BI wants banks to lend more to SMEs

The Jakarta Post, Jakarta

Bank Indonesia will push the country's banking sector to allocate a greater amount in loans to small and medium-sized enterprises (SMEs) this year as part of efforts to accelerate economic growth, a top official has said.

"We'll ask the banks to allocate a greater amount of loans (to the SME sector) this year. I'm confident that 2004 will be much better because of the higher economic growth target," Bank Indonesia Governor Burhanuddin Abdullah said on Friday.

He said, however, that the SMEs must improve their management ability and business administration skill to make them more bankable.

He pointed out that of the Rp 42.3 trillion (about US$5 billion) lending target for the SME sector last year, only around half was absorbed by SMEs.

He was quoted by Antara as saying that the relatively low absorption rate was because many of the SMEs were not bankable, partly due to their lack of necessary administrative documentation for loan application.

He said that the central bank had recently set up a consultancy center to help SMEs become more bankable.

Burhanuddin was speaking after opening an international workshop titled High-level policy meeting on microfinance and rural finance in Asia. The event was held in Yogyakarta and was participated in by representatives from 10 countries, including Bangladesh, Cambodia, Malaysia, Mongolia, Nepal, the Philippines, Srilanka and Thailand.

The workshop is aimed at generating ideas on how to empower and develop SMEs.

The government has been trying to empower the country's SMEs, which managed to survive the late-1990s economic crisis, in a bid to create more jobs for the millions of unemployed people.

In 2002, SMEs in the country totaled more than 3 million, providing around 12 million jobs.

The banking sector in general has also become more interested in giving loans to the SME sector, as investment in the highly indebted corporate sector is still deemed too risky.