NEWS FOCUS: GOVT CUTS SMALL BUSINESS CREDITS TO RP13.5 TRILLION BY ANDI ABDUSSALAM

Jakarta, 5 (ANTARA) - The government has cut its target this year to provide small and medium-sized businesses (UMKM) with small-holder's credits (KUR) from Rp20 trillion to Rp13.5 trillion due to lack of preparations.

Virtually, in an effort to develop small businesses in the country, the government has set itself a target of providing UMKM with Rp100 trillion in a KUR scheme in the coming five years, or Rp20 trillion annually.

But this year, the target of Rp20 trillion has been reduced to Rp13.5 trillion due to lack of preparations. "This year the amount of KUR to be extended to small businesses is reduced to Rp13.5 trillion, not Rp20 trillion," Minister for Cooperatives and Small Businesses (UKM) Sjarifuddin Hasan said on Friday.

According to the minister, the decision to reduce the target was made two weeks ago in a meeting with the KUR Policy Committee and KUR stakeholders, including KUR executing banks.

The government compelled to cut its target this year because a period of relaxation was decided in February to give a chance to executing banks to make preparations. The decision was taken on February 12, 2010.

"Since February, KUR executing banks have been making preparations, including policy adaptation, popularization, adjustment and preparation of human resources," the minister said.

This, the KUR extension began to be made after the relaxation period in the middle of March, 2010. Thereby, the amount of KUR provided since then is beyond expectation as it was practically effective only 2.5 months now.

Up to April this year, the cumulative amount of KUR credits already extended to small businesses reached only Rp19.28 billion for 2.67 debtors with an average of credits amounting to Rp7.21 million.

"Yet, executing banks have in principle agreed and are optimistic that they would be able to provide the KUR target of Rp13.5 trillion until the end of the year," Minister Sjarifuddin said.

The minister said that his ministry had communicated with 13 KUR executing regional development banks (BPD) which had expressed its commitment to each extending Rp2 trillion of small-holder's credits until the end of 2010.

He said that there were three BPDs which were able to show their performance in extending KUR credits to small businesses, namely BPD Jabar-Banten, BPD Jetang and BPD Jatim.

Of the 19 executing banks, Bank BRI is the biggest one which has provided Rp13.7 billion.

Although, this year the target of Rp20 trillion is unlikely to be achieved, the government remains upbeat of the success of the credit scheme.

It has set a target to provide Rp100 trillion in small-holder's credits in the coming five years. "The government has set itself a target of providing Rp20 trillion for UMKM every year in an effort to overcome capital problem and generate the development of micro, small and medium businesses in the country," Deputy Minister for Cooperatives and UMKM Development Khairul said meanwhile.

He said that the low-interest credits were handled and channeled by a number of executing banks, among others, Bank BNI, Bank BTN, Bank Mandiri and 13 regional development banks (BPD).

The deputy minister said that it was easy for UMKMs to obtain the working capital as long as they were economically reasonable and they have so far not yet obtained and used other form of banking credits.

Khairul said that each UMKM could be given a maximal credit of Rp500 million. He said that the government had up to now extended Rp19.2 trillion to 2.6 million UMKM or about Rp7.21 million for each business unit.

With the credits, small businesses are expected to increase their production and their roles in boosting exports and raise economic growth.

So far, UMKM was able to contribute 20.2 percent to non oil/non gas export income with an annual growth of about 15 to 17 percent.

"We hope that the UMKM roles would be increased in the future in line with easiness of obtaining working capital," he said.

Therefore, to support this program, the KUR guarantee agency should obtain more fund injection. "It cannot be denied that the capital of the guarantee agency should be increased to support the success of this program," senior banker Sigit Pramono said.

The BCA bank commissioner said that the KUR problem was not always relating to high interest rate, but to the efforts to reach out to small businesses in remoter areas in the country.

"This requires the relatively big number of executing banks. Banks would be active to do their jobs if the guarantee from credit insurance agency is strong," Sigit said.

Therefore, he is of the view that KUR insurance agency which is tasked to provide insurance for 70 percent of the KUR credits needed to be strengthened.

He said that the interest rate which was set at 14 percent per annum for retail businesses and 22 percent for the micro business sector should not necessarily be questioned, especially by certain sectors which were indeed able to pay it.

However, former chairman of the Indonesian Cooperative Council (Dekopin) Adi Sasono said that the 14 percent interest rate was too high.

"The 14 percent interest rate for retail enterprises and 22 percent for micro businesses actually still could be lowered," Adi Sasono said.

After all, the government has provided a guarantee up to 70 percent through an insurance agency, while the remaining 30 percent were guaranteed by banks, he said.

"It should be lowered because banks are imposing a for lower interest rates on the public savings," he said.