State banks, new govt firm to manage loans
State banks, new govt firm to manage loans
JAKARTA (JP): State Bank Rakyat Indonesia (BRI), Bank Tabungan
Negara (BTN) and PT Permodalan Madani will take over the task of
channeling heavily subsidized loans from the central bank in
November.
Bank Indonesia (BI) deputy governor Aulia Pohan said on Friday
that based on the new central bank law, which became effective on
May 17, the central bank could no longer provide the subsidized
loans, and it had to hand over the role to government appointed
institutions in six months time.
"BRI, BTN and Permodalan Madani, the newly established state
finance company, are likely to take over the role," he said.
He said BRI would handle subsidized loans for farmers and
cooperatives, BTN would manage mortgage facilities for
inexpensive housing and Permodalan Madani would channel loans to
small-scale businesses.
He said some Rp 7.4 trillion in subsidized loans had been
allocated for the period between May 17 and November 16, 1999.
The subsidized loan program has drawn criticism from a number
of quarters, including those concerned about the huge burden the
program will place on the state budget.
The head of the credit division at BI, Abubakar Karim, said
the subsidized loans had an average interest rate of around 9
percent, compared to the current lending rate of over 30 percent.
He said the government would have to provide a large amount of
funding for the program.
"This will be a big headache for the government... but if we
stop the program there could be fresh social and political unrest
because this is related to the small people," he said.
He said that when rumors emerged last year that the central
bank was considering canceling the program, many people
protested.
He said the only way the government could finance the program
was by issuing sovereign bonds.
The government earlier indicated it was considering Japan's
offer to guarantee sovereign bonds issued by crisis-hit nations
in the region.
Noted economist Anwar Nasution has also aired concern over the
burden the program places on the state budget.
"It will surely be a heavy burden for whoever wins the general
election," he said.
Indonesia held elections on Monday, with final results
expected to be announced on June 21.
The country's devastating economic crisis has caused serious
strains on the state budget. The government plans to issue more
than Rp 350 trillion in bonds to help recapitalize the country's
banking sector.
Meanwhile, economist Didik J. Rachbini warned the government
of the moral hazards of the program.
He said, as an example, that small-scale businesses in rural
areas which had been able to survive on loans at market rates
would turn to the subsidized loans even if they were intended for
small-scale farmers.
"They can always manage to get the subsidized loans and put
them in time deposits," he said. (rei)