NGOs seek funds to help small entrepreneurs<\/p>\n
Leony Aurora, The Jakarta Post, Jakarta<\/p>\n
In an effort to accelerate microcredit growth, the Indonesian
\nMovement for Microfinance Development (Gema PKM Indonesia) plans
\nto establish an independent institution to mobilize funds to be
\nchanneled to cash-starved small businesses.<\/p>\n
Titus Kurniadi, who has been tasked with setting up the
\ninstitution, told reporters on Tuesday that many non-bank
\nmicrofinance institutions had encountered problems in obtaining
\nfunds, as banks, following prudential banking principles, refused
\nto lend them money in the absence of collateral.<\/p>\n
This lack of funds made it difficult for these non-bank
\nmicrofinancers, generally non-governmental organizations (NGOs),
\nto expand their coverage areas and reach more people in need.<\/p>\n
"We need a wholesaler to collect the funds and channel them
\n(to microcredit institutions)," said Titus.<\/p>\n
Under the plan, donors will pledge 20 percent of the amount to
\nbe borrowed by a wholesaler as collateral. For example, the
\ndonors place US$1 million with a bank and the bank, in turn,
\nentrusts the wholesaler with a $5 million loan.<\/p>\n
"This is based on our experience that the non-performing loans
\nof micro businesses never exceed 20 percent," said Gema PKM
\nsecretary-general Bambang Ismawan.<\/p>\n
In fact, he added, the average recovery rate for the loans
\nextended by the NGOs was as high as 97 percent. By comparison,
\ndata from Bank Indonesia showed that the credit recovery rate in
\nbanks stood at 92.7 percent in July.<\/p>\n
Gema PKM, which was established in 2000 with members drawn
\nfrom various stakeholders involved in microcredit development,
\naims to have the wholesaler up and running by the middle of next
\nyear.<\/p>\n
"We are approaching Permodalan Nasional Madani (PNM) and Bank
\nMandiri to give us the loans," said Bambang, referring to a
\nstate-owned investment firm and bank.<\/p>\n
Micro businesses have come to be viewed in a better light
\nafter having proved themselves capable of weathering the economic
\ncrisis in 1998. However, data collected by Gema PKM from various
\nsources show that only 9.46 million units, or 23 percent of the
\nexisting 41.8 million micro enterprises, have received loans from
\nformal institutions.<\/p>\n
Microcredits are defined by the central bank as loans of under
\nRp 50 million (US$5,385).<\/p>\n
"There are very poor, poor, low-, middle-, and high-income
\nmicro enterprises," said Titus. The village units of Bank Rakyat
\nIndonesia (BRI) and credit banks (BPR), seen as the frontline
\ninstitutions in channeling microcredits, mostly cover the upper
\nlevels with loans of more than Rp 3 million.<\/p>\n
In the meantime, the very poor entrepreneurs, for whom a Rp
\n300,000 loan would be enough, remain beyond the reach of banks.
\n"The wholesaler will focus on the poor micro enterprises," Titus
\nsaid.<\/p>\n
In 1989, the central bank made an effort to connect banks and
\nNGOs. Banks provided loans, which were channeled by the NGOs at a
\nslightly higher interest rate. The interest margin enabled the
\nnon-bank institutions to cover operating costs, including hiring
\nsupervisors.<\/p>\n
This collaborative venture was pioneered in five provinces and
\ncontinued to develop until the economic crisis, which put a halt
\nto the program.<\/p>\n
The year 2005 has been declared the International Year of
\nMicrocredit by the United Nations in acknowledgement of the
\nimportant role played by such loans in alleviating poverty.<\/p>\n
According to government figures quoted by Gema PKM, there are
\nabout 42.5 million business units spread across the archipelago.
\nOf this figure, 98.5 percent, or 41.8 million, are micro
\nenterprises. There are also 650,000 small and medium enterprises
\nand 2,000 large ones.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ngos-seek-funds-to-help-small-entrepreneurs-1447893297",
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"sponsor": "Okusi Associates",
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