BI to handle credit supply to small firms<\/p>\n
JAKARTA (JP): Bank Indonesia will take over the overall supply
\nof subsidized credit to small and medium-scale businesses because
\nthe country's commercial banks can no longer make any
\ncontribution, a top official of the central bank said.<\/p>\n
BI director Miranda Gultom said yesterday that the central
\nbank would boost its contribution of total supply of subsidized
\ncredit to 100 percent from 65 percent last year.<\/p>\n
The remaining 35 percent of last year's subsidized credit was
\npreviously contributed by the country's commercial banks, which
\nwere required to allocate at least 20 percent of their total
\ncredit through the credit for small enterprises scheme.<\/p>\n
\"The proposal has been approved by the central bank's board of
\ndirectors,\" Miranda said at a discussion on how to strengthen
\nsmall-scale businesses, in which Minister of Trade and Industry
\nRahardi Ramelan and Minister of Cooperatives and Small
\nEnterprises Adi Sasono were also speakers.<\/p>\n
She said the subsidized credit would amount to several
\ntrillion rupiah, channeled to the recipients by intermediaries at
\nan interest rate of 9 percent.<\/p>\n
She explained that it was impossible for commercial banks to
\nprovide subsidized credit at an interest rate of 16 percent,
\nwhile they had to raise funds with an interest rate of 50
\npercent.<\/p>\n
Under the government's January 1990 deregulation package, the
\ncentral bank's role in providing subsidized credit to small and
\nmedium-scale businesses was to be reduced gradually and replaced
\nby the increasing role of commercial banks.<\/p>\n
\"But it is unrealistic to expect such a thing at the moment,\"
\nshe said.<\/p>\n
Lowest<\/p>\n
The country's banking system is currently at its lowest point,
\nbattered by the monetary crisis, mounting bad debt and poor
\nmanagement.<\/p>\n
Miranda, however, said many small businesses had failed to
\nbenefit from the subsidized credit facility because the
\nchanneling banks had imposed corporate financing criteria.<\/p>\n
\"Such a scheme is only applicable during normal times, which
\nis not now,\" she said, referring to the current economic crisis.<\/p>\n
She said the failure was both caused by the inefficient
\nintermediary role of the banking system as well as a lack of
\nproductivity in the real sector.<\/p>\n
To improve the absorption of subsidized credit by small-scale
\nbusinesses, BI has designed a new scheme which initially will be
\nimplemented through several pilot projects, she said.<\/p>\n
She explained that the new scheme would include providing
\ntechnology and marketing skills improvement in addition to credit
\nfacility in one package.<\/p>\n
\"Because the facility is credit, not a grant, then there must
\nbe feasibility to assure that it can be returned,\" she said.<\/p>\n
Rahardi Ramelan said a key factor to strengthen the country's
\nsmall-scale businesses was to introduce an antimonopoly law.<\/p>\n
He said the law was being prepared by his ministry and was
\nexpected to be delivered to the House of Representatives (DPR) by
\nDecember.<\/p>\n
He added that the law would include three aspects:
\nantimonopoly, anticartel, and healthy business competition.<\/p>\n
Adi Sasono said the government must also eliminate other
\ndistortions in the economy, including restructuring the country's
\ndistribution industry by adding new players. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-to-handle-credit-supply-to-small-firms-1447893297",
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"sponsor_url": "https:\/\/okusiassociates.com"
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