INDEF Lower Middle Class Society Rely On Online Loan For Living

Wednesday, 30 Oct 2024

By ridwan@insightinnews.com

Senior Economist at INDEF, Aviliani, has revealed that many individuals from the lower middle class are currently living in debt. A significant portion of this debt is attributed to online loans, as many people lack access to traditional banking services.

She noted that some individuals are even using borrowed funds to cover basic necessities such as food, and many are unable to repay their debts. Furthermore, these individuals do not qualify for direct cash assistance (BLT) due to their classification as middle class. Aviliani emphasized that this situation highlights the increasing prevalence of structural poverty in Indonesia. Structural poverty refers to a condition where an individual's income exceeds the poverty line but remains relatively lower compared to the income levels of those in their vicinity.

"Many individuals are now excluded from receiving BLT. The issue is that the lower middle class has significantly expanded due to layoffs, the impact of COVID-19, and job cuts resulting from efficiency measures in the digital era," she stated during a public discussion hosted by INDEF on Tuesday, October 22. She believes that this situation warrants the attention of President Prabowo Subianto's administration. Although there was the Prakerja Card initiative during Joko Widodo's presidency, its impact has not been substantial.

"This is the reality we are facing; the government must concentrate on addressing this issue. While the Prakerja program exists, it is essential to assess whether it has been adequately adjusted, given the considerable funds allocated for it," she added. Meanwhile, Senior Economist Didin S. Damanhuri from INDEF pointed out that the decline of the middle class is not solely due to the COVID-19 pandemic but also because the allocation of the state budget (APBN) and banking resources has predominantly favored large sectors over small and medium enterprises (UMKM).

Therefore, he believes that assistance to the community should be re-evaluated to ensure that all segments of society in need can benefit from it.To prevent structural poverty, the state budget must allocate resources that stimulate the lower segments of society, he stated. According to the data presented from Bank Indonesia, the funding allocation from banks for small and medium enterprises (SMEs) should ideally be 99 percent.

However, the actual realization stands at only 18 percent, with the remainder directed towards larger sectors or companies. "This represents a significant opportunity, not only from the state budget but also from the banking sector, for SMEs. It is essential that funding from third parties is directed towards these enterprises, in addition to the support from the state budget," she concluded.

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