'Collateral-free loans won't raise inflation'<\/p>\n
JAKARTA (JP): Minister of Finance Mar'ie Muhammad assured
\nskeptics yesterday that the planned collateral-free loans of up
\nto Rp 50 million (US$22,000) for small-scale businesses would not
\nraise inflation.<\/p>\n
\"The funds for the collateral-free loans will not be part of
\nBank Indonesia's subsidized loans and their interest rate will be
\nthe same as that on other commercial credits for small
\nbusinesses,\" Mar'ie told reporters.<\/p>\n
The government requires commercial banks to allocate at least
\n20 percent of their outstanding loans for small-scale businesses,
\nwhich can raise up to Rp 250 million in credit.<\/p>\n
\"But the ceiling of the collateral-free loans is set at Rp 50
\nmillion,\" he said after installing first echelon officials at his
\nministry.<\/p>\n
The minister inducted Mohammad Soleiman Abdullah as chief of
\nthe ministry's state financial accounting board to replace
\nMuhammad Nirwan Nazaruddin and First Air Marshal Soetriadji as
\ninspector general of the ministry to replace I.G.P. Surya.<\/p>\n
Mar'ie said earlier this week that the government is
\nformulating a regulation on the collateral-free loans for small
\nbusinesses. The planned ruling is expected to be implemented by
\nstate banks before being imposed on private banks.<\/p>\n
He said yesterday that the borrowers of the collateral-free
\nloans can use their contracts for projects to be financed with
\nthe loans or their liabilities as guarantees for their
\nrepayments.<\/p>\n
Quoting chapter eight of Law No. 7\/1992 on Banking, Mar'ie
\nsaid that the guarantee for banking loans can be material assets,
\nprojects or liabilities related to the loans.<\/p>\n
He said state banks will start providing such collateral-free
\nloans within the next two months.<\/p>\n
However, Rijanto, an outspoken banking analyst, was quoted by
\nBisnis Indonesia yesterday as saying that banks might face
\ndifficulties in providing such loans if the central bank does not
\nsupport them by providing subsidized credits.<\/p>\n
Rijanto, who is also commissioner of a number of private
\nbanks, also said that creditors might abuse the loans by using
\nthem to buy houses or cars, instead of financing business
\nprojects.<\/p>\n
Praise<\/p>\n
Meanwhile, Rizal Ramli, director of the Econit Advisory Group,
\npraised the government's move, saying that it would help small
\nbusinesses overcome their problems providing collateral for
\nloans.<\/p>\n
\"It is a very positive breakthrough,\" he told reporters
\nyesterday.<\/p>\n
He said the plan will require banks to carry out professional
\nbanking practices as they will have to rely on the soundness of a
\nprospective creditor's credit history.<\/p>\n
\"In disbursing such loans, banks should shift their focus from
\nassessing collaterals to evaluating credit histories and
\nanalyzing business prospects,\" he said.<\/p>\n
Giving an example, Rizal said the state-owned Bank Rakyat
\nIndonesia managed to prosper even though most of its customers
\nwere mostly small and medium-scale businesses in villages.<\/p>\n
He pointed out that although the assets of the bank's village
\nbranches made up only 10 percent of its total assets, the
\ncontribution of the small businesses to its profits accounted for
\nalmost 30 percent.<\/p>\n
\"This shows that as long as the principles of good banking
\nbased on a sound credit history are applied, loans to small
\nbusinesses are profitable and carry minimal risk,\" he said.
\n(kod\/pwn)<\/p>",
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