Loans to SMEs 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.