Endy Bayuni, Jakarta

In physics, the smallest particle of an element is called an atom. In business, the smallest unit is called a micro- enterprise. It's smaller than the conventional small business. Like an atom, it is sometimes too small to be visible. Like an atom, a micro-enterprise has vast potential energy.

Millions of such enterprises are scattered throughout the Indonesian archipelago. The Central Statistics Agency estimates there are at least 39 million of them. Typically, they are cottage industries employing anything from one to 50 people.

Sometimes they are family-run units employing immediate family members, but quite a number of them employ neighbors or members of their community. Some have over time graduated to become small, medium or even big enterprises and enjoy facilities that come with such status.

But most remain the way they have always been.

Because they are so small, their role in the economy for many years has long been underestimated, neglected, not recognized, or simply taken for granted.

Yet, it is now widely acknowledged that they were saviors for millions of people when Indonesia went through the most severe stage of the economic crisis between 1998 and 2000.

Many of these micro-enterprises survived the crash unscathed and continued to provide employment and thus income to millions of people throughout that period. Some new micro-businesses even emerged during this time as entrepreneurial spirits turned the crisis into a business opportunity.

They played a far more effective role than the government's social safety net program and the millions of dollars from the World Bank.

These entrepreneurs are the unsung heroes of the country.

In contrast, heavily indebted conglomerates were laying off workers by the hundreds of thousands, turning to the government to bail them out, and passing on the huge costs of their gross mismanagement and abuses of economic privileges to the people.

And in contrast to the big enterprises, most micro-enterprises have managed by themselves with no or very little assistance or subsidy from the government or the banking and financial system.

Slowly, the government is now realizing the role these micro- enterprises play in the economy. As we emerge from the prolonged economic crisis, the government is looking to micro-enterprises to help in its campaign to eradicate poverty.

The role of micro-enterprises in the economy is also gaining international recognition, and with it, hopefully, formal assistance, including, most importantly, credit facilities.

On Thursday, United Nations Secretary-General Kofi Annan is scheduled to officially pronounce 2005 as the International Year of Microcredit. The goal is to encourage the development of an affordable but commercially viable and thus sustainable microcredit system to serve the needs of micro-businesses.

The United Nations recognizes the potential of such enterprises in helping nations achieve the Millennium Development Goals set out four years ago; in particular, the goal of halving the number of poor people by 2015.

But in order to reach out to these micro-enterprises, they should be brought into the fold of the financial system proper, hence the emphasis on microcredit rather than the micro- enterprise.

Most banks have simply avoided them like the plague because they are too small and are too many in number to be administered effectively and efficiently. Most such businesses have no collateral to offer banks, nor can they come up with acceptable business plans to secure even the smallest of loans.

Typically, when banks do extend loans to them, they charge a high interest rate to cover the extra risks and administration costs involved.

In Indonesia, it is not unusual for micro-enterprises to pay between 2 percent and 4 percent monthly interest to the few banks or financial institutions that do lend them money. They are effectively paying annual interest rates of between 30 percent and 40 percent in contrast to the 10 percent to 15 percent that others pay.

Such shark loan-like interest rates and tough loan conditions effectively preclude millions of micro-enterprises in Indonesia from the financial system proper.

Access to inexpensive loans may not be sufficient in itself, but it is a beginning. The problem lies more in creating and managing the microcredit system rather than in the micro- enterprises, many of which have managed well without credit.

The Indonesian financial system has already developed a rudimentary microcredit mechanism. Bank Indonesia, the central bank, has a division dealing with this question. Subsidized government loans are also being parceled out through commercial banks to help microenterprises.

The official old acronyms for small and medium enterprises, UKM, has been expanded to UMKM, to denote macro, small and medium enterprises.

State Bank BRI is the leading institution in providing microfinance, and has a more than 100 years of experience in extending small loans to small and micro businesses. Other players include rural banks (BPRs), regional development banks (BPDs), savings and loans, cooperatives, pawnshops and some non- governmental organizations that actively provide help and loans to micro-enterprises.

In spite of their huge number, BRI president Rudjito reckons that only 15 percent of the 30 million-plus microenterprises have access to credit. The rest remains outside the system.

The yearly announcement by the government to write off unpaid microloans -- though the sum is nowhere near as large as that written off for big debtors -- suggests something amiss with the administration of these loans. And the subsidy provided by the government also raises questions about the fairness and efficiency of the system.

Plenty more needs to be done before Indonesia can come up with a microcredit system that has a much wider coverage, and one that is truly efficient and sustainable.

With international and national recognition and support, 2005 could become the defining moment for the establishment of microcredit in Indonesia's financial system proper, and thus help unleash the atomic potential of microenterprises.

The writer was a member of the Indonesian panel for this year's Global Microentrepreneurship Awards organized by the Management Institute of the University of Indonesia (LM-UI).