'No restructuring in new SME debt scheme'

'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.