Micro-credits require no subsidy, say Mar'ie
Micro-credits require no subsidy, say Mar'ie
JAKARTA (JP): Minister of Finance Mar'ie Muhammad said
yesterday the government would never subsidize credit to very
small businesses, usually called micro-credit, as it could
backlash.
Mar'ie said here yesterday that other countries' experiences
had taught Indonesia not to subsidize micro-credit.
"Microfinance institutions that provide commercial financial
services can become self-sufficient and sustainable without
government subsidies," Mar'ie told a workshop on micro-credit
financing held by state-owned Bank Rakyat Indonesia (BRI).
The minister said sound micro-finance institutions played a
vital role in meeting the financial needs of micro businesses and
low-income earners.
He said micro businesses and low-income earners did not care
much about interest rates, but they cared more about the
availability of funds.
Mar'ie gave as an example the popularity of pawn shops with
the poor as a loan source, even though they charge very high
interest.
"What is really needed by low-income earners and very small
businesses is easy access to financial services. Therefore,
credit for them must be processed quickly by officials at the
lowest possible level," Mar'ie said.
He saw lending to micro enterprises as a profitable business.
But the variety of micro businesses and their widely-spread out
locations calls for a flexible credit system responsive to their
diverse and specific needs.
He commended BRI's micro-credit scheme which has reached micro
businesses and low-income earners in almost every sub-district in
Indonesia.
"Financial services that are widely and easily accessible to
the rural community and poor urban community allow small and
micro businesses to take advantage of business opportunities and
financing their growth," Mar'ie said.
BRI president Djokosantoso Moeljono said the bank's micro-
credit had totaled Rp 23 trillion (US$9.44 billion) since 1983,
reaching 18 million low-income people and very small businesses.
BRI offers micro-credit in the form of loans up to Rp 25
million, with annual interest rates of up to 32 percent. But
customers who have good repayment records can get annual interest
rates of up to 28 percent.
Djokosantoso said the interest rates were quite high compared
with those corporate clients were charged, which are about 20
percent.
"But the administrations cost of micro-credit is also very
high, " he said, adding that BRI micro-credit interest rates were
lower than those charged by secondary banks.
Secondary banks usually charge interest rates of some 30
percent to 40 percent.
Djokosantoso said 96.2 percent of BRI's Rp 23 trillion micro
credit went to those who needed loans of less than Rp 5 million.
He said that problem loans under BRI's micro credit scheme
were below 2 percent.
Mar'ie said the success of BRI's micro-credit scheme had
attracted banking communities from 89 countries to study it. (rid)