Niaga secures coverage for SME loans

The Jakarta Post , Jakarta | Tue, 02/12/2008 11:15 AM | Business

Medium-sized Bank Niaga signed an agreement Monday with PT Asuransi Kredit Indonesia (Askrindo), a credit insurance firm controlled by the central bank, for the insurance coverage of its loans to small-and medium-sized enterprises (SMEs).

The bank's corporate and banking business director, Catherine Hadiman, said that under the agreement Askrindo was expected to guarantee the bank's lending which would amount to between Rp 200 billion (US$53.9 million) and Rp 700 billion this year.

Last year Askrindo covered 10 percent of the bank's 1,100 loans to SMEs, worth some Rp 360 billion.

Askrindo's insurance would cover only the loans to entrepreneurs willing to pay premiums, she said, adding that at least 50 percent of this year's debtors would opt to insure their loans.

"This insurance functions not only to reduce credit risks, but also to enhance credit," Catherine added.

Bank Niaga, she said, anticipated its total lending, with an annual interest rate of 10 to 11 percent, would grow by 20 to 25 percent this year, from Rp 11 trillion in 2007.

She said the bank expected a 30 percent growth in loans for SMEs, which, as in the previous year, would focus on the agro-business sectors, including sugar cane plantations and dairy farms.

Bank Niaga's west Indonesia area manager for small and medium businesses, Chairul Aslam, said the bank had allocated 40 percent of its total loans to such businesses.

Askrindo president director Chairul Bahri said the company had received an additional Rp 850 billion in capital from the government and was planning to allocate around 90 percent of its total funds to cover loans to SMEs.

The plan was in accordance with the company's goal to support the development of SMEs in Indonesia.

Askrindo is 55 percent owned by Bank Indonesia. (lva)

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