President urges banks to focus on microfinancing

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Sat, 04/26/2008 12:02 PM  |  Headlines

President Susilo Bambang Yudhoyono has called on the country's banking sector to provide more loans to small and medium enterprises (SMEs) to encourage further business growth.

"I ask that national banks disburse loans to small and medium businesses, and not only to big business," the President said during an aid event for local communities in Batulicin, South Kalimantan, on Friday, as quoted by Antara.

Yudhoyono said all stakeholders should become involved in developing SMEs, including those in the creative sector.

To support the Batulicin community, Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI) -- three of the country's largest banks -- lent a total of Rp 233.61 billion (US$25.6 million) in aid support.

"I welcome the efforts of these three national banks in giving out loans to support SMEs," the President said.

Mandiri, the country's largest lender, lent Rp 149.11 billion to 2,010 debtors. BRI lent Rp 48.13 billion to 6,618 debtors and BNI lent Rp 36.37 billion to 231 debtors.

According to the country's central bank, Bank Indonesia, in 2007 the banking sector disbursed Rp 502.8 trillion in loans to SMEs, an increase of 22.5 percent on Rp 410.4 trillion in the previous year.

The banks' loans totaled Rp 1,045.7 trillion, a 25.5 percent increase from Rp 832.9 trillion in 2006.

BI director of banking research and regulation Halim Alamsyah said as of the third week of April, the amount lent by banks had passed Rp 1,100 trillion.

"Banks are eager to give out loans while still maintaining risk management standards," Halim said.

He said the rate of nonperforming loans (NPLs) was still below BI's maximum tolerance level of 5 percent.

In 2007, the rate of NPLs among SMEs was 3.5 percent, down from 4.2 percent in the previous year.

BI deputy governor Muliaman D. Hadad has repeatedly said he expects the banking sector to disburse more loans to support SMEs.

Also on Friday, President Yudhoyono -- accompanied by State Secretary Hatta Radjasa, Cabinet Secretary Sudi Silalahi, Public Works Minister Djoko Kirmanto and Home Minister Mardianto -- announced the allocation of Rp 203.93 billion for a national program designed to empower local communities in South Kalimantan.

The government allocated Rp 114.52 billion for the development of 374 villages in 67 districts in 11 regencies and Rp 43.31 billion for the development of 214 villages in 15 districts in 11 regencies.

It also allocated Rp 10 billion for infrastructure development in 40 villages in 10 subdistricts in four regencies, Rp 35.5 billion for agribusiness development in 355 villages in 73 districts in 11 regencies and Rp 0.86 billion for three villages in three districts in three regencies.

Yudhoyono said the aid would help to develop SMEs, including those who engaged in creative industries.

"In 2007, creative industries contributed 19.5 percent of total state revenue, or $620 million," the President said, adding the creative economy was expected to contribute $953 million, or 33.6 percent of total state revenue, this year.

The creative economy refers to the economy originating from individual creative endeavors, skills and talents.

The Trade Ministry recognizes 14 areas for the creative sector: music and musical instruments, advertising, architecture, antiques, handicraft and art festivals, design, fashion, film, video and photography, interactive games, performing arts, printing and publishing, computer services and software, and radio and television.

The ministry said the country's creative sector now consisted of about 2.5 million companies.

Of these, 1.3 million are engaged in fashion, 900,000 in craft, 200,000 in graphic design and 25,000 in other areas.

The government is preparing a blueprint for the creative industries to encourage people to become more actively involved in the sector and help drive the national economy.

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