Bankers! Bad Debt Write-off Rules Do Not Eliminate the “Rubber” Article on State Losses

By: Eko B. Supriyanto, Chief Editor of Infobank Media Group

“Stalled” credit or bad debts of small businesses can be written off. President Prabowo Subianto has signed a Government Regulation (PP) on the write-off of bad debts. So, bad debtors of Micro, Small and Medium Enterprises (MSMEs) can be written off for free. Paid off, with no more installments. Of course, not just any MSMEs, but debtors from farmers and fishermen groups.

All of this is done by the government to revive the “civil death” of debtors, or no longer enter SLIK-OJK. And, of course, state-owned banks can refinance. But, is the PP bleaching MSME money the core of the main problem of the stalled bad credit in state-owned banks?

Honestly. Bankers do not dare to write off bad debts, even if it has been decades. This is because of the rubber article on state losses. Bankers do not dare, and tend to avoid and look for safety. Because, the frightening “ghost” article is still there. The rubber article always haunts and becomes a weapon for law enforcement officials.

For decades, the rubber article on harming the State has been a persistent “ghost”. The Supreme Audit Agency (BPK) is the most frightening “ghost” because it is equipped with Law No. 17/2003 on State Finance which still mentions write-offs as detrimental to the State. Furthermore, Government Regulation in Lieu of Law Number 49 of 1960 on State Receivables.

So, even though there is PP 33/2006 which emphasizes that BUMN receivables are not included in State receivables, bankers still do not dare. So, the PP remains barren. The position of PP is still lower than the law. Moreover, the rubber articles still mention the elimination of State receivables (credit) is a state loss, or corruption. Naturally, bankers are afraid to do it because it could be that 10 years later with the new regime it could be prosecuted.

The main problem of not being able to write off stalled credit is actually because there is a rubber article that harms the state. So, it’s not just giving relief to debtors who have become stones and are difficult to collect. Write-off is actually the domain of the board of directors, which is proposed to the owner. In private banks, this is a simple mechanism for resolving credit.

Write-off is the act of removing the debtor’s obligation for credit that cannot be resolved by removing the right of collection. Whereas, write-off is an administrative action to remove loans that have bad quality from the balance sheet (on-balance sheet) to the administrative account (off-balance sheet) in the amount of the liability.

According to the Infobank Institute, the write-off policy for state-owned banks is based on at least five important things. One, the number of ultra-micro, micro and small debtors who have been “stalled” is increasing every year. According to the government, this will include 6 million debtors consisting of farmers and fishermen with a value of IDR 8.7 trillion.

Two, cleaning up these “stalled” debtors can revive the debtor’s good name. Initially included in the black list category in SLIK, with this write-off, the debtor will recover his name. Debtors can get new credit again because their names have been cleared.

Three, the bank’s financial statements, both on-balance sheet and off-balance sheet are also clean and not preoccupied with bad loans that are “stalled” – which could be the cost of collection greater than the results. The problem of bad debtors is not a matter of cost but also involves human resources.

Fourth, in many cases the cost of collection is often greater than the result of the loan that has been written off. For example, the loan is only Rp1,000,000, but the cost to collect is more than that, as well as being protracted. In the end, the loan is left “stalled”

Five, state-owned banks that have run out of write-offs can more easily provide new loans to debtors from the write-off program. Moreover, the increase in the growth of MSME customers is not proportional to the increase in the volume of Small Business Credit (KUR), and of course the provision of 30 percent of credit to the MSME sector.

The bleaching news is certainly encouraging news for state-owned banks that have not dared to write off loans, because they are considered detrimental to the State. Even though the credit has become “garbage” in the bank book. There are greater opportunities for debtors and state-owned banks.

This write-off can be done if the loss incurred is not a loss to the State. Not the result of pat gulipat or fictitious credit. All of this can be done as long as it can be proven that the action is based on good faith, laws and regulations, articles of association, and principles of good corporate governance.

This write-off step is good, but what continues to be guarded concerns moral hazard. After write-offs, banks should not blindly grant loans, because they can be written off and written off anyway. The principle of caution is also still held and becomes the “spirit” for bankers because state-owned banks still make many write-offs even though they have been reserved. Risk calculation is important.

And, don’t let the good news of this bad credit write-off rule damage the mentality of debtors who have credit to write themselves off. This is only natural because of the concept of banking in the world. The treatment of bad debtors is lighter than good debtors who are current. Good debtors who have been paying interest and principal often have to feel jealous of bad debtors who are given a lot of convenience.

In fact, the practice of write-offs is already carried out by private banks. However, sometimes write-offs in private banks are often ceded to third parties, even dead debtors are still visited by debt collectors for consumer credit. However, the practice of write-offs in private banks is common, with no accusations of harming the State.

The government signed Government Regulation (PP) Number 47 of 2024 concerning the write-off of bad debts to micro, small and medium enterprises (MSMEs) regarding the elimination of bad debts and write-offs. This refers to Law Number 4 of 2023 concerning Strengthening and Development of the Financial Sector (P2SK). Articles 250 and 251 state that bad debts of state-owned banks and or non-bank financial institutions to MSMEs can be written off and written off to support the smooth provision of access to financing to MSMEs.

For years, state-owned banks have found it difficult to write off receivables. Write-offs are closely related to the article on State losses. So, even though it has been written off, given a reserve, it does not dare to write off the bill, because it can invite law enforcement officials, such as the Attorney General’s Office, which is of course with the Supreme Audit Agency (BPK). So, so far, bankers have allowed bad debts to remain “stalled”, even though they have been recorded outside the bank’s books. It is not a problem for banks, but because every bank wants to finance credit, they often meet debtors who are still on the OJK blacklist (SLIK-OJK).

If so, then this write-off is a good thing. However, the fundamental question is whether after this write-off regulation (PP) is issued, the state-owned bankers dare to write off these bad debts. This is because the articles in the State Finance Law have not been revoked. Now, because the State Finance Law is still in effect, in the future it can ensnare bankers who write off receivables. Articles harming the State will live again.

Especially, for example, in 5 or 10 years the government has changed. Plus BPK members who are “hordes” of party people. Hostage politics with accusations of harming the State has been common in Indonesia lately. Isn’t the position of PP lower than the law itself, even though this PP translates the P2SK Law. It is possible that law enforcement officials can “play around” from the rubber market – harming the State remains a “ghost” that continues to exist.

BPK is the most frightening “ghost” because it is equipped with Law No. 17/2003 on State Finance which still mentions write-offs as detrimental to the State. Furthermore, Government Regulation in Lieu of Law Number 49 of 1960 concerning State Receivables. These two ghosts are still hanging around, frightening state-owned bankers.

The question is; is the position of the PP on bad debt bleaching “magic” and doping the state-owned bankers, and will there be no danger after the regime is out of power? Be careful with write-offs to MSMEs, even though it is good and common in banking practices, but it is not a good idea.

There should be no stowaways in this write-off rule, and hopefully bankers will no longer be afraid and remain safe from the rubber article on harming the State. (*)