Gov't urges credit unions to become corporate bodies

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)