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)