'No restructuring in new SME debt scheme'

Berni K. Moestafa, The Jakarta Post, Jakarta

A new scheme for restructuring the debts of small and midsize enterprises (SME) falls short of providing for just that, an SME expert said referring to the government's plan to kick start the payment of some Rp 39 trillion (about US$3.8 billion) in SME debts.

Chairman of the SME Struggle and Restructuring Forum (FPR UKM), Ibih TG Hasan, said that the new scheme, as was the case with the current one, was not worthy of being called a debt restructuring scheme.

What the government was offering were discount rates for debt settlements in cash, he said on Thursday.

He was commenting on what Minister of Cooperatives Alimarwan Hanan called a debt restructuring plan for SME debtors. The plan is due to be finalized by the end of March.

If approved, it would offer a debt reduction of 50 percent for SMEs settling their debts up front and in cash.

A 40 percent debt cut would be offered for SME debtors settling their debts in cash within one year.

Under the current scheme, SME debtors enjoy only a 25 percent reduction in their debts if they settle within a year.

But Ibih said that only a few debtors were able to make cash settlements under the current debt payment terms and conditions.

"The government must address the debt payment terms first, restructure them, and also allow debtors to renew their working capital so that they can become productive," he explained.

He said that debtors could seek new working capital by capitalizing on the rising value of the assets they had pledged to the banks.

Assets like land and houses, the most common ones pledged by SME debtors, were now worth more than they were when pledged as collateral to the banks, he explained.

"When SMEs pledge assets, they surrender their personal belongings. These are real assets unlike those of large corporations, which pledge shares and so forth," he added.

He suggested that the banks reappraise SMEs' collaterals, and if the value had increased, provide them with working capital to enable them to repay their debts.

Categorized as SME debtors are those with debts of up to Rp 5 billion. In total, there are over 414,000 SME debtors with debts of Rp 39 trillion owed to the Indonesian Bank Restructuring Agency (IBRA), state banks, and the Ministry of Finance's Directorate General for Receivables and State Auctions.

Calls for an SME debt restructuring scheme have intensified on the back of rampant sequestration of SME assets by these state creditors.

Alimarwan promised to suspend the seizing and auctioning of SME assets for a year, pending a review of the ability of SMEs' to pay up.

But Ibih said the damage had already been done.

FPR data revealed that IBRA has sold unrestructured SME loans worth more than Rp 24 trillion to Bank Danamon and Bank Artha Graha.

IBRA sold the loans at a 70 percent discount. Both banks could now make a killing by selling the collateral pledged by SMEs, which by itself was worth more than the loans. This was even more so the case now.

"The execution (seizing and selling) of SME assets happens every day," Ibih said, adding that most of the assets involved were debtors' houses and land.

Bank analyst Mirza Adityaswara has said that the SMEs call for a restructuring scheme should be seen in the light of plans to ease the restructuring terms for large IBRA debtors.

He was referring to IBRA's indebted conglomerates, for whom it has proposed a longer payment period and lower interest rates.

"It's so much easier to collect money from small debtors than the big ones," Mirza said.