Gov't urges credit unions to become corporate bodies

JAKARTA (JP): The government urged independent credit unions yesterday to turn themselves into legal entities to allow for government supervision and prevent irregularities which could be detrimental to union members.

Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaya, in his opening address to participants at the Open Forum of Credit Union Indonesia, said that by forming legal entities such as cooperatives they could operate their businesses using economic principles while maintaining their social mission.

"The perception of cooperatives as a corporate entity has changed its image from one which focused more on social aspects to one which now concentrates on economic aspects. The former image had in the past become a major snag to the development of cooperatives as an economic institution," Subiakto said.

Yesterday's open forum was held to commemorate the 25th anniversary of the credit union movement in Indonesia.

President of the Credit Union Counseling Office (CUCO) P.M. Sitanggang told reporters that Credit Union Indonesia currently has 1,500 units, none of which has become a legal entity such as cooperative.

"We have been urged (by the government) since 1978 to establish corporate entities and become village unit cooperatives (KUD), but our members have refused," he said.

The reluctance of Credit Union members to become KUDs, he said, "is simply because they don't see KUDs as a role model. KUDs have a bad image in the eyes of our members and what we have done (without becoming corporate bodies) works effectively for us".

Sitanggang contended that the Credit Union -- which was established by non-governmental agencies and is currently affiliated to international institutions such as the World Council of Credit Unions and the International Cooperative Alliance -- takes high regard of its members.

"Therefore any decision on the establishment of legal entity should be made on the basis of a unanimous vote.

Sitanggang said the union's rolling capital currently stands at some Rp 75 billion (US$32.9 million).

Rp 10 million

Individual members of the credit unions can borrow up to Rp 10 million from their unions, and a village credit union may borrow up to Rp 50 million from CUCO's regional offices, which are spread across the country including West Java, North Sumatra and East and West Nusa Tenggara.

Meanwhile, CUCO regional offices can request up to Rp 100 million from CUCO's central office in Jakarta, he said.

Subiakto said yesterday the government was currently preparing a regulation on saving-loan associations.

"Saving-loan associations are unique because their business, which is mainly based on trust, contains high risks," Subiakto said.

As of last year, 42,061 cooperatives were registered at the Ministry of Cooperatives and Small Enterprises, of which 26,534 conducted saving-loan activities.

A total of Rp 1.28 trillion has so far been lent by credit- saving cooperatives. (pwn)