Government assures SMEs of more subsidized loans

Government assures SMEs of more subsidized loans

JAKARTA (JP): Minister of Finance Bambang Subianto reaffirmed
on Monday the government's commitment to provide cheap loans to
help small and medium-size companies (SMEs) and cooperatives
survive the prolonged economic crisis.

The minister said Bank Indonesia, which under the newly
approved central bank law would focus its activities on monetary
management, would no longer be involved in extending the
subsidized loans.

"It is the government's task to administer the subsidized loan
schemes, not Bank Indonesia's," he said before a Cabinet meeting
at the Presidential Palace.

Bambang said the subsidized loan schemes, including Farming
Credit and Credit for Working Capital for Cooperative Members,
would still be implemented using the currently applied interest
rates.

He said the disbursement of the loans was being handled by a
number of banks, including Bank Rakyat Indonesia, Regional
Development Bank, Bank Bukopin and other banks with extensive
networks.

"Corporate banks are not suitable to disburse these kinds of
loans," he said.

The government introduced in October last year a heavily
subsidized loan package worth Rp 10.8 trillion (US41.2 billion)
to fund 17 microcredit schemes designed to help SMEs.

Loans issued under the schemes have interest rates of between
6 percent and 16 percent a year, compared to the nearly 40
percent interest rates charged for commercial loans.

The subsidized loans -- covering a number of sectors in the
economy, including farming, fisheries, housing, trade and
commerce and poultry farming -- are disbursed through commercial
banks with the help of cooperatives and non-governmental
organizations across the country.

The cheap credit schemes have been widely criticized, with
critics saying the loans given to people in the informal sector
hamper the country's economic growth because of the low
productivity of the sector.

According to Minister of Cooperatives and Small Enterprises
Adi Sasono, of the Rp 10.8 trillion allocated for the credit
schemes, the government has as of March disbursed over Rp 4
trillion, including Rp 2.97 trillion to some 2.98 million
farmers. (cst)