Access to credit remains a hurdle to SME growth: Minister

Access to credit remains a hurdle to SME growth: Minister

The Jakarta Post, Jakarta

The government is working on efforts to help strengthen financial
access for small and medium enterprises, which has become a major
barrier for SMEs to grow and reach the targeted 6 million in
number within five years, a minister said.

State Minister of Cooperatives and Small and Medium
Enterprises Suryadharma Ali said on Thursday the low level of
financing to the sector would "surely make it difficult to
achieve the target".

Part of the problems, he said, was the stagnant distribution
of Rp 3.1 trillion (US$317.3 million) in funds derived from a
government bond issued in 2003. The bond amounted to Rp 9
trillion -- all specifically allocated to boost SMEs' financing.

"To date, only some 70 percent of the (Rp 3.1 trillion) fund
has been distributed," the minister said on Thursday after
officiating a seminar on SMEs jointly held by tobacco company Dji
Sam Soe and Tempo magazine.

The government had appointed PT Permodalan Nasional Madani and
the country's biggest lender Bank Mandiri to manage the fund,
which would then channel it through about 30 banks throughout the
country.

Suryadharma said some of the appointed banks had failed to
meet their targets of credit distribution, partly because they
did not have a sufficient number of branches in villages where
most SMEs were located.

He also said that some banks considered processing loans for
SMEs costly.

"For example, a Rp 10 billion loan usually goes to one or two
big enterprises, but if the same amount of money is channeled to
SMEs, the bank will be dealing with many people, maybe even
thousands of them," he said, adding that only 12 percent of the
country's SMEs could access bank loans.

Suryadharma promised to encourage banks to distribute the rest
of the funds immediately as there was a remaining fund of more
than Rp 6 trillion from the bond, although he was quick to add
that the remaining 30 percent of the Rp 3.1 trillion needed to be
disbursed soon.

"How can we ask for more if we have not dispersed the Rp 3.1
trillion fund," he said, adding that promoting more SMEs would
help create prosperity in the country.

Based on the state minister office's website, at present, the
4.2 million SMEs, which employ about 7.6 million people
nationwide, contributed more than half of Indonesia's gross
domestic product (GDP) in 2003. (006)