Two-step loans only for healthy firms: Mar'ie

JAKARTA (JP): The two-step loans pledged by Japan's Export- Import Bank (Exim Bank) will only be provided to viable venture capital and small-scale companies, says Minister of Finance Mar'ie Muhammad.

He said Saturday that venture capital companies and small- scale businesses applying for the two-step loans would be closely evaluated.

Two-step loans are generally channeled to borrowers through commercial banks.

"Those funds are our loans and we should, therefore, be very careful in lending them to small-scale businesses," Mar'ie said after the official opening of a capital venture firm in Pekanbaru, the capital of the Riau province.

The capital venture firm was established by PT Bahana Artha Ventura, a state-owned venture capital firm, in cooperation with local businessmen. Riau is the 20th province to receive a venture capital company since 1994. The government hopes to establish similar companies in all of the country's 27 provincial capitals.

The establishment of the venture capital companies was sponsored by Bahana Artha Ventura, which injected Rp 1 billion of equity participation into each.

Mar'ie said the government would further encourage the establishment of venture capital firms in the country to provide financial assistance to small-scale businesses.

The Japanese Exim Bank announced Friday a loan of 53 billion yen (US$490 million) to Indonesia to finance capital investment by small-scale enterprises.

Mar'ie said that about US$200 million of the Japanese bank's loans would be used to support the activities of the country's venture capital companies, which provide financial assistance to small businesses.

The Japanese bank said in a statement Friday that the loans are expected to help develop the domestic financial market, which is a source of stable medium-to-long-term funds.

Small-scale enterprises employed almost 90 percent of the Indonesian work force, or 70 million people, in 1994. They contributed an estimated 15 percent of the country's gross domestic product (GDP), the bank said.

The Indonesian government has highlighted the promotion of such enterprises in its current 25-year development plan, which was implemented in 1994.

The promotion supports various measures, including the provision of tax breaks for venture capital companies, the development of the domestic capital market and the requirement that commercial banks extend at least 20 percent of their loans to small enterprises, which are defined as companies with total assets of no more than Rp 600 million ($250,000).

Meanwhile, venture capital companies in West Java, Yogyakarta and Bali have complained that they are facing a shortage of funds to meet the demand for venture projects in the provinces.

Executives from the venture capital companies told a hearing with House Commission VII for Finance and Trade recently that they are only able to finance less than half of the proposed projects due to the capital limitations.(hen)