Draft Bill on Guarantees

Aiming to ensure a better financial access for micro-small-medium and cooperatives businesses (UMKMK),[1] the House of Representatives has initiated the Draft Bill on Guarantees (“Draft Bill”).

The Draft Bill establishes a legal framework for guarantee institutions – which is a business model that bridges UMKMK and banks – in providing business-visible UMKMKs that are unable to provide banks the necessary collateral to process a credit. With the existence of guarantee institutions, UMKMKs may disregard the collateral issue, as the guarantee institution will ensure banks on the loan.