Kadin sees expansion of small business with Rp 40t bank loan deal

Mustaqim Adamrah , The Jakarta Post , Jakarta | Tue, 09/23/2008 10:02 AM | Business

The Indonesian Chamber of Commerce and Industry (Kadin) is expressing optimism over the deal it has reached with banks to provide loans to micro-, small and medium enterprises (MSMEs).

Head of Kadin's permanent committee for MSMEs Sandiaga S. Uno said he hoped 30 percent of the nearly 40 million MSMEs in the country would have access to the Rp 40 trillion (US$4.25 billion) fund to be made available this year.

"With the agreement we've reached with the banks, I expect MSMEs to have a lot more access to loans... Some MSMEs have even collapsed due to lack of access to additional capital," he said.

Based on existing regulations, including those related to the new income tax law, MSMEs are defined as enterprises with annual sales below Rp 50 billion.

According to Sandiaga, Kadin will sign a partnership agreement with five state lenders: Bank Mandiri, Bank Mandiri Syariah, Bank Negara Indonesia, Bank Rakyat Indonesia and Bank Tabungan Negara.

Privately held Bank Bukopin will also be involved in the deal.

The banks will officially become part of the government-initiated lending program during Kadin's national coordinating meeting on Oct. 21.

The program, launched in November 2007, is aimed at providing MSMEs with greater access to financing options through a maximum Rp 500 million (US$53,191) loan per enterprise with a maximum interest rate of 16 percent.

Rp 9 trillion has been channeled to MSMEs to date, out of the Rp 40 trillion in the fund, Sandiaga said.

He suggested MSMEs be provided the loans at a rate comparable to Bank Indonesia's benchmark interest rate.

"If the BI deposit rate is 12 percent, MSMEs -- as the country's economic backbone -- should enjoy a maximum interest rate of 15 percent," Sandiaga explained, adding a low interest rate would also help reduce the amount of bad loans.

According to the Industry Ministry's director general for small and medium industries, Fauzi Azis, MSME loans for Rp 50 million are charged a 16-percent interest rate, with amounts below that subject to 26 percent.