IMF urges banks to lend to retailers

Fitri Wulandari, The Jakarta Post, Jakarta

The International Monetary Fund (IMF) has promised to advise banks to lend more to retailers, as the sector is considered to have a significant impact on the country's economy.

"Banks should be able to lend more to retailers. The IMF will advise them to help retailers," Chairman of the Association of Indonesian Retailers (Aprindo) Hari Darmawan told The Jakarta Post on Monday.

Hari made the statement following a closed door meeting between visiting IMF officials and Aprindo.

He said that the fund knew that small and medium-scale retailers played an important part in helping to get the country's economic wheel turning.

Hari said that in the meeting, the IMF asked the association to provide data on the country's retail business.

The fund also asked about the performance of the banking sector in backing up the retail sector.

"We just said that banks have never given us sufficient financial support," Hari said.

An IMF team has been in Jakarta for more than a week now to review the country's economic reform programs.

Pushing banks to resume their lending activities after the sector was badly hit by the 1997 financial crisis had been one of the government's major economic programs.

According to data from local consultant Capricorn International Consultant, 85 percent of the total retail market turnover in 2001 was from traditional markets, while the remaining share was divided between supermarkets and the wholesale sector.

The data shows that supermarkets and minimarkets booked a total sale of Rp 9.3 trillion (US$898 million), wholesale was Rp 5.7 trillion, while traditional markets booked a total sale of Rp 190.8 trillion.

The government has predicted that consumer spending would be the main driving force behind the country's economic growth this year.

While saying the retail business has good future prospects, Hari predicted that for the first semester of this year, the retail sector would slow down.

The hike in electricity tariffs, fuel prices, minimum wages and the recent floods would likely increase production costs, he said.

"I don't think we will make any profit for the first six months because sales will likely go down, while operating costs will rise," Hari said.