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.