Govt told to 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.
The incentive should focus on efforts to strengthen working capital for small industries, he added.
The need for classification of the debtors was also voiced by Raden, in order to make sure the debt workout scheme went into the right hands.
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, including credit card, housing, and car 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.
As the SME sector has shown itself to have the resilience to keep growing, even under the prolonged, difficult economic and political situation, the government's move is decisive to help fuel the country's economic growth.
The debt scheme for the SMEs is expected to be completed by March.
Under the new scheme, if implemented, 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.