In addition to a Rp 1.4 trillion (around US$149 million) allocation to subsidize the interest on loans taken out by micro, small and medium enterprises (MSMEs), the government also plans to streamline the requirements for borrowing from state SME financing institutions.
Aside from the interest-subsidy fund, the government will also assist SMEs to access financing by either waiving the collateral requirement altogether or reducing the required value of the required collateral from more than 100 percent of the loan to just 25 percent.
"Well, if collateral is needed, it should be about 25 percent. It shouldn't be more than that," Cooperatives and SMEs Minister Suryadharma Ali said, referring to the fact that between 100 and 125 percent collateral was normally required.
Suryadharma was speaking during a seminar on SMEs, which was also attended by Coordinating Minister for the Economy Boediono.
According to a recent study jointly conducted by the Cooperatives and SMEs Ministry and the Central Statistics Agency (BPS), 99.98 percent of the country's businesses were found to be SMEs, providing work for 96.18 percent of the country's 85.4 million-strong workforce last year.
But despite being robust and an essential part of the country's private sector, most SMEs suffer from capital constraints and poor management that hamper their growth.
This forced the government to come up with its loan interest subsidy scheme, which starts this year and is expected to continue in coming years.
"The money will be given to state credit insurance firms like Askrindo," Boediono said, as reported by detik.com.
The government had previously expressed its intention to strengthen the financial capacity of the two state-owned credit insurance and financing firms, PT Asuransi Kredit Indonesia (Askrindo) and Perum Sarana Pengembangan Usaha.
The government, Boediono said, was also working on allowing alternative forms of risk guarantees to be used by SMEs to secure loans, such as warehouse receipts.
Inter-ministerial coordination would also be strengthened. "Almost every ministry has a program to strengthen SMEs. We need to integrate these programs so as to maximize results," Boediono added. (09)