ADB to assist small and medium enterprises

The Jakarta Post, Jakarta

The Manila-based Asian Development Bank (ADB) has approved a US$85 million assistance package for Indonesia's export-oriented small and medium enterprises (SMEs), according to a government official.

Agus Tjahjana, the Director General of Industry and Trade for Small and Medium Enterprises at the Ministry of Industry and Trade, said the package was aimed at increasing the financial capability for SMEs to fund their operations, purchase raw materials and buy heavy machinery.

However, he was quoted by Antara as saying that ADB would only disburse the loan after Indonesia finishes drafting the scheme on the loan distribution to the prospective exporters. The drafting is now in progress.

"We expect to complete the (loan distribution) scheme by May of this year," he said.

ADB will deliver the loan to four national banks, namely Bank Ekspor Indonesia, Bank Danamon, Bank Rakyat Indonesia and Bank Negara Indonesia 46.

The four banks will give credit at a lower interest rate to the SMEs.

"The interest rate will be 1 percent or 2 percent lower than the commercial rate," said Agus.

Small and medium enterprises have been the backbone of the economy amid the economic crisis which has seen the collapse of many local giant enterprises.

Last year, the government made an agreement with the central bank to encourage local banks, granting Rp 30 trillion worth of credit to SMEs.

However, many analysts believe most banks are still reluctant to provide credit for SMEs, doubting their ability to repay their loans. Banks are now mostly interested in providing credit for consumers amid trends that show rising public consumption.

Many SMEs still face difficulties in raising credit to boost their businesses.

Agus said recently, Minister of Industry and Trade Rini MS Soewandi had ordered him to trace the credit given by local banks for the SMEs and requested information on which sectors had utilized the facility.

Agus however, cited difficulties in obtaining information, saying that most banks had refused to issue it due to their client-bank privacy policy.