The Impact of Government MSME Financing Program to the Recipients Household Economic Behavior

Kredit Usaha Rakyat (KUR) is a Government Credit Program to micro, small and medium enterprises (MSMEs) conducted by banks. KUR is an instrument of the government to subsidize low-income households that own a business. The subsidy is channeled through the interest subsidies given to implementing banks. KUR aims to lower the interest loans to less than 10%. In fact, the principle agent problem occurs in the KUR disbursement. Among others, the loan recipients do not have a business (Mardanugraha & Yappy, 2017). This study analyzes the impact of KUR on the economic behavior of MSME owners in terms of discipline in financial management and changes in household consumption expenditure. We conducted a survey data to 701 MSMEs owners around Jakarta in 2017. KUR disciplines households in managing finances but has not improved the ability of MSMEs to expand their businesses and it also has not yet changed household behavior from consumptive to productive. The psychological and sociological aspects of the business owner's in order to be consistent in running a business and expanding market reach are important. If MSMEs consistently runs and grows the business, accessing external capital with market interest rate will not be a problem.