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)