Small businesses to get collateral-free loans

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)