40% of city's microcredit turns into bad debts

40% of city's microcredit turns into bad debts

Damar Harsanto, The Jakarta Post, Jakarta

The City Audit Agency revealed on Tuesday that about 40 percent
of the total Rp 21.5 billion (US$2.3 million) in revolving funds
disbursed to small businesses from 2002 to 2004 had turned into
bad debts.

The Rp 8.6 billion of non-performing funds were part of the
larger Subdistrict Residents Empowerment Scheme (PPMK) in West
Jakarta.

"The reasons for non-payment vary in each subdistrict. Some
creditors have problems with their business; others are just
unwilling to pay the money back," agency head Firman Hutajulu
said.

He added that in some cases, it would be impossible for the
administration to recoup the funds since some creditors had
passed away or moved out of the area.

The agency had requested the help of 56 subdistrict heads in
the municipality to pursue the bad debtors and to carry out in-
depth evaluations on creditors who were seeking rescheduling.

Firman said the agency had reported alleged embezzlement cases
implicating several subdistrict councils (Dekel) to the police
but he would not say which local bodies were involved.

However, West Jakarta Police chief Sr. Comr. Suhardi Alius
confirmed his office had received a report detailing alleged
corruption in the local municipality and was investigating the
case.

West Jakarta has received a total of Rp 84 billion in funds
for a variety of projects under the scheme from 2002 to 2004.

The PPMK was initially launched in 2001 in 25 subdistricts,
each receiving Rp 2 billion in funds. The program was then
expanded to all 267 subdistricts in the city in 2002 with each
subdistrict receiving Rp 250 million. The administration
gradually increased the fund per subdistrict to Rp 500 million in
2003 and Rp 750 million in 2004.

This year, the administration allocated nearly Rp 1 billion to
each subdistrict in a bid to empower local communities,
especially small entrepreneurs.

Problems with the implementation of the program had surfaced
in many other municipalities, local officials said.

East Jakarta community empowerment board (BPM) acting head
Endjang Abdullah said the city had lent Rp 14.775 billion to
20,173 creditors last year.

"Unfortunately, about Rp 2.93 billion of this has turned non-
performing since many residents still misinterpret the program as
a grant, while other subdistrict councils have failed to channel
the funds in accordance with a priority scale made based on the
needs of the respective communities," he said.

In 2003, two members of the subdistrict council (Dekel) in
Serdang, Kemayoran district, who were in charge of channeling the
fund, were sent to jail for misusing Rp 700 million of the fund.

Despite irregularities in the implementation of the scheme,
Jakarta Governor Sutiyoso insisted on maintaining the program.

"The benefit of the revolving funds is that residents get easy
access to fresh cash to develop their businesses.

"However, we will continue to pursue irregularities in the
program and revise regulations to prevent those irregularities
from repeating," he said.

PPMK fund in 2005

Area subdistricts fund allocation

C.Jakarta 44 Rp 43.78 billion

N.Jakarta 31 Rp 33.98 billion

W.Jakarta 56 Rp 55.29 billion

S.Jakarta 65 Rp 63.03 billion

E.Jakarta 65 Rp 64.92 billion

Thousand Islands 6 Rp 6 billion

Total Rp 267 billion

Source: Jakarta Community Empowerment Board