Loans to SMEs to meet target: BI<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The central bank said on Thursday that up until the first
\nsemester, the banking sector had extended around Rp 19 trillion
\n(about US$2.29 billion) in new loans to small and medium
\nenterprises (SMEs) and was on track to meet the full-year loan
\ntarget of Rp 42.3 trillion.<\/p>\n
"We're confident the (full-year) target can be achieved.<\/p>\n
"The first half figures account for about 45 percent of the
\ntarget, and under the banks' business plan, the loans are set to
\nincrease in the second half," Bank Indonesia deputy governor
\nMaulana Ibrahim said.<\/p>\n
The figure should reflect the banks' rising confidence in the
\nSME sector, which proved resilient during the economic crisis, he
\nsaid.<\/p>\n
The target refers to one set by the central bank and the
\nPoverty Eradication Committee (KPK), headed by Coordinating
\nMinister for People's Welfare Jusuf Kalla, which is aimed at
\nbolstering the competitiveness of SMEs.<\/p>\n
The deal, which was signed two years ago, requires banks to
\nchannel a set amount of funds annually to the sector. The target
\nis then included in the bank's annual business plan, especially
\nin the area of lending.<\/p>\n
The capital injection was meant to empower and develop SMEs,
\nas part of the efforts to create job opportunities, and reduce
\nlingering poverty from the current 19 percent of the population
\nto 14 percent by the end of 2004.<\/p>\n
The SME sector is considered strategic due to its huge benefit
\nto the economy. In 2002, SMEs totaled 3.03 million across the
\ncountry, or equal to 95.78 percent of the country's total
\nbusiness units, and absorbed 12 million workers.<\/p>\n
Under this program, the banks extended last year Rp 30.7
\ntrillion in new loans to SMEs, a 35.1-percent growth compared to
\nthe previous year. The growth outpaced the 15-percent growth in
\noverall credit exposure last year.<\/p>\n
The SME loan target represents around 50 percent of this
\nyear's target for total new lending in the banking sector.<\/p>\n
Despite the current trend of increased loans to SMEs, however,
\nchallenges still remain and could well pose as potential
\nroadblocks to a further rise in lending exposure to the sector.<\/p>\n
The challenges include the lack of management, administrative
\nand technical skills in running a business.<\/p>\n
Based on Law No. 9\/1995 on small enterprises, a small
\nenterprise is defined as one having net assets of up to Rp 200
\nmillion and maximum annual sales of Rp 1 billion. The law does
\nnot define a medium enterprises.<\/p>\n
But according to a government publication on SMEs, a medium-
\nscale company is defined as one having annual sales of between Rp
\n1 billion and Rp 50 billion.<\/p>\n
Separately on Thursday, Bacelius Ruru, the secretary of the
\nOffice of the State Minister of State Enterprises, said state-
\nowned enterprises (SOEs) would channel Rp 945 billion (US$111
\nmillion) in loans to 36,000 small enterprises this year.<\/p>\n
Government data shows that as of 2002, outstanding loans
\nchanneled by SOEs stood at Rp 2.87 trillion for about 355,000
\nbusiness units.<\/p>\n
Ruru said that due to state-owned enterprises' poor
\nperformance, the loans being channeled were still focused on
\nsmall, not medium, enterprises.<\/p>\n
The channeling is called the "partnership program" required by
\na government regulation on guidelines for state-owned enterprises
\nissued in 1983.<\/p>\n
"The lending rate of the loans stand below the average
\ncommercial lending rate," Ruru said without giving further
\ndetails.<\/p>\n
Each enterprise has to allocate 1 percent to 3 percent of its
\nnet profit for loan channeling to SMEs, Ruru said on the
\nsidelines of the opening ceremony of an SME expo.<\/p>\n
The expo, taking place from Aug. 28 to Aug. 31 at the Jakarta
\nConvention Center, features 152 SMEs selling handicrafts,
\ntraditional apparel, snacks and beverages, jewelry, garments,
\nfurniture, leather products and services.<\/p>\n
The chairman of the organizing committee expects 50,000 people
\nto visit the expo.<\/p>",
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"sponsor": "Okusi Associates",
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