Small businesses need banks help<\/p>\n
The current issue of collateral-free loans to small businesses
\nwas discussed in an economic and financial ministerial meeting on
\nMonday. The Jakarta Post talked to noted economist Laksamana
\nSukardi to shed some light on the issue.<\/p>\n
Question: What do you think of the government's plan on this
\nissue?<\/p>\n
Answer: It's a little bit strange, I think, that people --
\nincluding the members of the House of Representatives -- are very
\nhappy about it. Especially if we look at the case from the point
\nof view of prudent banking principles. A professional banker will
\nunderstand at once that collateral is not the main factor
\nconsidered by a bank in assessing a loan application. It's the
\nfeasibility of the business that counts. Even if a businessman,
\nfor example, has no collateral, as long as he runs a good
\nbusiness the bank will give him a loan. It's very simple and
\nbasic.<\/p>\n
What worries me is that the banks here have not been applying
\nprudent banking principles; they only see collateral when they
\nevaluate loan proposals.<\/p>\n
What I'm trying to say is, don't misunderstand the Minister of
\nFinance's statement. His statement does not mean that loans will
\nbe given to business with no collateral without first evaluating
\ntheir future prospects.<\/p>\n
Q: So we shouldn't ignore the feasibility of the business?<\/p>\n
A: No you should not. A bank which only looks at the collateral
\nis a pawn shop. I am jittery about that. It's really dangerous if
\nbanks are forced to extend a collateral-free loan of up to Rp 50
\nmillion without examining feasibility. Bank funds are mostly
\nowned by the people. Therefore, we have to differentiate between
\nprofessional, prudent banking and political rhetoric.
\nEveryone at banking schools knows that collateral is only a
\nsecond way out. The first way out is feasibility. If the business
\nis feasible, collateral is not necessary. Without a government
\nregulation, a professional banker has to know that rule.
\nSo the most important thing here is how the government regulation
\ncan make it easier for small businesses to succeed. A businessman
\nfriend of mine has a good comment on this. He said that with this
\nregulation, it will be even more difficult for a small business
\nto get a bank loan. I think he is right.<\/p>\n
Q: Why?<\/p>\n
A: First of all, the bankers have to examine the business more
\ncarefully. This means they have to conduct a survey or do
\nresearch on the business as well as a credit check. In fact,
\nsmall businesses that are stable usually don't need to get loans
\nbecause supplier credits are quite often more than enough. If a
\nbank loan is needed, it's usually not much. It will be very
\ndangerous if the program is overzealously implemented.<\/p>\n
Q: How have bankers reacted?<\/p>\n
A: I've found that it's already difficult for them to fulfill the
\ngovernment's requirement that they allocate 20 percent of their
\nloans for small businesses. As a result their annual reports have
\nto look as if they have fulfilled the lending quota. It happens
\nwith many banks here. While they report that their KUK (credit
\nfor small business) targets are fulfilled, I don't think small
\nbusinesses actually feel it. So, the question is, do their
\nreports give exact data? I don't think so.<\/p>\n
Even if the government were to ask them to extend 50 percent
\nof their credits to small businesses, I'm quite sure that they
\nwould report fabricated figures of having accomplished that also.<\/p>\n
Q: What is your suggestion?<\/p>\n
A: You have to make a novel breakthrough by founding a new bank
\nwhich is specifically designed for small businesses and include
\nexisting banks as shareholders. The bank should be run by
\nindependent professionals who know about small businesses and are
\nexperienced in managing loans for them. A hundred percent of the
\nbank's funds should be extended to small businesses.<\/p>\n
Q: Do you think it's possible to establish such a bank here?<\/p>\n
A: Of course. It's much easier to found such a bank than require
\nevery bank to allocate 20 percent of their loans to small
\nbusinesses. Once set up, the private banks could then focus their
\nresources on medium and big businesses while small businesses
\nwould be taken care of by these new banks. That way private banks
\nwould no longer need to manipulate their annual reports just for
\nthe sake of fulfilling the credit quota.(swa)<\/p>\n
Laksamana Sukardi, former director of Lippobank, currently
\nserves as the CEO of the ReFORM Consulting Group and is the
\nAssociate Director and Co-founder of the Econit Advisory Group.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/small-businesses-need-banks-help-1447893297",
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"sponsor": "Okusi Associates",
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