Indonesia has launched a programme that offers a guarantee for working capital loans of between 10 billion rupiah to 1 100 trillion rupiah to businesses that are reeling from the impact of the coronavirus crisis. The $6.92 billion loan guarantee scheme was announced by the finance minister.

The scheme will help businesses in priority sectors for a period of up to a year, the minister said. "We hope the risk appetite from banks as well as companies can be restored and thus result in optimism to conduct activities," Finance Minister Sri Mulyani Indrawati told a press conference on Wednesday, Reuters reported.

Indonesia is offering a guarantee for up to 80% of loans for companies in priority sectors such as tourism, automotive, textile and garment, and electronics.

Jakarta rally
Tens of thousands of Indonesian took to the street to be a part of the second anti-Ahok rally in the capital city of Jakarta, Reuters

The loan guarantee scheme is an expansion of a previously announced initiative to help small businesses recover from the impact of the pandemic.

Businesses eligible for the latest programme are those affected by the pandemic employing at least 300 people and seen as having potential to support the country's economic growth.

Businesses in the priority sectors needed as much as 303.76 trillion in working capital over the next six month to meet operational costs after cash flows had dried up due to social restrictions to curb the virus, Rosan Roeslani, chairman of Indonesia's chamber of commerce and industry (Kadin), said on Tuesday.

Southeast Asia's largest economy has been trying to boost loan disbursement by channelling liquidity to state-owned banks and regional banks.

The financial regulator has also relaxed restructuring rules to help banks manage their capital.

Indonesia's loan growth in May expanded just 3.04% on-year, the weakest pace since at least December, 2002, as the pandemic took its toll on the economy.

(With Reuters Inputs)