Road map prepared for micro businesses

The Jakarta Post ,  Jakarta   |  Thu, 06/11/2009 1:13 PM  |  Business

The Indonesian Chamber of Commerce and Industry (Kadin) is drawing up measures to empower small and micro businesses, including efforts to address problems of limited access to financing.

The measures would be derived from inputs from relevant stakeholders - small and micro businesses, the banking sector and regulators - and put together under a road map for MSMEs, Kadin deputy chairman for small and medium enterprises and cooperatives Sandiaga S. Uno said Wednesday.

"Most of the country's more than 40 million micro, small and medium enterprises have little or no access to bank loans. The reasons vary from tight regulations on collateral necessities, to high interest rates," Sandiaga said after a Kadin technical meeting to discuss the concept of the road map.

The country's micro, small and medium businesses have proven their resilience amid waves of economic crises.

During the 1997-1998 Asian financial crisis, Indonesia's small and micro businesses - which account for about 65 percent of the country's enterprises - stood firm and continued to grow at a time when the government laid out costly bailout programs for large and internationally-recognized companies.

And it's more or less the same story during the current global economic downturn, Sandiaga said.

Still, the sector needs help to speed up its development, because under the current conditions, Sandiaga said, "It will take more than 40 years to assist those 40 million SMEs."

Wednesday's meeting, which was attended also by representatives from the banking sector and small businesses, will be the first of a planned series of meetings among stakeholders.

Kadin chairman M.S. Hidayat confirmed that banks had their own difficulties in aggressively channeling loans to the sector, since they had to comply with central bank regulations.

"The regulations themselves are quite logical, amid the increase in numbers of bad loans.

"So this is a tough dilemma for us to resolve, but we'll work on it," Hidayat told a press briefing after the meeting.

Hidayat however, strongly criticized banks for keeping their interest rates high, despite a steady decline in Bank Indonesia's benchmark rate, which currently stands at 7 percent.

Bank loan interest rates currently range between 13 and 19 percent.

"The margin is quite high, around 9 percent at most. Such a spread, I think, only exists in Indonesia. Lending interest rates should be around 12 percent," Hidayat said.

Aside from limited access to credit, Indonesia's small and micro businesses also lack expertise in production and quality control, marketing and managerial knowledge in finance and accounting, hampering development.

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