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.