Small businesses still face limited access to microcredits
Small businesses still face limited access to microcredits
Leony Aurora, The Jakarta Post/Jakarta
People in the market call her Bu Haji, because the salted fish
seller has been on a pilgrimage to Mecca, Saudi Arabia or
sometimes Bu Janda, the widow, as her husband passed away a year
ago.
Her son left shortly afterward, taking everything from his
parents' kiosks in Bendungan Hilir market in Central Jakarta,
even the worn out wooden racks.
"He thought that because his father died, all this belonged to
him," said Bu Haji on Tuesday as she packed crackers into plastic
bags. "Poor, poor me."
To stock her stall and keep her business afloat, Bu Haji
borrowed Rp 20 million (US$2,212) from the market's cooperative
unit.
Recognizing the importance of microcredits -- defined by Bank
Indonesia as loans under Rp 50 million -- in the fight against
poverty, the United Nations has set 2005 as the International
Year of Microcredit.
Today, in the launching ceremony of the program, eight
selected individuals from eight countries, including Indonesia,
will receive microcredit awards in New York.
Although deemed successful, microfinance has not reached as
many people as it should. The latest government data shows that
only 15 percent of some 30 million micro-entrepreneurs in the
country receive financing from banks.
Lack of collateral and complicated procedures often prompt
people in need of fresh funds to go to loan sharks, despite the
higher interest they charge.
Prihartini, who sells fruit in the same market as Bu Haji,
arranged a Rp 60 million loan -- a little higher than the
microcredit criteria -- with 40 percent interest for a friend in
Klaten, Central Java, three months ago. In comparison, the bank
lending rate is around 16-18 percent.
"I get 2 percent of the interest," she said. "He (the friend)
couldn't approach banks because he doesn't have land
certificates."
To solve this, economist Pande Radja Silalahi said that the
government should improve land ownership, or even provide land
certificates free of charge.
Director of the Institute for the Development of Economics and
Finance Imam Sugema urged banks to make more items eligible for
collateral.
For some entrepreneurs, a business license -- often also a
requirement from the bank -- poses another obstacle.
Roger, a florist, never arranges such a license. By law, he
does not have to -- his flower shop in Depok, West Java, operates
with capital of less than Rp 200 million. "It costs millions of
rupiah to get a business license," he said.
Pande urged the government to be proactive and to go to small-
scale entrepreneurs instead of waiting for them to get the
license.
The further development of microcredits should be headed by
banks with the most experiences, which, in the case of Indonesia,
is Bank Rakyat Indonesia (BRI), said Pande.
With more than 4,100 units across the country, BRI has been
recognized as the initiator of microfinance in the world. "Other
banks may have different segments (targeted)," he said.
Imam referred to another source that has not been optimally
utilized: informal financial bodies.
"There are so many small businesses. Banks cannot afford to
know as many customers closely," he said. "They are also usually
less eager to take the high risks of non-performing loans."
Many villages, for example, have collective rice barns, to
which villagers add a certain amount of rice per week. The money
gathered from these barns is later channeled back to the people.
"The government should guide these informal bodies," he said.