Lack of access to bank loans hampers SMEs

Aditya Suharmoko ,  Jakarta Post ,  Nusa Dua, Bali   |  Wed, 05/06/2009 9:19 AM  |  Headlines

Limited access to credit remains the primary concern of small-and-medium-sized enterprises (SMEs) in Indonesia, a seminar heard Tuesday.

"The problem for SMEs in Indonesia is credit mismatch, in which supply and demand are not balanced. SMEs also have poor accessibility to formal financial sources," Shujiro Urata, professor of economics at Waseda University in Tokyo said. He was speaking at a seminar at the 42nd annual meeting of the Asian Development Bank's (ADB) board of governors in Bali.

"The government has made progress in financial support, yet problems still exist," he added.

The industrial structure in Indonesia shows that SMEs, particularly the medium-sized ones, are lacking, despite the fact that medium-scale businesses are crucial to supporting bigger industries, Urata said.

Aside from limited access to credit, Indonesian SMEs also lack knowledge on production and quality control, marketing, and managerial knowledge on finance and accounting.

"What's important is, to be able use finance efficiently and effectively, SMEs have to have the capability, good management and know-how. Like Sony and Honda that all started as SMEs, I want to see a success story in Indonesia too," he said.

Arianto A. Patunru, the research director of the Institute for Economics and Social Research (LPEM) at the University of Indonesia (UI), echoed Urata's statements.

"What we want is the small-sized businesses to become medium ones, and the medium ones to support the large ones. Why SMEs are more informal here is because they have no money to become formal; its too expensive," he said.

If SMEs grow bigger, access to credit will open, enabling them to support larger businesses and absorb employment, he added.

Despite the fact the government has provided credit for SMEs, many are unable to access it as banks have stringent requirements, Arianto said. Urata suggested the government try to establish an SME council, in which government agencies, stakeholders, the Indonesia Chamber of Commerce and Industry (Kadin) and academics discuss economic policies deemed crucial to the development of SMEs in Indonesia.

"The council should also try to prepare annual SME reports, so people know what happens to SMEs," he said.

He added the government could further promote SMEs by creating a more favorable conditions, by, for instance, building a special economic zone for SMEs.

Arianto said a special zone consisting of SMEs would contribute to export growth.

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