Banking - MSME’s Nov24 growth at small single digit

Banking - MSME’s Nov24 growth at small single digit The distribution of bank credit to the micro, small, and medium enterprises (MSMEs) sector deserves a failing grade. In its development, the growth of MSME credit has become the worst in the past three years. SME credit grew by 3.7% yoy in Nov24. This marks the lowest monthly growth recorded throughout 2024. Year to date, the highest growth in MSME credit was recorded in Jan24 and Feb24, each at 8.9% yoy. Since then, MSME credit has tended to slow down until November 2024. Viewed based on the scale of business, MSME credit primarily slowed down due to two segments, namely micro segment credit and medium segment credit, which grew by 3.1% yoy and even -0.4% yoy, respectively. Meanwhile, small segment credit could still be boosted by 7.5% yoy. However, the MSME credit that still recorded growth is still better compared to the early days of the Covid-19 pandemic that hit Indonesia. During the period from August 2020 to April 2021, MSME credit even recorded a significant decline. At its lowest, MSME credit was -2.95%. (Source : Investor Daily). Comment : The sluggish growth of bank credit to MSMEs poses a significant challenge to Indonesia's economic development. Addressing this issue requires a multi-pronged approach involving financial sector reforms, and initiatives to improve MSME access to finance and financial inclusion. Government interventions may be necessary to incentivize lending to MSMEs, particularly in the micro and medium segments. This could include measures such as credit guarantees, subsidized interest rates, and simplified loan application processes. Overall, we anticipate the new administration will implement measures that instill greater confidence within the MSME lending landscape, thereby fostering renewed growth in this crucial sector. We maintain our Overweight rating on the conventional banking sector, with BBCA and BMRI as our preferred picks. For the Syariah banking segment, BRIS remains our top choice.