T

he government is improving the provision for KUR microcredit as part of efforts to accelerate the disbursement of the targeted Rp 13.1 trillion (US$1.45 billion) this year, a senior minister said Thursday.

Coordinating Economic Minister Hatta Rajasa said better microcredit provision, both in terms of credit ceilings and financing schemes, had been adopted by government to accelerate the disbursement of microcredit loans for micro businesses.

Hatta’s ministry defines micro businesses as having a capital of not more than Rp 50 million (US$5,561)and annual turnover of less than Rp 300 million.

Hatta said the improvements included increasing the ceiling of approved non-collateralized microcredit from Rp 5 to Rp 20 million.

The government would also increase its guarantee on microcredits for upstream industrial sectors — agriculture, maritime and fisheries, forestry and small industries — from 70 to 80 percent due to their big potential to strengthen economic growth and to develop employment opportunities for poorer people.

“It will increase the economic activities of microbusinesses,” Hatta told a press conference after the signing of a Memorandum of Understanding (MoU) on micro businesses, cooperatives and small and medium enterprise financing.

The MoU was signed by finance, cooperative and small and medium enterprises (SMEs), agriculture, industry and forestry with credit insurance companies Jaminan Kredit Indonesia (Jamkrindo) and Asuransi Kredit Indonesia (Askrindo); and microcredit providers BRI, Bank Mandiri, BNI, Bank Tabungan Negara, Bank Bukopin, and Bank Syariah Mandiri.

Other improvements include the increase of microcredit ceiling for the so called linkage executing program by up to Rp 2 billion from Rp 1 billion; the provision of a 13-year loan for cash crop plantations; and the provision of microcredit for Indonesian migrant workers with the government guaranteeing up to 80 percent of the loan amounts.

The Coordinating Economic Ministry said as of Aug. 31, the six appointed banks had a ceiling of
Rp 24.11 trillion with Rp 9.46 trillion having been disbursed to 3.17 million debtors with average loans of Rp 7.59 million per client.

The development of microbusinesses has been hampered by lack of financing due to limited access to banks and financial institutions.

Hatta denied rumors as to the unwillingness of the banking sector to provide non-collateralized approvals for micro loans up to Rp 20 million due to their relatively high non-performing loans (NPLs).

SMEs Minister Syariefuddin Hasan said that the microcredit program had lower proportions of NPLs compared to other commercial credits.

“Micro credit debtors have stronger discipline,” Syarief said, adding that the average NPL for all microcredits only reached 4.86 percent gross.

The provision of microcredit for Indonesian migrant workers was intended to help finance the processing of their documents and licenses and other expenses. Currently, to cover these front up charges, workers have to seek money from loan sharks who charge high interest depriving workers of their salaries for more than three months, Hatta said.

“I hope the banking sector could respond to this problem by providing softer loans,” he said. (ebf)