T

he central government and Riau Islands administrations are being urged by the central bank to use rural banks (BPR) to help grow small and medium enterprises (SMEs) and creative economic sectors around Batam.

Bank Indonesia’s (BI) Riau Islands director Elang Tri Praptomo said that as a relatively small city, Batam had 30 BPRs with combined assets of Rp 2.2 trillion (US$239.8 million) this year, up from Rp 1.5 trillion and Rp 1.8 trillion in previous years.

“BPRs in Riau Islands grow much better than conventional banks,” Elang said during a discussion with the Batam branch of the Alliance of Independent Journalists (AJI) on Monday.

This potential for growth, Elang said, had to be utilized by the government and local administrations to push the development of SMEs and other creative sectors in the area. “The distribution of credit to the SME sectors has to be facilitated by the local administration.”

He added that the Municipal Cooperative Agency and city-owned SMEs could bridge the gap between the rural banking sector and SMEs in the region as a result of lack of trust.

In this case, he said, the municipal administration could register the SMEs and evaluate the feasibility of particular businesses. The data on these SMEs could then be handed over to the BI as a reference for the rural banks to channel loans.

He said the lack of trust among rural banks toward SMEs was due to debtors using fake addresses, among other things.

“Today the address is written as A. But the next day, when it is checked, the address is no longer there. This has caused doubts among the rural banks to channel loans despite their potential of helping SMEs to grow,” he said.

The rapid growth of BPRs in the region, according to Elang, prompted the BI to limit their number into only 32, as two more BPR are in the process of feasibility study.

Separately, the municipal People, Market, Cooperatives and SME Empowerment (PMPK-UKM) Agency head Amsakar Achmad said his organization has already come up with a solution to help fund SMEs through the distribution of an annual Rp 2 billion in funding to be managed by a technical managing unit (UPT) of the city administration.

“Banks are sometimes too rigid, so SME sectors are often reluctant to have business with them. But we will give support if there are banks willing to fund SMEs,” Amsakar said.

Batam is home to around 1,000 SMEs, but they mostly lack access to the marketplace as a result of not having enough working capital.