Micro-credits require no subsidy, say Mar'ie<\/p>\n
JAKARTA (JP): Minister of Finance Mar'ie Muhammad said
\nyesterday the government would never subsidize credit to very
\nsmall businesses, usually called micro-credit, as it could
\nbacklash.<\/p>\n
Mar'ie said here yesterday that other countries' experiences
\nhad taught Indonesia not to subsidize micro-credit.<\/p>\n
\"Microfinance institutions that provide commercial financial
\nservices can become self-sufficient and sustainable without
\ngovernment subsidies,\" Mar'ie told a workshop on micro-credit
\nfinancing held by state-owned Bank Rakyat Indonesia (BRI).<\/p>\n
The minister said sound micro-finance institutions played a
\nvital role in meeting the financial needs of micro businesses and
\nlow-income earners.<\/p>\n
He said micro businesses and low-income earners did not care
\nmuch about interest rates, but they cared more about the
\navailability of funds.<\/p>\n
Mar'ie gave as an example the popularity of pawn shops with
\nthe poor as a loan source, even though they charge very high
\ninterest.<\/p>\n
\"What is really needed by low-income earners and very small
\nbusinesses is easy access to financial services. Therefore,
\ncredit for them must be processed quickly by officials at the
\nlowest possible level,\" Mar'ie said.<\/p>\n
He saw lending to micro enterprises as a profitable business.
\nBut the variety of micro businesses and their widely-spread out
\nlocations calls for a flexible credit system responsive to their
\ndiverse and specific needs.<\/p>\n
He commended BRI's micro-credit scheme which has reached micro
\nbusinesses and low-income earners in almost every sub-district in
\nIndonesia.<\/p>\n
\"Financial services that are widely and easily accessible to
\nthe rural community and poor urban community allow small and
\nmicro businesses to take advantage of business opportunities and
\nfinancing their growth,\" Mar'ie said.<\/p>\n
BRI president Djokosantoso Moeljono said the bank's micro-
\ncredit had totaled Rp 23 trillion (US$9.44 billion) since 1983,
\nreaching 18 million low-income people and very small businesses.<\/p>\n
BRI offers micro-credit in the form of loans up to Rp 25
\nmillion, with annual interest rates of up to 32 percent. But
\ncustomers who have good repayment records can get annual interest
\nrates of up to 28 percent.<\/p>\n
Djokosantoso said the interest rates were quite high compared
\nwith those corporate clients were charged, which are about 20
\npercent.<\/p>\n
\"But the administrations cost of micro-credit is also very
\nhigh, \" he said, adding that BRI micro-credit interest rates were
\nlower than those charged by secondary banks.<\/p>\n
Secondary banks usually charge interest rates of some 30
\npercent to 40 percent.<\/p>\n
Djokosantoso said 96.2 percent of BRI's Rp 23 trillion micro
\ncredit went to those who needed loans of less than Rp 5 million.<\/p>\n
He said that problem loans under BRI's micro credit scheme
\nwere below 2 percent.<\/p>\n
Mar'ie said the success of BRI's micro-credit scheme had
\nattracted banking communities from 89 countries to study it. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/micro-credits-require-no-subsidy-say-marie-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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