Fauzi short on microcredit

The Jakarta Post ,  Jakarta   |  Sat, 10/31/2009 1:43 PM  |  City

Corruption and mismanagement had slowed the disbursement of loans to small and medium enterprises (SME) through subdistrict-based cooperatives, Jakarta Governor Fauzi Bowo said Friday.

"Today the city administration has only disbursed Rp 7.98 billion *around US$830,000* to cooperatives in 16 of the 267 subdistricts in Jakarta," Fauzi said at a ceremony for the first funding disbursement under the Subdistrict Community Empowerment Program (PPMK).

The administration had previously targeted to disburse about Rp 148 billion to 267 cooperatives, through the program this year. However, only cooperatives in 82 subdistricts would likely receive the PPMK loans by the end of the year, Fauzi said, adding that his administration could not disburse the loans faster because the auditing of the previous program had taken much longer than expected.

"The audit found indications of mismanagement in the previous PPMK. Many PPMK borrowers died, disappeared or went bankrupt, leaving their loans unpaid. And much of the funding was embezzled," he said.

"We are still trying to resolve the problems. The cooperatives that will manage this program must not be burdened by these problems," Fauzi said.

Previously, funding was disbursed through subdistrict administrations.

Fauzi said that 65 subdistrict councils (Dekel) had not submitted this year's financial reports for auditing.

The administration has run the program since 2001, using funding from the city budget. Over the last two years, it has introduced stricter regulations for the management of the program, because of criticism from various groups.

The management of the program had been deemed prone to corruption. Much of the fund was used to build facilities in the subdistricts, rather than to promote small and medium entrepreneurship.

Some of the funding was allocated to members of the public who could afford the interest, even if they were not residents of the subdistricts they were borrowing from.

Two gubernatorial decrees have established new regulations in the management of PPMK. From this year on, subdistrict-based cooperatives will be fund managers, and such funds can no longer be used to build subdistricts facilities.

Funding in subdistrict cooperatives can only be lent to legal residents of that subdistrict, and borrowers are no longer required to pay interest, but must make profit-sharing agreements with cooperatives.

Ade Soeharsono, the head of the Jakarta Cooperatives and Small and Medium Enterprises Agency, said the revised PPMK program had better mechanisms.

"We expect cooperatives can be more prudent in approving applications *for loans*. Now, borrowers must also submit periodical reports to cooperatives," he said.

"We have also trained cooperative leaders about business management and other entrepreneurship skills. Hopefully they can share these skills with borrowers," he said. (mrs)

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