'Govt must select SME debtors carefully'

'Govt must select SME debtors carefully'

Dadan Wijaksana, The Jakarta Post, Jakarta

The planned debt restructuring scheme for small- and medium-sized
enterprises (SMEs), currently being prepared by the government,
should avoid generalizing to ensure the incentive package reaches
the intended targets.

While citing the government's plan to give the much-needed
incentive as being on the right track, analysts warned of the
importance of classifying the debtors, as not all can be
categorized as SME debtors.

Analysts Drajat Wibowo and Raden Pardede agreed that the
incentives ought to go to where they belonged, and that selective
approaches ought to be applied properly.

"There has to be a differentiation. The credit should be
examined case-by-case to determine which debtors or sectors are
eligible for the package," Drajat said over the weekend.

At present, the government only classifies SME debtors as
those having debt amounting to not more than Rp 5 billion (about
US$490,000).

As reported earlier, the government is planning to restructure
some Rp 39 trillion (US$3.8)-worth of SME debts that have turned
sour by giving the SMEs incentives to accelerate debt repayment.

The Indonesian Bank Restructuring Agency (IBRA), state banks
and the Ministry of Finance's directorate general for state
credits and auctions are all acting as creditors.

But many believe that not all of the debts are owed by SMEs.
There has been evidence that bad loans subsequently turned out to
be consumption loans. Other loans belong to companies linked to
huge business groups, whose outstanding debts have fallen to
below Rp 5 billion.

The case of Bank Danamon Indonesia (BDI) should serve as an
example.

According to BDI, most of the purchased loans, categorized by
IBRA as SMEs, consisted of consumption loans, mostly related to
credit card use.

BDI, along with Bank Artha Graha, has purchased around Rp 24
trillion worth of unrestructured SME loans from IBRA.

"This is exactly why we need some sort of selection process,
which is to prevent those holders of consumption loans from
getting an incentive out of the scheme," Raden said.

Under the new scheme, expected to be completed by March, the
debtors would enjoy a hefty 50 percent debt reduction if they
were willing to settle their debts up front in cash.

In the case of debtors who could only settle their debt within
a year -- also in cash -- they would also enjoy a debt reduction
of 40 percent, as against 25 percent in the current scheme.

The government would also ban creditors from seizing the
assets of the debtors within one year.