INCENTIVES NEEDED TO MAKE BANKS LOWER INTEREST RATES

Jakarta, June 11 (ANTARA) - The government should provide incentives for banks so that they will be able to lower their rates of interest in accordance with the already lowered benchmark rate of Bank Indonesia (BI Rate), a private business organization official said.

"The government can provide incentives for banks so that they will be able to lower their interest rates in accordance with the BI rate," deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin), Sandiago Uno, said here on Thursday.

He said the government should intervene in private banks which had not yet lowered their interest rates because BI, the central bank, had already cut its benchmark rate to 7 percent.

Uno said that banks should have lowered their interest rates so that it would not have affected micro, small and medium businesses (UMKM). Banks at present still imposed a range of 16 - 24 percent interest rates on their lending. Kadin hoped that banks would in the near future cut their rates to about 10 percent.

He said that the government and banks should provide low interest credits for UMKMs like those provided for big businesses which carried an interest of between 10 and 12 percent.

After all, UMKM contributed more to banks then big business maker did, he said.

Early this month, BI cut its key rate by 25 basis points to seven percent. But the lowering of BI's benchmark interest was not followed by the lowering of banks lending rates.

In the meantime, chairman of the Association of Indonesian Sidewalk Vendors Yudi Lazuardi asked banks to simplify applications for smallholder credits for UMKM players and lower high interest rates.

"We also hope the banks will raise business capital on a routine basis to enable UMKM to reach progress in their operations," Yudi said***2***

T.SDP-41