Washington, United States: The World Bank announced on Thursday that it was providing $750 million in financial guarantees to Indonesia's largest state-owned commercial bank, with the funds to be channeled into the government's low-interest loan program for small businesses.
The loan will be provided in two tranches by financial giant HSBC to Indonesia's Bank Mandiri over a three-year term, and is backed by the Multilateral Investment Guarantee Agency (MIGA), an arm of the World Bank Group.
"This transaction marks a significant milestone for Bank Mandiri and underscores the confidence of the international financial community in Indonesia's economic fundamentals and the strength of our institution," said Ari Rizaldi, director of treasury and international banking at Bank Mandiri.
The funds will be used for Indonesia's Kredit Usaha Rakyat (KUR, or "People's Business Credit") program, which provides loans to the micro, small and medium-scale (MSME) businesses that account for roughly 60 percent of the country's $1.45 trillion GDP, employing the vast majority of the country's labor force.
In a statement, the World Bank said proceeds from the loan would be used to help finance and refinance loans to retail and service sector businesses, street vendors, farmers and fishermen.
According to Indonesian finance ministry data, the KUR program has reached 2.65 million people and businesses, and disbursed 169 trillion Indonesian rupiah ($9.4 billion) in funds as of July 22 this year.
"Women entrepreneurs are at the heart of this opportunity," said the World Bank statement.
"They own or manage an estimated 65 percent of Indonesia's MSMEs, making greater access to formal credit a powerful lever for broad-based prosperity."
The multilateral lender said Bank Mandiri had committed to a Gender Action Plan to expand lending to women-owned businesses.
