N. Sulawesi village cooperatives fail to receive funds

Yongker Rumthe, The Jakarta Post, Manado

The North Sulawesi provincial legislative council has questioned irregularities in the distribution of the central government's Rp 50 billion low interest loan package to village cooperatives by the North Sulawesi Development Bank (Bank Sulut), saying the discrepancies must be thoroughly investigated.

Suspicion emerged after most village cooperatives complained that they had not received the financial assistance.

The Ministry of Finance appointed Bank Sulut to distribute the financial relief as soft loans to village cooperatives. The funds were expected to allow cooperatives to purchase cloves from clove growers so that they would not have to sell them to local brokers at a low price.

Bank Sulut has admitted to disbursing only part of the funds to village cooperatives, claiming that many had not met the legal requirements. The remaining funds have been invested at the local Bank Mandiri branch, attracting an annual interest rate of 18 percent.

A legislator of the local chapter of the Indonesian Democratic Party of Struggle (PDI Perjuangan), who requested anonymity, said the funds should have been distributed to village cooperatives in June 2000, with the conditions of an annual interest rate of 3 percent and a grace period for repayment of one and a half years.

"Under the clove credit scheme, village cooperatives should start paying their loans back, plus interest, as of January 2002," he said, adding that the credit scheme did not achieve its aim of helping clove growers in the province and Gorontalo.

Another legislator of PDI Perjuangan regretted that a part of the funds had been channeled to the wrong parties.

"We are surprised to learn that Bank Sulut has lent a part of the funds to state-owned Bank Mandiri at an annual interest rate of 18 percent," he said, adding that the issue was very sensitive and had to be resolved immediately to maintain the central government's image in the province.

He admitted to having received many reports from local village cooperatives that Bank Sulut has lobbied them to acknowledge that they had received the funds.

"This is an old-fashioned trick that, in the era of reform, must be left behind. We want Bank Sulut to be honest and transparent in the distribution of those funds. We have asked the government prosecutor's office to investigate this scandal thoroughly because it has affected local clove growers," he said.

When asked for comment by The Jakarta Post recently, Bank Sulut president Yopy Lumintang conceded that his bank had suspended around Rp 25 billion of the Rp 50 billion disbursed by the central government and invested it at Bank Mandiri because a majority of the 224 village cooperatives were unable to meet all legal conditions required to receive the soft loans.

"We have channeled only a part of the funds as many cooperatives have failed to meet the criteria established to obtain the credit," he said.

James Ch. Salibana, head of Bank Sulut's credit division, said the bank had channeled the funds to only 80 of 224 village cooperatives in Gorontalo and the province.

"Only 80 cooperatives have received the funds. The remaining 144 could not meet the credit requirements. We would be in trouble if we gave the credit to cooperatives with no legal documents or assets," he said.

According to James, village cooperatives are required to lodge their credit applications and guarantee fixed assets worth 150 percent of the amount of their loan.

"They are also required to have clove plantations in their own operation area. That's all," he said.

He regretted that many village cooperatives had no assets or executive board and had never held an annual meeting, saying he believed the leaders of such cooperatives, if granted the loans, could have embezzled the funds.

Meanwhile, North Sulawesi Village Cooperatives (Puskud) president Inyo Koloay criticized Bank Sulut for having imposed strict requirements on access to the loans.

"Clove growers in this region will not be able to give a guarantee worth 150 percent of the loan applied for. Only conglomerate owners can meet such tight requirements. Why doesn't the bank have lenient requirements that enable village cooperatives to obtain the credit and return it in time?" he said.

Koloay said he did not know exactly how many village cooperatives had gained the credit and Puskud did not apply for funds because of the stringent requirements.