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NEWS UPDATES 4 September 2010

Lower interest rates for Indo SME loans

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The Indonesian Chamber of Commerce and Industry (Kadin) expects banks to set lower interest rates for loans to small- and medium-scale enterprises (SME) from the current 20 to 30 percent to no more than 17 percent.

Kadin deputy chairman for SMEs and cooperatives Sandiaga S. Uno said Friday that the gap between interest rates for corporate and SME loans should not exceed 5 percent.

“The current interest rate for credit extended to large companies is about 12 percent, so ideally the rate for SMEs should not be higher than 17 percent,” he said during the chamber’s national coordination meeting on SMEs and cooperatives at the Jakarta Convention Center.

He said he also expected the government to provide alternative financial institutions for SMEs, since many complained that procedures to apply for credit in conventional banks were too cumbersome and difficult.

Sandiaga said that to accelerate the growth of SMEs, the sector needed not only low interest rates for credit, but also assistance to build their management capacity and improve the quality of their human resources.

“We plan to apply a capacity building method by which a credit receiver will be assisted by a Kadin officer for six months to develop their businesses,” he said.

The SME sector is among the most vital pillars of the country’s economy. Currently, the sector comprises 51.26 million business units, representing 99 percent of the population of the country’s business sector.

The government has expressed its commitment to developing the sector by allocating Rp 20 trillion from this year’s state budget, spread to seven state-owned banks, through a program called the micro-credit support program (KUR). As of July, only 680,270 entrepreneurs had made use of Rp 6.5 trillion of the facility.

In 2009 the export value of the SME sector fell to US$1.23 million from $1.35 million previously.

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