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With the country's more than 200 financing firms mostly
focused on the consumer sector, the government should look for ways of
encouraging them to lend to the real sector, especially SMEs, based
upon leasing arrangements, an executive of a financing firm says.
By helping financing firms provide leasing facilities to SMEs, the
government would be able to kill two birds with the one stone --
improving SMEs' access to financing and helping revive the still
sluggish real sector, according to Doddy Virgianto, the president
director of BNI Multifinance.
"We have some 200 financing companies. Only a fraction of these lend to
SMEs. Meanwhile, we have a huge number of SMEs, some 43 million of
them, according to Industry Ministry figures.
"But only 13 percent of them are bankable, that is, they are capable of
satisfying the criteria for obtaining bank loans, such as having
collateral to pledge. Now, with leasing, we would not need collateral
as the assets we finance would themselves serve as the collateral,"
Doddy told The Jakarta Post in a recent interview.
At present, according to Doddy, of the 13 percent of bankable SMEs,
numbering around 5.6 million, only 0.4 percent of them were able to
avail of leasing facilities.
Indonesia has seen the number of financing firms grow rapidly in recent
years, although most of them focus on consumer lending. This market is
currently booming on the back of demand for such consumer goods as cars
and motorcycles against a backdrop of declining interest rates.
In the first quarter of the year, the total value of outstanding
consumer loans from both financing firms and banks amounted to a
staggering Rp 231 trillion.
On the other hand, corporate and investment loans -- which indicate the
level of activity in the real sector -- lagged behind at Rp 154
trillion.
According to Doddy, this meant there was plenty of room for growth in
SME leasing.
"However, we will need the government's support to make this work, such
as a relaxing of the regulations. We've been having discussions about
this and hopefully they can come up with some sort of support for us,
such as tax breaks."
"If that's not possible, the government should help us identify funding
sources, be they domestic or overseas institutions, that could provide
cheap and flexible funds for channeling to the SME sector," Doddy said.
Finding funding sources, other than from the banks, is the main
challenge facing financing firms in their efforts to increase leasing
to the SME sector, with most firms currently securing funding from the
banks, which means their loans have to be based on the tough lending
requirements imposed by the banks.
Doddy said that BNI Multifinance had initiated discussions with a
number of institutions, including overseas ones, to try to seek
additional funding sources.
"They are mostly enthusiastic about this concept. But no commitments as
yet. We'll wait and see," Doddy said, saying he could not give any
names as the discussions were still ongoing.
BNI Multifinance entered the SME sector last year and currently SMEs
account for about 10 percent of its loan portfolio of some Rp 600
billion.
"We expect SMEs to become the backbone of our business, and are ready
to increase SME lending to up to 60 percent in the next two to three
years. The percentage could be much higher if we secure additional
funding sources.".
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