Loans to small businesses still below target

Loans to small businesses still below target

The Jakarta Post
Jakarta

Credits funneled by the banking sector to cooperatives and
small and medium enterprises (SMEs) reached Rp 24.8 trillion
(US$2.9 billion) as of the third quarter of 2003, a minister has
said.

The amount represented only around 58 percent of the full-year
target of Rp 42.4 trillion, State Minister of Cooperatives and
SMEs H. Alimarwan Hanan told legislators during a hearing with
the House's Commission V for state enterprises, industry and
trade on Tuesday.

The situation was a stark contrast as compared with that of
the previous year, when during the same period, credits provided
to the sector accounted for more than 70 percent of the yearly
target.

In 2003, the full-year credit realization for SMEs reached 116
percent of the target of Rp 30.9 trillion.

Alimarwan did not provide reasons for the shortfalls.

The target was set by Bank Indonesia together with the
Poverty Eradication Committee, headed by Coordinating Minister
for People's Welfare Jusuf Kalla and tasked to coordinate efforts
to empower cooperatives and SMEs.

The two institutions signed a memorandum of understanding
three years ago to let national banks channel a certain amount of
loans to SMEs and include the scheme in their annual business
plans.

The scheme was meant to develop SMEs and to boost economic
activities and create more job opportunities and thus reduce
chronic poverty. The program aims to reduce the national poverty
rate from the current 16 percent to 14 percent of the population
by the end of 2004.

Lending to SMEs is of high priority, given their strategic
role in the country's economy. In 2002, there were 3.03 million
SMEs across the country -- equal to 95.78 percent of the
country's business units -- and absorbed 12 million jobs.

Elsewhere, Alimarwan also said that during 1998-2003 period,
funds from the state budget allocated to the sector amounted to
Rp 1.7 trillion, while those from outside the budget, including
the banking sector, totaled Rp 79.8 trillion.