BI says loan program for SMEs running well

BI says loan program for SMEs running well

The Jakarta Post, Jakarta

Bank Indonesia said the loan scheme program for small and
medium-sized enterprises (SMEs) had been progressing well, with
banks allocating nearly half of their lendings to the sector.

"Data from the banks' financial reports received monthly by BI
shows that the average amount of loans channeled each month by
the banking sector totals around Rp 5 trillion (US$650 million),
of which 48 percent goes to SMEs," Bank Indonesia spokesman Halim
Alamsyah told The Jakarta Post on Friday.

Governor of Bank Indonesia Sjahril Sabirin signed in April a
memorandum of understanding (MOU) on the empowerment and
development of SMEs with the Poverty Eradication Committee, under
which banks would allocate some Rp 30 trillion in funds this year
to help SMEs.

The amount is not part of Rp 250 million worth of loans set
aside by the state budget to be channeled for SMEs this year.

The Bank Indonesia loan program is seen to have the potential
to reduce poverty as the loans can be used to finance labor
intensive programs which can absorb plenty of workers.

The chairman of the Poverty Eradication Committee, Yusuf
Kalla, who is also Coordinating Minister for People's Welfare,
has stressed that the MOU was part of efforts to reduce the
number of poor people to around 14 percent of the whole
population in 2004.

Currently some 40 million are categorized as poor, accounting
for some 19 percent of the population.

The role of the SME sector is seen as crucial to further
reduce the figure, as they have been proven to be the most
resilient even during the country's economic crisis.

Empowering them through capital injection will therefore be
significant in igniting the economy, thereby helping eliminate
poverty in the country.

As for the banks' point of view, lending more loans to SMEs
are seen as less risky given their good track record in repaying
the loans.

According to Gunarni, the chairwoman of the National Banking
Association (Perbanas), the banks only have a small risk of
having their loans to SMEs turning bad.

As of last year, non-performing loans (NPLs) channeled to SMEs
amounted to less than five percent of their total loans.

Also stated in the MOU, which will be in effect for three
years and could be extended thereafter, the central bank is also
in charge of providing banking regulations to help push banks to
lend to SMEs.