IFC, Govt launch $19m initiative for SMEs

I Wayan Juniartha, The Jakarta Post, Nusa Dua, Bali

The Indonesian government and the International Finance Corporation (IFC) here on Tuesday officially launched a US$19 million program to help small and medium enterprises in the eastern part of Indonesia.

The Program for Eastern Indonesia SME Assistance (PENSA), a five-year technical assistance program, is cofunded by the IFC and the governments of Australia, Japan, Switzerland and Netherlands.

The program was officially launched by Minister for Cooperatives and Small and Medium Enterprises (SMEs) Alimarwan Hanan, followed by the signing of the MOU by the general manager of Indonesia Enterprise Development Facility (IEDF), Chris Richards, and representatives of Bank Rakyat Indonesia (BRI) and Dharma Bhakti Astra Foundation, which are to assist the IFC in implementing the program.

IFC, the private sector development arm of the World Bank, would manage the US$19 million initial funding to provide training and assistance aimed at improving SMEs capacity and competitiveness.

The PENSA will focus on business sectors which have "regional comparative advantages", such as furniture and handicrafts in Denpasar (Bali), mining in Balikpapan (East Kalimantan), agribusiness in Makassar (South Sulawesi).

It would conduct various training programs for banks and other financing institutions in Surabaya, East Java, to create a wider financial access for SMEs.

Praising the launch of the program as a very important event, the World Bank's country director in Indonesia Andrew Steer highlighted the fact that out of the 17 million registered companies in Indonesia, only 1 percent had more than 20 employees. The rest were SMEs.

"The SMEs are absolutely essential for the future of this country," he stressed.

"Throughout Eastern Indonesia today, there are millions of people who need jobs, there are ten of thousands of good entrepreneurs with good ideas that can change the face of this country if they were given a little help. That's what this program is all about," he added.

Separately, IEDF general manager Richards pointed out that in Indonesia there were 15 million unregistered businesses, mostly micro-size firms. Moreover, SMEs employed approximately 60 percent of the country's labor force and they were represented across most economic sectors.

He also stressed that the PENSA would not provide SMEs with direct funding or loans since the program would focus on training and technical support.

However, the program would actively engage and facilitate the involvement of various strategic partners, which were interested in providing the SMEs with such funding.

Separately, the Embassy of Canada's development counselor Julian Murray stated that his government would soon participate in the program.

"Canada is not yet a donor (in this program), but we hope to get our government's approval for PENSA in the next few months," he said.

Denpasar has been chosen as the location for the program's headquarters with smaller representative offices to be established in the other three cities -- Surabaya, Balikpapan and Makassar. A satellite office would be established in Jakarta to help create a better business environment and policy.

Including PENSA, IFC was currently managing nine SMEs facilities in Southeast Asia, China, Africa, Southeast Europe, South Asia and South Pacific.