Govt seeks funds to boost microcredit program

Govt seeks funds to boost microcredit program

Urip Hudiono, The Jakarta Post, Jakarta

The government plans to use proceeds from state-owned enterprises
(SOEs), in addition to idle funds in banks, to finance the
expansion of microcredits next year.

It will also ask donor countries grouped in the Consultative
Group on Indonesia to focus more attention on microcredits at
their meeting in January.

Speaking after a meeting on Friday with officials from the
Coordinating Minister for the Economy to discuss the Year of the
Microcredit program, the director of state-owned investment firm
PT Permodalan Nasional Madani (PNM), B.S. Kusmulyono, said the
government planned to mobilize as much domestic funding as
possible for the program.

Kusmulyono said these funds would include some Rp 150 trillion
(US$16.7 billion) that was lying idle in banks.

"There is also some Rp 1 trillion in proceeds from SOEs that
the government has targeted for next year," he said.

The United Nations has named 2005 as the International Year of
the Microcredit, which the government will implement here. The
government has appointed PNM to manage lenders -- including
state-owned pawnshop Perum Pegadaian and regional development
banks -- in channeling microcredits.

Microcredit, first conceived by rural economics professor
Muhammad Yunus in Bangladesh in 1976, is a concept of providing
loans to small entrepreneurs who would likely be ineligible for
bank loans under traditional means of evaluating credit-
worthiness.

Kusmulyono said the funds from the SOE proceeds would likely
be in the form of a loan, to be managed by PNM.

"We are still in talks with the Office of the State Minister
for State Enterprises," he said. "It should be agreed during the
shareholders meetings of the SOEs to allocate 5 percent of their
profits for microcredits."

Kusmulyono said the funds would also be used for poverty
eradication projects, particularly for the improvement of housing
in slum areas.

"We plan to improve 300,000 houses in 30 cities throughout the
country," he said.

PNM also has received $4.5 million in funds from the Asian
Development Bank for the program, under which each recipient will
receive Rp 5 million.

A deputy at the Office of the Coordinating Minister for the
Economy, Dipo Alam, said the housing improvement project was
included in the microcredit program because it would help small
entrepreneurs increase their productivity.

"If they have better housing, then they can work better and
improve their businesses," he said.

Dipo also said the government would propose that donor
countries establish a forum on microcredits at their meeting in
January.

"We hope that they will help drive small businesses, besides
just helping to fund large-scale projects.

"We will also work on needed regulations so that non-bank
lenders can participate in channeling microcredits," he said.

The latest government data shows that only 15 percent of some
30 million micro-entrepreneurs in the country receive financing
from banks.