Small businesses ask for easier financing access
Small businesses ask for easier financing access
The Jakarta Post, Jakarta
One day, 63-year-old Suherman, a small-scale entrepreneur, asked
for a loan from a local bank in Jakarta. He needed to borrow Rp 2
million (US$219) to support his business that produced
caramelized traditional snacks.
"I didn't understand why the process was so difficult,"
Suherman told The Jakarta Post.
He had to undergo a lengthy process that started by acquiring
and filling out piles of application papers, to which he had to
attach his land certificate as collateral.
Weeks afterwards, a bank official surveyed his house, a 200
square meter plot of land in Kemanggisan, West Jakarta.
All in all, it took him almost a year to finally secure the
loan.
Still, despite all this trouble, Suherman can be counted
among the lucky ones. Thousands of other small scale
entrepreneurs were not considered worthy enough to even submit a
loan application, much less have it actually approved.
There are plenty of tales of how small businesses experience
difficulty in securing access to financing, and this at a time
when the United Nations has officially declared 2005 as the
International Year of Microcredits.
According to a discussion held here recently, limited access
to credit currently poses the biggest obstacle to the development
of micro-, small- and medium-sized enterprises (UMKM).
"More than 60 percent of UMKM have never received loans from
banks or other financial institutions," said lawmaker Irsan
Tanjung during the discussion.
He cited the latest data from Bank Indonesia and the Ministry
of Cooperatives and SMEs that shows that only 37.7 percent -- or
15 million -- of Indonesia's 42.39 million SMEs have accessed
loans from some 11,548 bank branches and 37,062 branches of non-
banking financial institutions, with total credits of Rp 35.2
trillion as of June 2004.
Partly to blame for this state of affairs was the
implementation of Law No. 10/1998 concerning banking, which
requires a long chain of bureaucratic steps to obtain loans, and
included hard-to-meet collateral requirements.
Against this backdrop, Irsan said that it was crucial that the
banking sector give special treatment to SMEs in obtaining
business credit.
Andang Setiobudi, head of SMEs research and development unit
at Bank Indonesia, also said that banks should be more aggressive
in extending loans to SMEs especially after the central bank
issued new banking regulations last week that were designed to
expand bank lending into the private sector, including SMEs.
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