ADB signs $85m loan to help SMEs
ADB signs $85m loan to help SMEs
Dadan Wijaksana, The Jakarta Post, Jakarta
The Asian Development Bank (ADB), one of the country's major
lenders, said on Wednesday it had signed a US$85 million export
credit agreement with six local banks -- including Bank Negara
Indonesia (BNI) and Bank Rakyat Indonesia (BRI).
The credits, to be extended by the banks to small and medium-
size enterprises (SMEs), were scheduled to be given earlier but
were delayed primarily because of lending scandals at the two
banks.
David J. Green, ADB country director in Indonesia, said the
bank resumed the export credit facility after receiving
assurances that the lending problems at BNI and BRI had been
corrected.
"Bank Indonesia has given us the assurance that corporate
governance at banks has improved," said Green.
BNI and BRI, the country's second and fourth largest lenders,
respectively, have made headlines in recent months because of
lending scandals.
BNI became involved in a Rp 1.7 trillion lending scandal,
while BRI has been investigated for suspicious loans valued at Rp
294 billion. The cases exposed the poor internal control
mechanisms at the banks.
After receiving assurances from the central bank, Green said
he felt "comfortable" that the credit program could resume,
although the disbursement of the credits was still pending
further administrative work.
Aside from BNI and BRI, Bank Mandiri, Bank Danamon, Bank Niaga
and Bank Bukopin are also included in the program.
Shamshad Akhtar, ADB director general for Southeast Asia, said
the program was part of the bank's integrated efforts to empower
SMEs across Indonesia.
The SME sector not only has the resilience to weather various
shocks -- it was able to grow during the economic crisis when
larger businesses suffered -- but it can also absorb huge numbers
of workers. Millions of people has been sent jobless since the
economic crisis hit the country. The economy needs to grow by
around 6-7 percent per year (compared to the average growth of 4
percent during the past years) to be able provide enough jobs.
Government data says that at present, there are more than
three million SMEs in the country employing about 12 million
workers.
The export credit program will allow the six banks to obtain
inexpensive credit export facilities from the ADB, which they
will then extend to SMEs as working capital.
Law No. 9/1995 on small enterprises defines small-scale
enterprises as those with net assets of up to Rp 200 million and
maximum annual sales of Rp 1 billion. The law does not provide a
definition of medium-scale enterprises.
According to a government publication, however, medium-scale
companies are those with annual sales of between Rp 1 billion to
Rp 50 billion.