Thekabarnews.com—President Prabowo Subianto’s plan to increase the distribution of people’s credit at a maximum annual interest rate of 5 percent, including from state-owned banking institutions, has received a mixed reaction.

Banking experts say that the effort represents a key step toward greater access to affordable financing for low-income communities. However, they note it could face significant challenges related to credit risk and industry stability as it develops.

President Prabowo first raised the idea in a speech on International Labour Day on Friday, May 1, 2026.

In his speech he also spoke about the condition of common people, especially small borrowers. These borrowers are often charged exorbitant lending rates that can in some cases reach 70 percent a year.

“The government must step in so that workers, small businesses, and low-income households can get access to financing,” Prabowo said.

In response to the proposal, Hermita, Commercial Banking Director of Bank Tabungan Negara (BTN), said that BTN generally supports policies for low-interest financing. In particular, they support policies to increase access to credit for low-income earners.

“BTN already has a similar model through the Housing Finance Liquidity Facility (FLPP) mortgage program,” Hermita said.

The FLPP scheme offers a fixed mortgage interest rate of 5 percent for the entire loan term. It is specifically aimed at low-income households that need affordable home ownership.

“Basically BTN supports policies for financing with low interest rates, especially those that support access for low-income communities,” Hermita added.

She said the success of subsidized low-interest lending depended a lot on government support mechanisms. This is especially true in keeping banking sustainable and managing risks of default.

Hermita stated that without a lot of strong fiscal backing, then there is a lot of pressure on the banks. They must try and balance affordability and financial health.

Banks will have to protect their asset quality and maintain prudent lending standards, banking analysts said. Lower interest rates on loans could catalyze economic participation and financial inclusion.

Aggressive credit expansion without adequate safeguards could pose a risk to the financial system in the longer term.

The policy could be most effective if it had targeted subsidies and risk-sharing arrangements. Moreover, sector-specific financing models like housing finance programs are important.

But the bigger challenge is to ensure that the affordable loans reach the right beneficiaries. The government must do this without compromising the resilience of the banking sector.

A major hurdle for improving economic mobility for many Indonesians is access to fair and affordable financing.

The proposal has a lot of political support, but the government and the financial institutions will have to balance public welfare and banking sustainability judiciously. This is essential to ensure the scheme is a long-term success.

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