Indonesia's state banks to halve small business lending rates: Bloomberg

[JAKARTA] Indonesia's state-owned banks will halve lending rates to small businesses, Bloomberg reported on Wednesday, quoting Vice President Jusuf Kalla.

Trying to stem weak growth in Southeast Asia's biggest economy which has slowed to 2009 levels, lenders have agreed that rates will be lowered to 12 percent from 22 to 24 percent, Mr Kalla said in a speech in Jakarta on Wednesday.

"Small business loans have much higher interest rates compared with bigger loans," Mr Kalla said.

"This is one thing that needs to be straightened up."

Indonesia's government will subsidise interest payments received by state-owned banks and provide cheaper funding to them to lend to small firms, he added.

President Joko Widodo's government is looking at ways to stimulate the flagging economy, while consumption languished at a four-year low of 5 per cent in the first quarter.

To stimulate demand, the government is considering raising the income tax threshold and the central bank plans to relax rules on lending, including mortgages and auto loans.

But with inflation climbing and the rupiah at a 17-year low versus the dollar, cutting interest rates is not an obvious solution.

REUTERS