BI moves to protect small businesses

JAKARTA (JP): Bank Indonesia's recently reopened short-term money market securities (SBPU) facility will be available only to local banks which provide credit for small-scale businesses, the central bank announced yesterday.

The bank's credit director, Mukhlis Rasyid, said yesterday that about 70 private banks, whose portion of small credit made up over 20 percent of its total credit, were eligible for the facility.

"We are gradually providing the facility again in phases, but only to banks which provide a minimum 22 percent of their total credit expansion this year to small-scale enterprises," Mukhlis told a banking forum.

Credit for small enterprises is defined as credit of up to Rp 350 million (US$97,200) disbursed to small-scale firms for productive purposes.

Mukhlis said the central bank had so far injected about Rp 500 billion into the market through SBPUs since they were reopened on Tuesday.

He said small enterprises had been hit the hardest by the current financial turmoil and natural disasters, such as the long dry season and the haze from forest fires.

At the same time, the currency crisis made many banks hesitant to give credit to small businesses, he said.

"But we must protect small business sectors," he said.

The government had closed the SBPU facility since July 24 to drain liquidity in a measure to prevent the rupiah from further weakening against the dollar at the time.

Mukhlis said the central bank would use the SBPU facility as an incentive to encourage banks to provide credit to small businesses.

"We have given notice to banks to help the small businesses survive the crisis," he said.

The central bank would also adjust the interest rate of SBPUs to make them competitive enough for banks to provide loans to small enterprises.

"Current interest rates might not be suitable to the cost of funding, so there needs to be a change," he said.

The banks could cooperate with secondary banks in allocating credit to small businesses, he said.

According to official data, about Rp 49.7 trillion worth of loans had been given to small businesses as of last March, or 16.24 percent of total credit.

Nevertheless, the head of the National Banking Fund Foundation, Markus Permadi, said the small-business credit was not received by the 33 million small entrepreneurs in the country.

He said small businesses were usually family businesses and traditional, and had many problems, including a lack of capital and unsophisticated production techniques and technology.

At yesterday's banking forum, the foundation and the Association of Indonesian Secondary Banks agreed to cooperate in providing credit to small businesses.

Nine private banks signed an agreement yesterday to give Rp 32.1 billion worth of loans to 100 rural banks.

Markus Permadi said the nine banks gave loans with interest rates of between 20 percent and 22 percent to the rural banks. (das)