SME financing gets a boost
The Jakarta Post, Jakarta
To help improve financial access for micro-entrepreneurs, the government will support the raising of Rp 800 billion (some US$80 million) in funds next year for 2,000 micro-financing agencies across the country to channel as credit.
The funds, Minister of Cooperatives and Small and Medium-Sized Enterprises (SMEs) Suryadharma Ali said on Saturday, were expected to come from a Rp 200 billion allocation in the state budget derived from the government's fuel price hike compensation program, and would be disbursed to the micro-financiers through state financing firm PT Permodalan Nasional Madani (PNM), state- owned lender Bank Mandiri and privately owned, sharia-based lender Bank Muamalat Indonesia.
Under the program, PNM, Mandiri and Muamalat will each contribute further by doubling the assistance funds, taking the total amount for the micro-financing agencies to Rp 800 billion.
"The funds will be given to such micro-financing institutions as rural credit cooperatives in the regencies and subdistricts throughout the country," said Suryadharma quoted by Antara.
"If the program proves to be successful, then we may even extend it to micro-financiers at the sub-district level."
This year, the ministry has disbursed Rp 106 billion through the three lenders, raising a total of Rp 424 billion in funds for 444 micro-financing institutions to channel as credit.
It is targeting to support a total of 5,557 micro-financing agencies until 2008 under the scheme, a continuation of its previous success of raising Rp 617 billion in funds for 5,174 micro-financiers from 2000 to 2003.
The amount of funds, however, is strikingly low compared to the Rp 4.65 trillion in direct cash subsidies for 15.5 million low-income households that the government has also allocated for the fuel price compensation scheme, despite criticism that the scheme would only create a dependent mentality among the poor and that the funds should instead be used for labor-intensive projects or supporting SMEs.
SMEs, which have proven their resilience against economic crisis and help absorb manpower, are still facing financing problems due to the lack of formal requirements for making commercial loan applications.
Meanwhile, in a similar move to support micro-entrepreneurs, the Asian Development Bank (ADB) last week disbursed $2 million in grants to restore micro-enterprises and support microfinancing institutions in the tsunami-affected Aceh province and North Sumatra's Nias island.
The grant will be used to provide micro-credits schemes averaging Rp 5 million each to some 1,500 micro-enterprises through local regional development banks over a two year period.