Subsidized loans to farmers embezzled

Subsidized loans to farmers embezzled

JAKARTA (JP): More than half of the government-sponsored
credits for farming activities in the Malang regency, East Java
have been embezzled, according to findings announced by the
Center for Banking Crisis (CBC) on Tuesday.

Eliadi Hasmi Daulay of the CBC Jakarta head office said that
about Rp 180 billion (US$25.7 million) from the Rp 300 billion in
the subsidized loans locally known as KUT credits channeled to
farmers in the regency had allegedly been misappropriated.

"We have complete documentation as solid evidence to
substantiate such a claim," said Eliadi after submitting the
findings on the alleged fraud to Bambang Setyoprojo, the head of
Bank Indonesia's Special Unit for Banking Investigation.

Eliadi said the wrongdoers had committed acts such as creating
fictitious loan applications, marking up the size of the loan
needed and delaying the loan disbursement for a few months to
gain from bank interest rates on the money.

Soegiharso of the CBC Malang office said the culprits could be
people at the channeling bank level, the Department of
Cooperatives, Small and medium Enterprises, the local NGO and
cooperatives.

Under the current government-sponsored KUT scheme a group of
farmers working with an established local cooperative or a non-
governmental organization (NGO) could apply for soft loans to
finance their crops.

The application process for the 10 percent per year soft loans
were too simple and lacked supervision, according to Soegiharso.

He said the farmer applicants only had to submit their
identification cards and a fill out form of the size and facts of
the would-be financed crop to the channeling bank after the
applicants' corresponding cooperative or NGO gave their
endorsement to the application.

The channeling bank would then disburse the loan proceeds
following approval by the Department of Cooperatives, Small and
Medium Enterprises.

Soegiharso showed a sample of evidence to reporters where a
farmer who had received a loan of Rp 1.5 million was registered
to have an outstanding loan of Rp 9.2 million at the Department
of Cooperatives, Small and Medium Enterprises office.

"How can a farmer, who received a Rp 1.5 million loan,
maintain repayments on Rp 9.2 million at the loan maturity?" he
asked.

He said the NGO or the cooperative might have marked up the
amount of the loan and put the burden on the farmers' shoulders.

He said in some other cases loans had been extended to parties
which had submitted fictitious identification cards and crop fact
data to acquire loans that were not at all used for crop
financing.

"We found a case where a property developer received KUT for
building housing projects," Soegiharso said.

Soegiharso also presented a documented, as evidence,
demonstrating a Rp 29 billion loan proceed which was transferred
to an individual account of a local NGO head.

He said such loan proceeds were to stay at that individual's
bank account for about three months before it finally reached
several groups of farmers who were on the list of KUT recipients.

KUT is a government-sponsored soft loan given to farmers to
help finance the purchase of fertilizers, seeds and other farming
necessities. The loan is repaid after the harvest of the crop.
(udi)