Low-lending rates proposed to aid agribusiness

Low-lending rates proposed to aid agribusiness

JAKARTA (JP): Minister of Agriculture Justika Sjarifudin
Baharsjah urged the central bank yesterday to lower lending rates
charged on farming activities to encourage businesspeople to
invest in the agribusiness sector.

Justika said the lending rates currently given by Bank
Indonesia were too high for agriculture-based companies and
discouraged businesspeople from entering the agribusiness sector.

At present, Bank Indonesia provides loans for farming
activities through commercial banks at a subsidized rate of 16
percent per year, much lower than the commercial lending rate of
more than 50 percent.

The minister said a reasonable lending rates for the
agribusiness sector would be between two percent and three
percent per annum.

"Lending rates for agribusiness should be lower that those for
other sectors because it is a resource-based business and people
cannot make a profit in a short period," she told journalists on
the sidelines of an agribusiness seminar held by the Bogor
Institute of Agriculture (IPB).

For example, she said, horticulture plantations can only be
harvested after five years. It was difficult for agribusiness
companies to pay 16 percent lending rates every year while their
plantations were not yet making a profit.

Justika noted that Malaysia and Thailand had given special
lending rates to agriculture-based companies of between two
percent and three percent which had made their agriculture
products more competitive than Indonesia's.

She said her ministry had repeatedly suggested the reduction
of the lending rates but had never received a satisfactory
response from the central bank.

According to the central bank, she said, a further cut in the
lending rates was impossible because it would put a heavier
burden on the government budget.

IPB rector Soleh Solahuddin echoed Justika's view. He said
the government should give the agribusiness sector more
privileges because it could lead the country out of the economic
crisis.

But Soleh said that the lending rates for the agribusiness
sector should be set at different levels depending on the
commodity but should not exceed 10 percent.

Soleh also suggested the government establish agriculture
banks or develop special facilities at existing banks to service
the financial needs of agriculture-based companies.

He added the banks should provide special treatments for the
agribusiness sector because it was different from other sectors
such as manufacturing. (gis)