support the implementation of supervisory duties and information services in the financial sector.
What are the benefits for banks? Bank reserves could be reduced significantly, considering that previously banks were required to create reserves of at least 100 percent for bad loans. Now it seems as if top banks are competing to form reserves well above 100 percent. When not used, these reserves can be converted into other income to increase profits.
NPL will also get better. Now the NPL of commercial banks has improved, from 2.88 percent to 2.50 percent. In the end, bank financial reports will become more beautiful.
However, it is best to only write off books, not plus write off charges. That way, the bank still has the right to collect debt from the debtor. Deleting books and writing off bills at the same time can invite aji mumpung (moral hazard) for debtors. On the other hand, banks can bleed.
Currently there is OJK Regulation Number 16/POJK.03/2014 concerning Asset Quality Assessment of Sharia Commercial Banks and Sharia Business Units (UUS) which regulates, among other things, write-offs and write-offs of commercial banks or UUS. However, OJK Regulation Number 40/POJK.03/2019 concerning Asset Quality Assessment of Commercial Banks only regulates write-offs. Strictly speaking, currently there are no OJK regulations regarding write-offs. As a result, banks and non-bank state-owned financial institutions have not been able to write off and write off bad credit claims for MSMEs.
So what is the alternative solution? OJK is obliged to immediately issue regulations as guidelines for the implementation of Law Number 4 of 2023. In this way, write-offs and/or write-offs for bad debts of MSMEs can be carried out smoothly.
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2023-12-12 19:52:30
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