IDB plans $30m loan for local SMEs

Zakki P. Hakim, The Jakarta Post/Jakarta

The Islamic Development Bank (IDB) is to extend a US$30 million loan to Indonesia's small and medium-sized enterprises through three national banks next year, a senior official with the international institution said.

IDB representative for Indonesia Charmeida Tjokrosuwarno said a mission from head office in Jeddah met with Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Muamalat staff earlier this week to discuss the disbursements.

"We may channel up to $10 million (of funds) through each bank," Charmeida told The Jakarta Post" recently.

Loans to businesses would be set at a minimum of $4,500 and a maximum of $4.5 million for each project proposal.

However, the three banks would first be appraised to classify them into two categories. Category "A" banks could channel up to $4.5 million for a single proposal, while category "B" banks could only disburse a maximum of $3 million, he said.

Charmeida said the loans would carry repayment charges equivalent to about a 6 percent annual interest rate for 10 years, with a two-year grace period.

The IDB uses a sharia system, which prohibits interest being charged for all financial transactions.

The latest lending plan followed a meeting between Minister of Industry and Trade Rini MS Soewandi and IDB president Ahmad Mohamed Ali in Saudi Arabia last week.

The IDB also agreed to consider providing working capital for ailing state airplane maker PT Dirgantara Indonesia (DI).

DI, after undergoing a restructuring program, had received orders from British Aerospace and Boeing to produce aircraft components, but had no working capital to finish the job, he said.

An IDB mission is scheduled to visit the DI plant in Bandung, West Java, on Saturday.

The IDB was established in 1973 by the member countries of the Organization of the Islamic Conference (OIC), of which Indonesia is a member. The bank was set up to foster economic development and social progress in member countries and Muslim communities worldwide based on the principle of sharia.

The government and the private sector in the country could only absorb $150 million or about 30 percent of $500 million loan the bank extended last year due to difficulties caused by regional autonomy law.

Central government had also limited the loans allocated to local administrations.