President Prabowo Subianto has pledged a groundbreaking people’s credit program featuring a 5% interest rate and an extended mortgage (KPR) tenor of up to 40 years. This promise was made to thousands of laborers during the recent May Day celebration at Monas on Friday, May 1st, aiming to significantly boost home ownership and economic relief for underserved communities.
During his address, President Prabowo highlighted the burden of housing costs on ordinary citizens. “You yourselves have stated that 30% of your income goes towards rent. Soon, you will own a home, as 30% of your income can then be allocated to mortgage installments with this extended tenor,” Prabowo announced, offering a vision of greater financial stability for working families.
The extended mortgage tenor is specifically designed to benefit particular groups: laborers, fishermen, and farmers. This initiative marks a significant departure from current banking practices, where the maximum mortgage tenor typically stands at 30 years and is only offered by a limited number of banks. This targeted approach aims to empower those who traditionally face greater challenges in accessing long-term home financing.
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Beyond the extended mortgage terms, President Prabowo is also planning to roll out a specialized cheap credit program for laborers. This program will cap annual interest rates at a maximum of 5%, making it even more affordable than the existing People’s Business Credit (KUR) program, which is set at 6%. While the specifics regarding the full scope and purpose of this credit program are yet to be detailed, it underscores a broader commitment to accessible financing.
The impetus behind these affordable credit initiatives stems from the alarmingly high interest rates that often burden small-scale borrowers, sometimes reaching up to 70% per year. The Financial Services Authority (OJK) currently permits such high rates, particularly for online lending companies employing daily interest schemes for consumption-based loans, contributing to a cycle of debt for many vulnerable individuals.
A telling example of this is OJK Circular No. 19 of 2025, which stipulates that online loan companies can charge a daily interest rate of 0.2% for consumptive needs. While seemingly small, this daily rate can compound to a staggering 70% when calculated on an annual basis, illustrating the severe financial pressure faced by those dependent on these lending options.
Acknowledging this disparity, President Prabowo stated, “For too long, small people borrowing money have faced incredibly exorbitant interest rates. I have already instructed state-owned banks to launch credit programs for the public with a maximum interest rate of 5% within one year,” signaling a direct intervention to protect ordinary citizens from predatory lending practices.
In a related development, Bank Indonesia (BI) has previously voiced concerns regarding the sluggish disbursement of credit by commercial banks. According to BI’s records, a significant portion of banking credit, referred to as “undisbursed loans,” remains idle, constituting more than 20% of the total credit ceiling. This highlights a potential bottleneck in channeling funds into the economy.
Senior Deputy Governor Destry Damayanti of Bank Indonesia underscored the substantial untapped potential for credit disbursement across various productive sectors. She identified agriculture, business services, construction, and transportation as areas with ample room to absorb financing from the banking sector, suggesting that a more proactive approach could unlock significant economic growth.
“We observe that the ratio of undisbursed loans remains quite high, exceeding 20% of the credit ceiling,” Damayanti reiterated, emphasizing the urgency of addressing this issue to ensure that financial resources are effectively deployed to stimulate economic activity and development.
Damayanti stressed that this situation presents a collective challenge for both the banking industry and policymakers. She expressed hope that credit distribution could become more optimized and equitable, thereby accelerating economic growth and ensuring that the benefits of financial inclusion reach a broader segment of the population.
Despite these challenges, BI’s data indicates a positive trend in credit disbursement, which grew by 9.49% as of March 2026. However, this growth was predominantly driven by state-owned banks, particularly those grouped under the Himpunan Bank Milik Negara (Himbara), suggesting that private banks may need to increase their lending activities to contribute more broadly to national economic expansion.
Summary
President Prabowo Subianto has pledged a new people’s credit program featuring a 5% interest rate and an extended mortgage tenor of up to 40 years. This promise, made to laborers on May Day, aims to significantly boost home ownership and provide economic relief, particularly for working families, fishermen, and farmers. The initiative also includes a specialized cheap credit program with an annual interest rate capped at 5%, making it more affordable than existing schemes.
These affordable credit programs aim to counter the high interest rates often faced by small-scale borrowers, which can reach 70% annually from online lenders. Meanwhile, Bank Indonesia has highlighted a challenge with over 20% of credit remaining undisbursed by commercial banks, despite growth in state-owned bank lending. Policymakers hope for more optimized credit distribution to accelerate economic growth and enhance financial inclusion across various sectors.
