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)