Indonesia subsidizes loans to lower interest rates for women entrepreneurs

The Indonesian government launched the Pre-Prosperous Women’s Credit program, also known as KPPS, to reduce interest rates for women running ultra-micro businesses.

This initiative targets borrowers within the PNM Mekaar network, where women previously faced annual interest rates between 18 and 25 percent. Under the new scheme, the state provides a subsidy that lowers the borrower's rate to 8 percent for loans up to Rp15 million. The program aims to provide working capital for productive use rather than immediate consumption.

By lowering the cost of credit, the government intends to help market vendors and home-based food producers reinvest in their businesses, such as purchasing stock or equipment. The government set aside approximately Rp2.6 trillion to fund these subsidies through the end of 2026. PNM aims to reach 1.7 million borrowers by December, with plans to include the remaining 12 million active Mekaar clients starting in 2027.

The initiative relies on a partnership where the state covers the cost gap while PNM manages the field network and group lending model. Officials noted that the program focuses on women because research suggests that income controlled by women is more likely to be spent on children's health and education. To ensure long-term success, the government plans to provide training in bookkeeping and digital literacy to help borrowers eventually graduate to larger credit schemes like the People’s Business Credit program.