Bank credits for small enterprises fall: Soedradjad
Bank credits for small enterprises fall: Soedradjad
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
asked bankers last night to increase lending to small-scale
companies.
Soedradjad said that the last three years have seen declining
growth in small-scale business lending and in the ratio of this
lending to total credit.
He told an annual bankers meeting that lending under the
small-scale business credit program increased by 18 percent last
year to Rp 48.3 trillion (US$20 billion).
This is apparently below the overall growth of bank credit
which exceeded 24 percent last year.
"I would like to ask you to devote greater attention and more
effort to improving bank commitments to small business
enterprises, particularly as bank lending to small businesses
remains below the mandated requirement," the central bank
governor said.
Bank Indonesia's managing director, Paul Sutopo Tjokronegoro,
said earlier yesterday that small-scale business credit reached
23.5 percent of total bank lending in 1996, down from 24 percent
in 1995 and 25.1 percent in 1994.
Soedradjad said the central bank would continue encouraging
banks to participate in the development of small businesses by
imposing the minimum small-scale business credit ratio with the
emphasis on greater quantity of lending while improving the
lending quality.
Local commercial banks are required to extend at least 20
percent of their total lending to small-scale enterprises and
cooperatives.
Small business credit is defined as credit for small
enterprises or cooperatives with a maximum ceiling of Rp 250
million to finance productive business activities.
To facilitate the extension of small-business credit, the
central bank allows commercial banks to cooperate with other
commercial banks, rural banks and other financial institutions.
The cooperation may be in the form of direct loans by
commercial banks to rural banks, joint financing, channeling,
factoring and issuance of small business-credit money market
securities.
By the end of November 1996, Soedradjad said, such cooperation
had involved 79 commercial banks and about 950 rural banks,
managing about Rp 181 billion in small-business lending.
He said Bank Indonesia would continue to encourage
cooperation between commercial banks and rural banks in the
allocation of credits to small business.
The central bank would also support the financing of small
enterprises through various programs currently supported by Bank
Indonesia Liquidity Credit and two-step loans from multilateral
lending institutions.
It would continue to provide technical assistance to small
enterprises through the so-called small enterprise development
project and self-help group project.
Soedradjad said the central bank was studying the possible
improvements in the regulations governing small-business credit.
"This may encompass changes in the criteria of small
enterprises in accordance with Act No. 9 of 1995 (concerning
small enterprises, and changes in the sanctions applied for non-
compliance)," he said.
Currently, the infringements of the requirements pertaining to
small-business credit are subject to penalties which could result
in a downward soundness rating of the bank.
Bank analysts have questioned the penalty applied to banks
which fail to observe the small-business credit requirements,
arguing that any reduction in small-business credit has nothing
to do with the soundness of banks.
Soedradjad said the planned changes aimed to find the right
penalty for any infringements of the small business credit
requirements. The changes were expected to improve the
effectiveness of the efforts to facilitate small-business
development. (rid)