Bank Ekspor to channel loans via other banks

Bank Ekspor to channel loans via other banks

JAKARTA (JP): The newly established state Bank Ekspor
Indonesia (BEI), which will start operation on Sept.1, will
channel its loans through appointed commercial banks, the bank's
executive said here on Monday.

At the bank launch, BEI's president Bambang Hendrajatin told
the media that the new bank, founded by the government especially
to assist export-oriented companies, would allocate around US$100
million in loans a month.

He guaranteed that all exporters of any industrial sector
would be able to get access to the bank's financing facilities
even though the loans would be extended through appointed banks.

He said BEI's financial schemes would include a guarantee on
letter of credits issued to finance imports of local exporters,
in addition to import refinancing and working capital loans and
exporters' bill of exchanges.

Bambang said that loan interest rates offered by the bank
would be lower than commercial rates despite the use of an
intermediary in the loan extension.

"It's the government's policy not to allow us to extend the
funds directly to exporters. But we guarantee that the funds will
reach exporters without unnecessary delay and at a reasonable
cost," he said.

BEI, which was established by the government in May, will
operate with a paid-up capital fund of Rp 3 trillion (about $400
million at current rate) allocated from the state budget.

The government initially planned to transform Bank PDFCI, one
of the private banks nationalized last year, into an export
financing agency. However, the plan was canceled as the
government considered the establishment of a new bank as more
effective.

Unlike a conventional bank, BEI will not raise funds from the
public to finance its activities, but will obtain the funds from
bilateral and multilateral foreign financial institutions. These
include the Japan Export Import Bank, the World Bank and the
Asian Development Bank.

BEI's director Budi Mulya said the government had secured $1
billion in standby loans from the Japan Export Import Bank to
finance BEI's operations.

"We believe many exporters will benefit from the BEI financing
facilities. We predict that in one year after commencing
operation, BEI will be able spend up to 80 percent of the entire
Japan Export Import Bank's facility," he said.

Exporters, however, expressed their skepticism over the way
the bank would channel its lending, arguing that the indirect
financing would make loan distribution more complicated and
costly.

Joy Martua Pardede, head of the trade department of the
Indonesian Chamber of Commerce and Industry (Kadin), said the
operation of the bank would not really solve exporters' problems
if the bank provided its financing facilities through other
banks.

"What is really needed is a direct loan system to increase
working capital, not refinancing loans through a third party
bank," he said.

Irwandy Muslim Amin, the secretary-general of the Indonesian
Textile Association, said the indirect lending policy would not
help exporters and could instead be exploited by the third party
bank as an excuse to increase costs and interest rates.

"It's useless. It's been proven for years that the existence
of a third party in the indirect lending method will only ruin
the export schemes," he said. (cst)