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n a bid to stimulate the emergence of new entrepreneurs in the country and increase the number of small- and medium- sized industrial firms outside the island of Java, the government promises to provide such firms with better access to financing.

Industry Minister M.S. Hidayat said on Tuesday in Jakarta that his ministry would cooperate with large-scale companies to help small- and medium- sized enterprises (SMEs) through a venture capital scheme.

“The venture capital scheme is very good and has been proven in developed countries to help generate small industrial firms. Venture capitalists can also benefit from this cooperation as they do it according to business norms,” he told reporters after the signing of a memorandum of understanding between the ministry and the Indonesian Indigenous Entrepreneurs’ Association (Hippi).

Hidayat said 10 large-scale entrepreneurs had committed to providing up to Rp 5 billion (US$545,000) in initial capital for small firms before being able to access loans with low interest rates, in addition to assistance in business management.

“Later, we and the entrepreneurs will draft the mechanisms and priority sectors [for cooperation],” he added.

The number of entrepreneurs in Indonesia is still low due to lack of entrepreneurship and difficulty in obtaining credit. As of last year, the number of the entrepreneurs totaled only 0.24 percent of the population and the government has launched a national entrepreneurship movement to increase the figure to 2 percent.

Despite their resilience to the impact of the global economic crisis and their contribution to more equitable income distribution in the country, SMEs face difficulties in getting access to finance, which is often combined with complicated procedures and high interest rates.

The government has made various efforts, including distributing micro-credit loans, which this year was increased by 25 percent to
Rp 25 trillion (US$2.73 billion), enhancing technological capacity through machinery-restructuring programs and human resource empowerment through training.

The Industry Ministry’s small- and medium-sized enterprise director general Euis Saedah said that the venture capitalists would offer 49 percent of the capital needed by small and medium industrial start-ups.

“This [cooperation] can last for up to the next three years. We still need to discuss it further,” she said, adding that in the meantime, her office would continue to identify firms interested in the venture capitalist scheme.

The Industry Ministry will prioritize the financing of creative industries, including fashion and handicrafts, under the venture capitalist scheme, according to Euis.

Around 75 percent of the 3.8 million small- and medium-sized industrial firms in Indonesia are located in the country’s most-developed region, the island of Java, with the remaining 25 percent outside Java.

The government wants to shift this pattern by increasing the proportion of firms in other islands to 40 percent by 2014.