Bank Mandiri to focus more on SMEs

JAKARTA (JP): The giant state-owned Bank Mandiri will channel around Rp 4 trillion (US$470.59 million) in new loans to small and medium-sized enterprises (SMEs) next year, the bank's president E.C.W. Neloe said here on Tuesday.

Neloe said that the amount represented around half of the bank's Rp 8 trillion total lending target for 2001.

"We will channel Rp 4 trillion to SMEs next year," he said at a press conference following a signing ceremony of a five-year cooperation agreement with the Indonesian Chamber of Commerce and Industry (Kadin).

Under the agreement, which was co-signed by Kadin chairman Aburizal Bakrie, Bank Mandiri will extend part of its money to SMEs, while Kadin would help the bank to identify SMEs and help small businesses to make credit proposals.

The signing ceremony was witnessed by Minister of Trade and Industry Luhut B. Pandjaitan.

Neloe said that the bank was set to lend around Rp 500 billion to the SMEs in the remaining period of this year under the cooperation scheme with Kadin.

He added that the bank's total lending for this year was expected to reach Rp 4 trillion.

Neloe said that loans to the SMEs would provide the bank with a better "margin" compared to lending to the corporate sector.

"The turnover is also good," he said.

Bank Mandiri is a merger result of four state banks.

The move by Bank Mandiri marked a significant turn around in the lending policy of the domestic banking industry. In the past, domestic banks channeled most of their loan funds to big corporate borrowers.

After the banking industry plunged to near bankruptcy as a result of the financial crisis and the government had to spend heavily to bail out almost all the major banks, there has been an increasing demand for the banks to allocate more of their money to SMEs.

Asked about the interest rate to be charged to the SMEs, Neloe said: "Currently, the interest rate is still around 18-19 percent. But if our funding cost declines, the interest will also decline."

In comparison, the Bank Indonesia benchmark interest rate is currently hovering at around 13.5 percent.

Meanwhile, Aburizal said that Kadin had so far identified around 30 projects scattered across several parts of the country that were feasible to be financed by Bank Mandiri. (rei)