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. (004)