Govt funds allocated for micro, small businesses

Govt funds allocated for micro, small businesses

The Jakarta Post, Jakarta

In another attempt to speed up the poverty eradication drive,
the House of Representatives approved on Monday plans to set
aside Rp 3.1 trillion (about US$365 million) of working capital
for small- and micro-scale businesses.

The funds, taken from part of the government proceeds from its
domestic bond sales, will be distributed through state banks and
other state financial institutions which have networks across the
country over a seven-year period.

The decision was taken during a hearing between legislators at
the House Commission IX on financial affairs and a government
delegation led by Darmin Nasution, Director General for Financial
Institution at the Ministry of Finance.

The plan first emerged two years ago based on a recommendation
from the ministry for cooperatives and small and medium
enterprises.

According to Darmin, a business is categorized as micro if it
has less than Rp 100 million (around US$ 12,000) of sales volume
per year.

"As for small businesses, we categorize them as a productive
business which are not affiliated with medium and huge business,"
he told the hearing, adding that annual sales should also be on
or below Rp 200 million.

The state institutions appointed to distribute the low-
interest funds are differentiated into two groups.

Bank Tabungan Negara (BTN), Bank Negara Indonesia (BNI), Bank
Mandiri, Bukopin, Bank Rakyat Indonesia (BRI), Regional Banks
Association (which groups regional lenders of Bank Perkreditan
Daerah, or BPD), and Perum Pegadaian (state-owned pawnshop
agency) are included in the first group. They will be allowed to
directly extend the working capital to customers.

The second group, which consists of state-owned investment
firm PT Permodalan Nasional Madani (PNM), will distribute the
loans through other state banks -- notably Bank Perkreditan
Rakyat (BPR), although consequently the two-phases of lending
process would create higher interest rates than those of loans
disbursed directly.

The program forms part of intensified efforts on part of the
government to develop and empower small- and medium-scale
enterprises (SMEs), which are expected to eventually boost
economic activities and create more job opportunities, thus help
reduce chronic poverty and unemployment problems.

It is different from another program set up by the government
and Bank Indonesia which requires local banks to set aside a
certain amount of lending to SMEs in their business plan.

In 2002, SMEs totaled 3.03 million across the country, or
equal to 95.78 percent of the country's total business units, and
absorbed 12 million jobs.