Bank loans to SMEs grow by 32.5%: BI
Urip Hudiono, The Jakarta Post, Jakarta
In an encouraging sign for the country's small and medium-sized enterprises (SMEs), loans to the sector grew by 32.5 percent to Rp 72 trillion (US$7.75 billion) last year on the back of the sound credit performances of SMEs, Bank Indonesia said.
In a report released over the weekend, BI deputy governor Maulana Ibrahim said the country's banking industry nearly doubled its Rp 38.5 trillion lending target for SMEs through the final quarter of last year.
In comparison, banks disbursed just 63.8 percent of their Rp 42.3 trillion lending target for the sector in 2003.
"It shows the banking industry has started regarding SMEs as potential customers for their lending schemes," Maulana said. "This is encouraging news for both SMEs and the banks, and BI hopes this trend will continue."
Maulana said the main reason banks were increasing their loans to SMEs was because the number of non-performing loans (NPLs) in the sector had declined in recent years.
The report said last year's NPL figure among SMEs stood at 3.44 percent, down 0.86 percent from the previous year's 4.3 percent. Both figures are lower than the banking industry's average NPL rate of 4.5 percent and 6.7 percent in 2004 and 2003, respectively.
"This shows that SMEs have a better credit performance than other sectors," Maulana said.
Loans are considered non-performing if the interest payments on them are more than three months overdue, and NPLs are commonly used to gauge a bank's financial health. BI requires all banks to maintain a NPL figure of below 5 percent.
Last year's growth in credits to SMEs also helped the banking industry lower its undisbursed loan figure to 21.3 percent from 23.1 percent in 2003.
Maulana said SMEs absorbed 50.5 percent of last year's total bank loans of Rp 560 trillion, up from 48.5 percent of Rp 440 trillion in 2003.
Of the total loans given out in 2004, 70.8 percent were disbursed as microcredits (loans below Rp 50 million) and small credits (loans between Rp 50 million and Rp 500 million).
Sector-wise, 23.7 percent of the loans were channeled to the trading sector, 9.4 percent to the industrial sector and 5.5 percent to the service sector.
BI has been encouraging banks to disburse more loans to SMEs in line with the government's plan to empower the sector. The central banks expects loans to SMEs to grow by up to 22 percent in 2005.
The government wants to empower SMEs, which survived the late- 1990s economic crisis much better than larger companies, to create more jobs.
In 2002, SMEs in the country provided about 12 million jobs, while last year SMEs absorbed more than 95 percent of the workforce.
Nevertheless, there still exists a relatively low credit absorption rate among SMEs because many of these businesses lack the necessary administrative documentation for loan applications.