Small businesses to get collateral-free loans

JAKARTA (JP): The government is formulating a regulation which will allow small businesses to obtain bank loans of up to Rp 50 million (US$22,000) without collateral, Minister of Finance Mar'ie Muhammad said recently.

During a meeting with small-scale entrepreneurs at the 1995 Indonesian Product Exhibition here on Tuesday evening, the minister said that the drafting of the ruling is expected to be completed within the next two months.

Mar'ie, as quoted by the Kompas daily, said that, under the planned regulation, the collateral-free loans to small businesses will first be provided by state-owned banks, while private banks will be involved in such a lending scheme in the future.

"But borrowing entrepreneurs must be able to prove that they are reliable," he said. "Their reliability will be determined by the lending banks."

He said that, under the proposed scheme, all of the debtors' revenues will have to be saved in their accounts with the creditor banks.

Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaya, who accompanied Mar'ie at the meeting, said that the government's plan is intended to help small businesses, which usually face difficulties in raising loans from banks because of a lack of assets.

He gave assurances that the banks which will be assigned the task of providing the collateral-free loans would conduct unbiased assessments in determining which businesses were reliable enough to qualify for the scheme.

Nevertheless, he added, there is always a possibility of differing interpretations between the banks, on the one hand, and the entrepreneurs, on the other.

Meanwhile, members of the House of Representatives yesterday hailed the government's plan to issue the regulation.

A deputy spokesman of the House, Soerjadi, and members of the House's banking commission, Uray Faisal Hamid and Saleh Khalid, commented that the planned regulation is expected to promote the businesses of small-scale entrepreneurs and help narrow the gap between the poor and the rich.

However, Soerjadi warned that big companies might abuse the planned financial facility by establishing small firms which would then seek such loans in collusion with banking officials.

Tuesday's meeting, which was also attended by Minister of Industry Tunky Ariwibowo, became an opportunity for small-scale entrepreneurs to complain about the difficulties -- particularly red tape -- which they face in doing businesses.

The entrepreneurs, who came from various parts of the country, mostly criticized complicated licensing procedures and difficulties in completing export procedures and in obtaining funds for their businesses.

Mar'ie stressed that he would issue a decree simplifying the procedures that small businesses must follow to obtain loans in the near future.

Tunky promised that his office would soon issue a regulation on small businesses. He added that preparing such a regulation was not an easy task, given the complexity of the problems faced by small-scale entrepreneurs. (pwn)