Loans to SMEs to meet target: BI
The Jakarta Post, Jakarta
The central bank said on Thursday that up until the first semester, the banking sector had extended around Rp 19 trillion (about US$2.29 billion) in new loans to small and medium enterprises (SMEs) and was on track to meet the full-year loan target of Rp 42.3 trillion.
"We're confident the (full-year) target can be achieved.
"The first half figures account for about 45 percent of the target, and under the banks' business plan, the loans are set to increase in the second half," Bank Indonesia deputy governor Maulana Ibrahim said.
The figure should reflect the banks' rising confidence in the SME sector, which proved resilient during the economic crisis, he said.
The target refers to one set by the central bank and the Poverty Eradication Committee (KPK), headed by Coordinating Minister for People's Welfare Jusuf Kalla, which is aimed at bolstering the competitiveness of SMEs.
The deal, which was signed two years ago, requires banks to channel a set amount of funds annually to the sector. The target is then included in the bank's annual business plan, especially in the area of lending.
The capital injection was meant to empower and develop SMEs, as part of the efforts to create job opportunities, and reduce lingering poverty from the current 19 percent of the population to 14 percent by the end of 2004.
The SME sector is considered strategic due to its huge benefit to the economy. In 2002, SMEs totaled 3.03 million across the country, or equal to 95.78 percent of the country's total business units, and absorbed 12 million workers.
Under this program, the banks extended last year Rp 30.7 trillion in new loans to SMEs, a 35.1-percent growth compared to the previous year. The growth outpaced the 15-percent growth in overall credit exposure last year.
The SME loan target represents around 50 percent of this year's target for total new lending in the banking sector.
Despite the current trend of increased loans to SMEs, however, challenges still remain and could well pose as potential roadblocks to a further rise in lending exposure to the sector.
The challenges include the lack of management, administrative and technical skills in running a business.
Based on Law No. 9/1995 on small enterprises, a small enterprise is defined as one having net assets of up to Rp 200 million and maximum annual sales of Rp 1 billion. The law does not define a medium enterprises.
But according to a government publication on SMEs, a medium- scale company is defined as one having annual sales of between Rp 1 billion and Rp 50 billion.
Separately on Thursday, Bacelius Ruru, the secretary of the Office of the State Minister of State Enterprises, said state- owned enterprises (SOEs) would channel Rp 945 billion (US$111 million) in loans to 36,000 small enterprises this year.
Government data shows that as of 2002, outstanding loans channeled by SOEs stood at Rp 2.87 trillion for about 355,000 business units.
Ruru said that due to state-owned enterprises' poor performance, the loans being channeled were still focused on small, not medium, enterprises.
The channeling is called the "partnership program" required by a government regulation on guidelines for state-owned enterprises issued in 1983.
"The lending rate of the loans stand below the average commercial lending rate," Ruru said without giving further details.
Each enterprise has to allocate 1 percent to 3 percent of its net profit for loan channeling to SMEs, Ruru said on the sidelines of the opening ceremony of an SME expo.
The expo, taking place from Aug. 28 to Aug. 31 at the Jakarta Convention Center, features 152 SMEs selling handicrafts, traditional apparel, snacks and beverages, jewelry, garments, furniture, leather products and services.
The chairman of the organizing committee expects 50,000 people to visit the expo.