JAKARTA – The Ministry of State-Owned Enterprises (BUMN) plans to increase the People’s Business Credit (KUR) guarantee premium rates as a measure to prevent swelling losses in one of the state-owned KUR guarantee companies due to a high rate of non-performing loans (NPLs). The premium rate increase is expected to take effect this year.
During the 2021 BUMN Outlook event last weekend, the Ministry of SOEs revealed that 17 state-owned enterprises (SOEs) recorded losses in 2010, amounting to a total of Rp1.69 trillion. One of them was PT Asuransi Kredit Indonesia (Askrindo), which suffered a loss of Rp224.4 billion.
The Ministry of SOEs stated that Askrindo’s losses were not solely due to investment mistakes. The low KUR guarantee premium rates also played a significant role.
Moreover, KUR disbursement has increased every year, automatically leading to higher claim obligations for guarantee companies such as Askrindo and PT Jaminan Kredit Indonesia (Jamkrindo).
Currently, the KUR premium rate is set at 3.25%, with 70% paid by the government and the remaining portion by banks. This is an increase from the 2007 premium rate of 1.5%.
Meanwhile, the total KUR disbursement at the end of 2010 reached Rp16.42 trillion. According to the Ministry of Cooperatives and SMEs, the NPL rate stood at 5.6%. This means that as NPLs increase, so do claims.
The government aims to expand KUR disbursement to Rp18 trillion–Rp20 trillion this year.
"If KUR is expanded, then the premium rate must also be increased," said Parikesit Suprapto, Deputy for Banking and Financial Services at the Ministry of SOEs, after the 2021 BUMN Outlook event.
Changing the Business Structure
The Ministry of SOEs is also considering changing Askrindo’s business structure. As an insurance company, Askrindo is required to set aside reserves equivalent to at least 20% of its capital, plus 1% of net premiums.
"This is also what burdens Askrindo’s financial system," explained Minister of SOEs Mustafa Abubakar.
Despite having larger capital than Jamkrindo, Askrindo has a greater guarantee capacity. Askrindo’s capital stands at Rp2 trillion, while Jamkrindo’s is Rp1.75 trillion.
"If we want KUR to be successful for all parties, the business structure must be adjusted," said Mustafa, without specifying the planned changes for Askrindo.
Jamkrindo President Director Nahid Hudaya acknowledged that long-term guarantee premiums need to be adjusted, as they relate to the risk borne by guarantee companies. However, he refrained from making a request.
"We will just wait," said Nahid on Sunday (30/1).
Askrindo President Director Chairul Bahri welcomed the potential KUR premium increase but stated that it was too early to determine the ideal premium rate.
"This requires further study and must be approved by the KUR Policy Committee," said Chairul.