Bankers' dilemma

It seems to me that during the present monetary turmoil many economists came to the fore, each presenting his own solution or theory as to how to cope with this crisis. What I am writing here is the wishful thinking of the man in the street. The present tight money policy brings many financial problems to entrepreneurs. The property sector, for example, intends to rationalize (read dismiss) 40,000 workers in order to stave off bankruptcy (Bisnis Indonesia, Oct. 16, 1997).

At present the banks, especially the small ones, face a major dilemma. I believe that the revenue from import and export commissions of around 0.5 percent of the L/C amount is hardly enough to cover the overhead costs (such as employees' salary) and banks are relatively labor-intensive companies. Hence, the main source of revenue is the credit/interest on the loans the banks give to their customers.

On the one hand, the credit to the customers is a "must" in order to survive. On the other hand, in this time of monetary uncertainty, the chance of customers defaulting is greater than ever.

It is common knowledge that every bank has its bad debts (or dubious debtors). Under these circumstances, the banks with a small working capital are put at a disadvantage, because borrowers prefer to borrow larger amounts at the same interest rates.

A. DJUANA

Jakarta