Securitization suggested to help small businesses

JAKARTA (JP): The government can securitize loans extended to small businesses and trade them on capital markets if it wants to provide more finance to small businesses, noted economist Rizal Ramli said yesterday.

"There is one thing we can do through the capital market to help small industries. We can package the loans and securitize them. Then we trade them on the capital market," said Rizal, a director of the Econit economic advisory group.

Speaking to The Jakarta Post after addressing a seminar on how to help small and medium-scale businesses and cooperatives, he said that many commercial banks had met the government's requirement that they allocate 20 percent of their total credits to small businesses, and that several of the banks had exceeded the target.

"But on the other hand, there are still many small businesses which need such financial facilities. So why don't we securitize the loans and trade them on the capital market like bonds," he said, adding that the proceeds from this could be used by the banks to provide loans to more small businesses.

In March this year, Rp 42 trillion in credits was extended to small businesses, up 18.98 percent on March 1995.

At yesterday's seminar, organized by Golkar, several participants complained about the difficulties faced by small businesses seeking loans. They urged the government to make sure that loans were extended to as many small businesses as possible.

Asked whether small businesses should be given lower interest rates, Rizal said the main problem hindering small businesses was inadequate access to finance.

"Their main problem is not high interest rates, but the way in which they can access the financial system to expand their businesses," he said.

Rizal said the government should also control lending to make sure that loans are to be used to develop small businesses, instead of for consumption.

The Capital Market Supervisory Agency's chairman I Putu Gede Ary Suta, who addressed the seminar, said that Rizal's suggestion could be applied to the capital market, but that it would need a customized mechanism and a legal framework.

"Yes it is possible. We can do it in our capital market. But of course we have to study it first thoroughly, particularly its legal aspects," he told the Post. (bnt)