New credit insurance scheme launched
Tony Hotland, The Jakarta Post, Jakarta
Small and medium-sized enterprises (SMEs) in regional areas are expected to get better access to bank loans with the implementation of a new credit insurance scheme launched on Monday, Governor of Bank Indonesia Burhanuddin Abdullah said.
Burhanuddin said the new scheme, which was based on studies in several neighboring countries, would provide insurance for regional development banks (BPDs) in lending money to the SME sector.
"The intermediary role will hopefully function better since the risk loss due to bad loans could be kept at a manageable level," he asserted on Monday.
The new scheme involves a risk-sharing management among regional administrations, BPDs, and credit insurance firm PT Askrindo.
Under the scheme, the risk of a loan channeled to SMEs will be covered by the three parties, thus expected to minimize the risk as there is more control and monitoring over the borrower from the parties.
"Local administrations, down to the lowest levels, are the ones who really know the history and situation of the SMEs in their areas. With Askrindo coming in, BPDs are expected to have more confidence in SMEs," added Burhanuddin.
SMEs in the country have been having difficulties in accessing bank loans compared to giant companies due to the high risk of incurring bad debts they naturally pose.
Askrindo president director Jati L. Mangunsong said the maximum loans to be covered per one company borrowing would be around Rp 50 billion (US$5.49 million).
"We will impose a 1 percent premium to the local banks for the scheme. The premium is our standard and the same as other types of loans we cover outside this scheme," Jati added.
The new scheme will be implemented in only four provinces for the initial phase. The provinces are North Sulawesi, Gorontalo, East Java and Riau.
"These provinces were considered the most prepared for this stage," said Nelson Tampubolon, a banking researcher at the central bank and a coordinator for the implementation of the Indonesian Banking Landscape.
He added that the scheme would hopefully be implemented in other provinces as soon as possible because almost all SMEs in all provinces were facing similar problems in getting access to bank loans.
Nelson also shrugged off the possibility of SMEs misusing the loans knowing that the loans were insured, saying there were already regulations and monitoring tools available.
"We'll be working with the lowest level of administration, and also local banks that supposedly have a lot of knowledge about businesses in their areas. There should also be a familiarization process to the SMEs about the program and the source of funds," he added.
Elsewhere, Burhanuddin said the plan to sell the central bank's shares in Askrindo was still pending the approval of the new Cabinet.
He assured that the divestment plan would not affect Askrindo's role in the new scheme. In fact, there is a possibility for the shares to be sold to local administrations. We are discussing it, he added.
The central bank owns 55 percent of Askrindo and the remainder by the government.