ADB to assist small and medium enterprises

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.