Jakarta | While many medium and large-scale business players are struggling, Yully Widianto's business continues to grow despite the sluggish economic conditions. This is because he already has a steady customer base; exports to Asia, Europe, and the Middle East are still running smoothly. Orders from domestic buyers have also not declined significantly.
What troubles the owner of the decorative lamp business Dhowo Art in Yogyakarta is funding. Most buyers only provide a 30% down payment on the order value. Meanwhile, labor costs and raw materials, which require a larger amount, must be paid in full upfront.
Thus, loans have become the choice for this 38-year-old entrepreneur. However, he does not rely on the People's Business Credit (KUR) or commercial micro, small, and medium enterprise (MSME) loans from banks since establishing his business in 2000. Instead, Yully has been a loyal customer of the Partnership and Community Development Program (PKBL) from various state-owned enterprises.
Although the loans Yully receives range from only IDR 20 million to IDR 50 million, the interest rates are extremely low. Meanwhile, KUR interest rates, especially those of commercial MSME loans from banks, are too high and burden his business, even though the KUR interest rate has been reduced from 22% to 12% this year. "The PKBL interest rate is only 0.5% per month," he said.
A similar experience was shared by Rajib Naskrudin, owner of RPG Tenun Sutra and Batik Garut in Garut, and Siti Solihah, a producer of processed cake and bread products under the Bagelen Ganyong brand in Bandung. The difference is that these two small business owners have used KUR before, back in 2013, when the interest rate was still 22% per year.
The reduction of the KUR interest rate to 12% and the plan to lower it further to 9% next year has been welcomed with enthusiasm. Without affordable funding, Rajib and Siti often had to hold back their business growth. "If it's not absolutely necessary, borrowing from a bank is not appealing because the high-interest rates are actually quite stressful," Siti said.
Expanding Coverage
To expand the reach of KUR, the government has cut its interest rate from 22% to 12% this year. The breakdown is as follows: the government subsidizes 7% per year for microcredit, 3% per year for retail credit, and 12% per year for Indonesian migrant worker (TKI) loans.
However, the targeted loan distribution of IDR 30 trillion is unlikely to be achieved. Minister of Cooperatives and SMEs AAGN Puspayoga acknowledged that IDR 20 trillion is a more realistic figure than the IDR 30 trillion target, given that KUR 2015 was only disbursed starting August 18. As of October 8, the number of KUR participants had reached 270,127 debtors, with a total credit disbursement of IDR 4.39 trillion.
Bank Negara Indonesia (BNI), for example, targets to distribute IDR 3 trillion in KUR throughout 2015. "So far, we have only disbursed IDR 463 billion," said Sutanto, BNI's Director of Business Banking II.
In 2016, with a larger subsidy, the KUR interest rate is expected to be reduced to 9%. Meanwhile, the loan distribution target is set at IDR 100 trillion–IDR 120 trillion. According to Braman Setyo, Deputy for Business Development and Restructuring at the Ministry of Cooperatives and SMEs, if the average loan is IDR 25 million, next year's KUR could reach 4.8 million micro and small business players.
Additionally, under the government's fourth economic policy package, the scope of KUR has been expanded. Recipients now include MSMEs, former TKIs, as well as TKIs and their families. The business sectors eligible for KUR have also been increased to include agriculture, fisheries, trade, accommodation and food services, transportation, leasing, and education services.
The number of banks distributing KUR has also increased from three (BRI, Bank Mandiri, and BNI) to seven banks. Two additional banks come from the regional development bank (BPD) category: Bank NTT and Bank Kalbar. Two more are private banks: Bank Sinarmas and Bank Maybank Indonesia. More banks may be added in the future. "Bank Sinarmas and Bank Maybank have been appointed as KUR distributors for TKIs," said Bram.
Although the allocation for next year is still uncertain, Sutanto stated that BNI has already determined two distribution channels for KUR. For businesses that are feasible and bankable, KUR will be directly distributed by BNI. Meanwhile, for MSMEs that are feasible but not yet bankable, the financing model will follow a partnership and core-plasma concept.
The more aggressive KUR program aligns with the slowdown in commercial MSME loan disbursement by banks. As of August 2015, the total outstanding MSME loans stood at IDR 710.098 billion, growing only 9.47%. In comparison, during the same period in 2014, growth was 11.97%. This trend is consistent with the overall slowdown in credit distribution.
However, low-interest loans are not the only form of support that MSME players hope for. Entrepreneurs contacted by Tabloid KONTAN unanimously stated that the government has focused solely on loan interest rates. Commercial MSME lending banks have also been preoccupied with offering high-interest loans.
Meanwhile, the sustainability of businesses is often overlooked. "For commercial MSME and KUR loans, we are usually just borrowers. There is no guidance from the lenders," Yully revealed.
Without proper guidance, micro and small businesses generally struggle to grow. Product design development, workforce availability, and affordable raw materials remain major challenges for most MSME players. "If they just give out money without providing mentorship, it's pointless," Rajib said.
Braman Setyo confirmed that without proper assistance, micro and small businesses often end in failure. Therefore, the government has established 42 Integrated Business Service Centers (PLUT) specifically for MSMEs across Indonesia. Next year, eight more PLUTs will be added. However, the central government is only responsible for setting up the PLUT buildings and providing mentorship consultants. The management of these centers is left to local governments.
So, if you don’t want these loans to go bad, provide guidance!
(Source: Laporan Utama Mingguan Kontan No. 05-XIX, 2015, Kontan.co.id)