A government grant is a financial contribution to any eligible person or entity made by:
- Local Governments
Indonesian government grants enable organisations incorporated in the country to undertake projects and business operations that they would not otherwise be able to do; they also provide greater financial security to those that received.
Why does Indonesian Government Grant exist?
Certain government incentives are designed to assist organisations in improving their facilities and/or operations. These are usually public-service organisations that lack the financial resources to enhance their facilities without help from outside sources. Grants are frequently used to:
1. Government subsidies for schools and institutions
Government subsidies are available, which offer cash for teaching materials specifically to schools and institutions. Other educational subsidies are available to individuals who are financially disadvantaged.
2. Indonesian government grants for national, local and commercial organisation
There are certain grants available to help national, local, and commercial organisations prepare for emergencies to improve the security in the community. The money raised may be used to purchase equipment that would help during emergencies or to pay for emergency workers’ salaries.
3. Indonesian government grants for social programs
Grants to help social programs are also available from some governments. These social programs may help with:
- Environmental preservation
- Educational advancement
- Disability support
Types of Indonesian Government Grants
The Indonesian government grants are eligible for certain businesses.
The majority of Indonesia’s economic growth is based on contributions from small and medium businesses at the grassroots level (SMEs). As a result, it is clear that Indonesia’s SMEs are critical to the country’s long-term economic growth.
For this reason, the Indonesian government grants intends to help the country’s SMEs improve their productivity levels and experience growth rates similar to those of large enterprises. The Indonesian government also works with certain non-profit organisations to issue appropriate grants to SMEs across Indonesia.
Some of the government grants in Indonesia are highlighted below:
1. Credit for Businesses (Kredit Usaha Rakyat)
This grant offers SMEs in Indonesia with credit, working capital, and investment finance programs that are precisely customised to meet their financial needs. The Startup Incubator Program was established by the Ministry of Cooperatives and SME.
2. Start-up Incubator Program
This initiative was launched in collaboration with the Ministry of Corporate Affairs and Small Medium Enterprises (SMEs) in Indonesia. This is to allow more locals to patronise and support local entrepreneurship as most of the businesses received direct grants relating to SMEs by the government.
3. Micro Business and Government microloan Program (KUR).
This grant allows local business owners to loan up to a certain amount for their businesses. The amounts are as follows:
4. Loan Repayment borrowed from KUR Program
The grant is intended to assist SMEs in repaying loans taken out by microbusinesses up to Rp 500 million from rural banks and up to Rp 500 million to Rp 10 billion from conventional banks. Additionally, the grant intends to reduce interest payments for SMEs who loan money through the KUR programme.
5. Support for the National Economic Recovery Program
The national recovery programme intends to offer MSMEs financial aid. The sum is distributed for six distinct activities, ranging from interest subsidies to investment funding, as shown in the table below, along with allotted money borne by the government.
Different Forms of MSMEs’ National Economic Recovery Program Assistance (Rp):
1. Interest subsidies
2. Placement of funds for credit restructuring
|3. Expenditure for guarantee service fees||5 Trillion|
|4. Guarantee for working capital||1 Trillion|
|5. Government borne final income tax||2,4 Trillion|
|6. Investment financing to cooperative through the LDPB||1 Trillion|
6. Direct Assistance Program (BLT)
The Direct Assistance Program for MSMEs was started by the government. Businesses will receive 24 million in help through this initiative.
The program’s objective is to increase the MSMEs’ commercial resilience. The plan attempts to ease the working mechanism for smooth assistance submission.
7. E-brochure Program
MSMEs are introduced to the online market through the e-brochure initiative. The programme was started by the Ministry of Cooperatives in collaboration with Smesco Indonesia.
The programme intends to give MSME products a digital market and platform. Further, it aims to compile a list of all those products in Indonesia.
8. UMKM Tax Incentives
The Ministry of Finance released the UMKM tax incentives regarding tax advantages for taxpayers impacted by the COVID-19. The incentive gives advanced taxpayers an edge, and as a result, the government bears or may exempt the final PPh (Income Tax) of 0.5% for MSME players.
9. UMKM Credit Restructuring
The following are covered by the Ministry of Finance Regulation on the UMKM Credit Restructuring:
- The steps to provide interest and margin subsidies for funding the MSME
- The steps for providing an MSME loan facility with interest and margin subsidies
Both steps are part of the government of Indonesia’s National Economic Recovery Program.
10. Working Capital Policy
The working capital policy seeks to engage with commercial banks to offer MSMEs low-cost working capital loans in the form of deposits or demand deposits.
The government commits funding of IDR 30 million for a period of 6 months in order to speed up the granting of loans to MSME, particularly those in labour-intensive businesses, to encourage the lower-class population’s economic revival with this strategy.
11. UMKM Working Capital Credit Guarantee Scheme
The Ministry of Finance Regulation on the loan guarantee to MSMEs also governs the UMKM Working Capital Credit Guarantee Scheme. Further, it attempts to offer assistance through State Capital Participation, loss restrictions, and IJP payments.
The grants mentioned above are related to MSME development. To fully utilise the potential of the digital economy, the Indonesian government is creating a space for all small business owners to enter and advance their digital transformation.
Indonesia’s consistent and rapid economic growth has led many to have desires to migrate there so as to take advantages of the economic advantages present across the country.
How do Indonesian Government Grants Benefit Businesses?
Indonesian government grants can be used in a variety of ways to support businesses in Indonesia. The financial benefits are the most important benefit of government incentives offered to SMEs in Indonesia.
This reality permits many small business owners around the country who don’t have a lot of revenue and can’t repay a loan to find themselves in a much more financially sustainable scenario.
It is also not difficult to figure out if one’s company qualifies for any of the Indonesian government grants. This is due to the fact that information on the availability of and eligibility for such awards can be accessed on a variety of websites.
The working capital policy aims to provide low-cost working capital loans to MSMEs in deposits or demand deposits in collaboration with commercial banks.
The government places funds for IDR 30 million for six months to accelerate the provision of credit to MSME specifically belonging to labor-intensive industries.
Step 1: Familiarise yourself with the grant cycle and determine your eligibility for the grant opportunity.
Step 2: Search for the specific grant you will apply for
Step 3: After familiarising, prepare the list of reporting requirements to comply with the granting norms.
Step 4: Fill in the form and apply for a suitable grant.
Step 5: Complete the registration process, submit and wait for the update by the government.
Government grants in Indonesia may be received by business in any industry. However, the fact remains that the government deems more businesses in certain industries as being more deserving of government grants than in other industries. In Indonesia, the industries with businesses that have claimed the most government grants are textiles, coal, automotive, palm oil, and petroleum and natural gas.
According to the current laws in Indonesia, there are no restrictions on the number of grants for which a business owner may apply. Should it happen to be the case that a business is eligible for more than one government grant at the same time, the business owner may apply for all of them. The Indonesian government typically supplies further details related to its grants for the benefit of all those who intend to apply for one or more of them.