Govt launches new farming credit scheme

JAKARTA (JP): The government launched on Monday a new credit plan to replace the heavily subsidized credit for farmers (KUT) scheme.

Minister of Finance Bambang Sudibyo said under the new scheme, the loan would come from commercial banks while the government would only provide a maximum 10 percent interest rate subsidy.

Under the KUT scheme, Bank Indonesia, through several appointed banks, had channeled the heavily subsidized loan. The farming loan was part of Bank Indonesia's special liquidity loan.

Speaking at a joint news conference with Minister of Agriculture M. Prakosa, Bambang said Bank Indonesia was no longer allowed to provide any special loan facilities after it gained an independent status last year.

He said the new credit scheme, called the food resilience credit, would start in October for the current 2000 budget year.

He said the government would allocate up to Rp 1.9 trillion for the interest rate subsidy during the period.

Meanwhile, Prakosa said while the KUT scheme covered 14 credit programs, the new farming credit scheme would only cover six programs, including credit for farming rice, soybean corn and raising chickens.

Prakosa said credit for other agribusiness activities would be provided through a normal credit commercial program.

"The government will soon launch the agribusiness credit program but without an interest rate subsidy," he said.

The KUT credit program has largely been a failure, particularly due to the low rate of return.

Director general of financial institutions Darmin Nasution said the recovery rate of the KUT credit program this year was only expected to be about 30 percent of the outstanding credit of more than Rp 85 trillion.

Asked about the number of banks participating in the new credit scheme, Darmin said there were 16 banks involved in the discussion of the new program.

He said the banks included state Bank Rakyat Indonesia, Bank Negara Indonesia, Bank Mandiri and privately run Bank Central Asia, Bank Bukopin, Bank Niaga and several provincial government- owned banks. (rei)