Furniture Makers Struggling To Access Financing
Small and medium-sized furniture and handicraft businesses are calling on the government to help increase their access to cheap credit and guarantee them a supply of timber, which has fluctuated over the past few years.
Erwin Elias, chairman of the Indonesia Small Business Exporters Consortium, or Isbec, said on Thursday that a drop off in demand for furniture and handicraft products during the global economic crisis meant it was more difficult than usual for small businesses to access bank loans.
The producers, who rely on buyers in the United States, the European Union and Japan, said orders had decreased by around 40 percent in the past few months.
Because income had dropped, the so-called soft loans extended to small businesses were now too high, Elias said.
“Furniture and handicraft makers are telling us they will think twice about applying for loans specifically designated for micro, small and medium-businesses because they come with high interest rates and they’re afraid they will not be able to pay them back later,” he said.
For this reason, only around 50 percent of micro, small and medium enterprises had utilized the cheap bank credits available to them under government schemes for micro businesses, Elias said.
“We need the government to pay more attention to the small businesses as from our experience, in times of economic crisis such as in 1998, this sector has been resilient and made a substantial contribution to maintaining employment in the economy,” he said.
Furniture makers are also facing scarcities in supplies of raw materials such as rattan and timber, causing declines in production. Supplies of timber and wood materials have dropped off in the past three years as the government has clamped down on illegal loggers, who had supplied much of the timber for the industry.
Elias said in the last three months, furniture and handicraft producers in Jepara and Yogyakarta in Central Java Province had faced an inconsistent supply of rattan and wood.
Achmad Rifai, owner of PT Siji Furniture in Yogyakarta, said that though orders have dropped significantly, his company was still trying to find alternative markets in East Asian countries in addition to traditional markets in the United States and Europe.
In response to the sector’s concerns, Fauzi Azis, the trade ministry’s director general for small and medium industries, said that the ministry would continue its village revitalization program called One Village, One Product.
The program, in conjunction with the Japan External Trade Organization, or Jetro, gives training and assistance to small businesses throughout Indonesia, encouraging them to find alternative markets.
Indonesia earned $1.5 billion in furniture and processed wood product exports in 2008, according to ministry data. Production decreased to 1.8 million cubic meters in 2008 from 2.3 million cubic meters in 2007. The industry employs a total of nine million people. Over 70 percent are believed to work in firms of between five and 20 people, according to the data.
Erwin Elias, chairman of the Indonesia Small Business Exporters Consortium, or Isbec, said on Thursday that a drop off in demand for furniture and handicraft products during the global economic crisis meant it was more difficult than usual for small businesses to access bank loans.
The producers, who rely on buyers in the United States, the European Union and Japan, said orders had decreased by around 40 percent in the past few months.
Because income had dropped, the so-called soft loans extended to small businesses were now too high, Elias said.
“Furniture and handicraft makers are telling us they will think twice about applying for loans specifically designated for micro, small and medium-businesses because they come with high interest rates and they’re afraid they will not be able to pay them back later,” he said.
For this reason, only around 50 percent of micro, small and medium enterprises had utilized the cheap bank credits available to them under government schemes for micro businesses, Elias said.
“We need the government to pay more attention to the small businesses as from our experience, in times of economic crisis such as in 1998, this sector has been resilient and made a substantial contribution to maintaining employment in the economy,” he said.
Furniture makers are also facing scarcities in supplies of raw materials such as rattan and timber, causing declines in production. Supplies of timber and wood materials have dropped off in the past three years as the government has clamped down on illegal loggers, who had supplied much of the timber for the industry.
Elias said in the last three months, furniture and handicraft producers in Jepara and Yogyakarta in Central Java Province had faced an inconsistent supply of rattan and wood.
Achmad Rifai, owner of PT Siji Furniture in Yogyakarta, said that though orders have dropped significantly, his company was still trying to find alternative markets in East Asian countries in addition to traditional markets in the United States and Europe.
In response to the sector’s concerns, Fauzi Azis, the trade ministry’s director general for small and medium industries, said that the ministry would continue its village revitalization program called One Village, One Product.
The program, in conjunction with the Japan External Trade Organization, or Jetro, gives training and assistance to small businesses throughout Indonesia, encouraging them to find alternative markets.
Indonesia earned $1.5 billion in furniture and processed wood product exports in 2008, according to ministry data. Production decreased to 1.8 million cubic meters in 2008 from 2.3 million cubic meters in 2007. The industry employs a total of nine million people. Over 70 percent are believed to work in firms of between five and 20 people, according to the data.