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ndonesia’s major banks are still facing several constraints in disbursing government-sponsored micro loans (KUR) to small businesses , despite high demand.

Many credit applicants’ businesses failed to meet criteria set by banks to make sure they could pay back the loans, Bank Mandiri business banking senior vice president Tatang Tabroni told The Jakarta Post on the weekend.

“Before providing loans, we have to make sure their businesses have good prospects for the future, meaning they will have the ability to repay their debts,” he said over the telephone.

Tatang added that because of this requirement, Mandiri had not given loans to people wanting to start new businesses, but mostly to businesses that were already running.

According to the Cooperatives and Small and Medium Enterprises Ministry, in the first half of this year, Bank Mandiri had disbursed Rp 252.7 billion under micro credit loans (KUR) to 732 debtors. However, the government had asked Mandiri to disburse at least Rp 1.84 trillion worth of KUR by the end of this year.

The government is committed to developing the SME sector by allocating Rp 20 trillion from this year’s state budget to give SMEs easier access to capital.

As of July, 680,270 entrepreneurs had made use of Rp 6.5 trillion of the facility.

The government is disbursing the Rp 20 trillion worth of KUR loans through Bank Nasional Indonesia (BNI), Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Bukopin, Bank Tabungan Negara (BTN), rural banks (BPR) and Regional Development Banks (BPD).

BNI is expected to disburse Rp 3 trillion, Bank Mandiri Rp 2 trillion, BRI Rp 8 trillion, Bukopin Rp 750 billion and BTN Rp 750 billion. The remaining Rp 4.5 trillion is divided between rural banks and Regional Development Banks across Indonesia.

During the first semester, besides Bank Mandiri, two other big state-owned banks, BNI and BRI, were able to disburse Rp 1.7 trillion and Rp 5.3 trillion. Coordinating Economic Minister Hatta Rajasa had earlier raised concerns that as of today, 90 percent of the KUR loans dispersed so far had gone to businesses in the services and trade sectors, but not to the production sectors.

Kadin deputy chairman for SMEs and cooperatives Sandiaga S. Uno last week said many small businesses had been unable to access the micro credit guaranteed by the government, because of its tight requirements.

An economist from the Institute for the Development of Economics and Finance (INDEF), Aviliani, acknowledged the problem. She suggested the government assist KUR applicants to develop their businesses so their feasibility to pay back loans improved.

“With that assistance, banks will feel safer in disbursing the KUR loans, because their risk will be reduced,” she told the Post.

Aviliani also suggested the cooperatives and SME ministry invite SME businessmen to make a business group before applying for loans, which could enable them get higher loans with lower interest rates.

“Currently, most credit applicants come individually. Banks mostly charge them about 22 percent interest because their loans are below Rp 20 million. If they come in groups and borrow more than Rp 20 million, the interest rate will be lower,” she said. (rdf)