Banks to channel Rp 30t for SMEs

Dadan Wijaksana, The Jakarta Post, Jakarta

Bank Indonesia and the Poverty Eradication Committee (KPK) signed on Monday a Memorandum of Understanding (MoU) on the empowerment and development of small- and medium-sized enterprises (SMEs).

Bank Indonesia Governor Sjahril Sabirin said the MoU covers Rp 30 trillion (about US$3.2 billion) worth of funds set to be channeled to SMEs during the year, in which the central bank would act as supervisor, in a bid to help create job opportunities and eradicate poverty.

"The funds come from 14 large banks in the country to be allocated for SMEs in 2002, through a banking mechanism fully supervised by BI," Sjahril, who was recently found guilty in a corruption/embezzlement case, said on Monday.

He added that the deal was necessary as loan programs from banks had the potential to help reduce poverty, saying: "These loans from the banks can be used to finance labor intensive programs which absorb plenty of workers."

Meanwhile, Coordinating Minister for Public Welfare Yusuf Kalla, who is also the KPK chairman, said that the deal to empower SMEs through capital injection was part of the efforts to reduce poverty from the current 19 percent of the population to 14 percent by the end of 2004.

After the 1997 financial crisis, the number of poor people in the country increased sharply with almost 50 million people categorized as poor by the end of 1998.

But the relatively better political and economic condition has gradually reduced the number with the latest data showing it has dropped to less than 40 million, which accounts for some 19 percent.

The role of SMEs is seen as crucial to further reduce the number, as they have been proven to have the strongest resilience even during the economic crisis.

Giving capital support to them will therefore be significant in efforts to eliminate poverty in the country.

"With this, we expect to create more job opportunities in order to generate income," Yusuf said.

He also added that the government itself had set aside some Rp 250 billion of funds for SMEs this year.

Under the MoU, the central bank will conduct a study on various matters to help make sure that the credits would benefit SMEs. The study will be centered on what commodities are eligible for banks to fund for SME development.

The central bank is also in charge of providing banking regulations to help push banks to lend to SMEs.

The MoU will be in effect for a three-year period and can be extended thereafter.