Govt empowers small businesses through bill on microfinancing

Leony Aurora, The Jakarta Post, Jakarta

To accelerate and better coordinate the distribution of credit for small businesses here, the government is drafting a bill on microfinancing for non-bank microfinancing institutions, a senior official said.

Dipo Alam, the chairman the National Committee for Microcredit Year 2005 who is also the deputy minister to the Coordinating Minister for the Economy, said in a recent press conference that the committee had designed several programs to enhance the performance of non-bank microfinancing institutions.

"(One of our programs) is to pass a law on such institutions," Dipo told reporters. He did not elaborate on the details as the bill had not yet been completed.

However, the bill is expected to serve as a legal basis for the institutions and to coordinate thousands of non-bank financing agencies currently serving micro businesses.

Microcredit is defined by the central bank as a loan below Rp 50 million (US$5,373).

The committee's deputy chairman Kusmulyono said there were at present some 50,000 non-bank financing bodies in the country, such as cooperatives and credit banks, in addition to hundreds of banks including Bank Rakyat Indonesia's village units and regional development banks.

"This is the right time to strengthen them," said Kusmulyono, also president of government's investment firm PT Permodalan Nasional Madani (PNM).

The bill however, would not regulate non-governmental organizations (NGOs) that are providing saving and lending facilities for micro businesses using funds from donors, he added.

Such NGOs, many of which operate in remote areas where there are no formal financing bodies, have repeatedly asked the government to recognize their efforts and draft a law to protect their activities.

"PNM will encourage those NGOs to become formal bodies (into financing bodies), so that they can be audited and regulated under the bill," said Kusmulyono further.

The bill is expected to be passed later this year, he added.

The move is in conjunction with the implementation of the International Microcredit Year 2005, which was launched by the United Nations in November last year as an effort to help fight poverty.

The national committee was established in August last year, grouping together representatives of the coordinating minister for the economy, coordinating minister for people's welfare, ministry of trade, state minister of cooperatives and small and medium enterprises, BRI, Bank Mandiri, and the University of Indonesia.

Noted Indonesian singer Anggun also attended the press conference and has been appointed as a spokeswoman in Indonesia and other Asian countries for the UN program.