'SMEs are always hardest hit'

In an attempt to put some backbone into the rupiah, Bank Indonesia has decided to increase its benchmark interest rate. How will this affect people who have to repay bank loans? The Jakarta Post asked some Jakarta people for their views on the issue.

Tasha, 23, works for a property firm in Central Jakarta. She lives with her family in Kelapa Gading, North Jakarta:

I have savings in both dollars and rupiah. So, if the interest rate increases then I get a double advantage. I gain on the exchange rate as the value of the dollar is still high and I also get higher returns on my savings.

However, I think this will only be short term gain as the majority of people are suffering under the current conditions. One sector that is hard hit by rising interest rates is the small and medium enterprise sector. It is a pity they will have to pay more interest on their loans.

I think the government should find another solution to defending our currency. If the problem is huge demand for oil, then they should find alternative fuels to replace oil. I've noticed recently that many students who participated in alternative fuel competitions are capable of coming up with alternative sources of energy.

Yanti, 35, owns a small garment business in Ciracas, East Jakarta. She lives with her husband and children in Pasar Rebo, also in East Jakarta:

I have an outstanding bank loan that I took out to help finance my business. I understand that increasing interest rates is an attempt by the government to strengthen the rupiah. But they must remember that small-scale businesspeople like us depend on bank loans. And higher interest means higher operating costs and lower profits for us.

I am afraid that if interest rates stay high, I will have to lay off workers. This is the last thing I want to do, actually.

So, let's hope that the higher interest rate policy will work quickly so that they can soon go back to their earlier levels.

The sad thing is that if higher interest rates don't help to defend the rupiah, many businesses will have been sacrificed in vain.

-- The Jakarta Post