Banks provide Rp 30.7t in new loans to SME sector
The Jakarta Post, Jakarta
The country's banking sector channeled some Rp 30.7 trillion (US$3.3 billion) in fresh loans to small and medium-sized enterprises (SMEs) last year, slightly exceeding the initial target of Rp 30 trillion.
Bank Indonesia Governor Sjahril Sabirin disclosed the figure at a media conference on Tuesday, which was also attended by Coordinating Minister for People's Welfare Jusuf Kalla.
"The credit realization accounted for some 43 percent of the total new loans extended by banks last year, which amounted to Rp 79.4 trillion," Sjahril said.
Compared with the year before, the loans for SMEs grew by 35.1 percent, outpacing the 15 percent growth in overall bank lending.
Early last year, the central bank and the Poverty Eradication Committee (KPK), headed by Yusuf, signed a memorandum of understanding (MoU) requiring banks to channel Rp 30 trillion of their funds to SMEs. The MoU is in effect for three years and can be extended thereafter.
The deal was meant to empower and develop SMEs through capital injection, as part of efforts to create job opportunities and eventually reduce lingering poverty problems, from 19 percent of the population currently to 14 percent by the end of 2004.
SMEs are one of the country's strategic sectors due to their huge impact on the economy: They can employ some 37 million of the more than 100 million people that make up the country's workforce.
The figure should reflect the banks' rising confidence in the SME sector, which has proved to have the strongest resilience, even during the economic crisis.
Of the total new credits for SMEs, Sjahril added that 53 percent were in the form of productive credits such as for working capital and investment, while the remainder went to consumption credits.
"In terms of credit distribution, Java and Bali still took most of it, accounting for 73 percent of the credits (for the SME sector)," Sjahril added.
Based on these positive figures, Sjahril said that the government was optimistic that the trend would continue this year, while attempts to improve existing obstacles would also be made.
For 2003, loan commitments from the banking sector to SMEs have been targeted to reach Rp 42.3 trillion, to make up around 50 percent of this year's new lending target.
However, despite the current rising trend in SME lending, certain challenges still lie ahead, and could well become a potential roadblock to further increases in loan exposure to the sector.
The most profound center on the lack of managerial, administrative and technical skills available for the running of SMEs.