Bank loans to SMEs to grow by 22% next year

Bank loans to SMEs to grow by 22% next year

Urip Hudiono, The Jakarta Post, Jakarta

It might be easy for many of us these days to get bank credit
for consumer goods like motorcycles and home appliances, but it
is not the case for small and medium-sized enterprises (SMEs).

Many SMEs that need credit to expand businesses come to a dead
end when the owners of the businesses have to fulfill the "5C"
requirements to obtain loans from banks -- of good "character",
their business "condition and "capability", and whether they have
enough "capital" and "collateral" to cover the loans.

However, with the government now changing its paradigm from
mere consumption and endorsing conglomerates to real production
and empowering SMEs -- which includes helping them get credit --
things might get better for them.

What is more promising, is that the banking sector is
apparently answering the government's calls, as reflected in the
recent increase of loans to SMEs.

"Based on our analysis of the business plans of several banks
that we have received, loans to SMEs are expected to grow between
20 percent to 22 percent next year," Bank Indonesia deputy
governor Maulana Ibrahim said on Thursday during a seminar on
bank credit for SMEs.

And such a figure would likely be a viable one, Maulana
explained, as such loans had until this year's third quarter
alone reached Rp 50.8 trillion (some US$5.6 billion) --
surpassing the central bank's previous estimation of Rp 38.5
trillion.

"This has made the total of loans to SMEs currently stand at
Rp 262.7 trillion, or 50.7 percent from the banking sector's
total credits," he said.

Maulana further explained that loans to SMEs were actually
prospective, as regional development banks (BPR) -- which usually
provided such loans -- managed to achieve an average lending-to-
debt ratio (LDR) of 79 percent, as compared to only 48 percent at
commercial banks.

Most of the credits were also in sound condition, with non-
performing loans (NPL) standing at 4.4 percent, proving that most
SMEs were prudent in doing their businesses.

"To keep the momentum, we will encourage more banks to
facilitate credit to SMEs, and extend our SMEs empowerment
projects," Maulana said.

Speaking on the same occasion, State Minister for National
Development Planning Sri Mulyani Indrawati said what was also
important in increasing loans to SMEs was how both the banks and
SMEs can get access to information on each other.

"It is a fact that banks will only give loans to SMEs that
have a proven track record and whose operations conform with
their concerns on prudential banking practices," she said.

Mulyani said that upgrading the status of the country's mostly
informal SMEs into a more legalized one was therefore needed.

"And this implies that the government should improve its
bureaucracy so that SMEs do not become victims of red-tape and
corruption in the process."

Meanwhile, State Minister for State Enterprises Sugiharto said
that his office would prepare a new scheme to better channel the
profits of state-owned enterprises (SOE) to SMEs.

Sugiharto explained that SOEs regularly disbursed between 1
percent to 5 percent of their profits as loans to SMEs, but have
not been optimal.

"The loans amounted to Rp 1.8 trillion this year," he said.
"However, some 40 percent, or Rp 400 billion, turned up as NPLs."

With the new system, Sugiharto expects to be able to provide
Rp 1.6 trillion in loans to SMEs next year.

The latest data from the ministry shows that 89 SOEs enjoyed
profits totaling Rp 9.1 trillion.

Sugiharto recently appointed state-owned financing firm PT
Permodalan Nasional Madani to manage the profits set aside by the
SOEs as loans to SMEs.