STRENGTHENING THE BANKING SECTOR CAPACITY FOR MSMEs FINANCING :

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STRENGTHENING THE BANKING SECTOR CAPACITY FOR
MSMEs FINANCING THE ROLE OF BANK INDONESIA as
THE CENTRAL BANK
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About Indonesia

• Indonesia is one of the world's biggest
  archipelagic country. Situated between two
  continents.i.e. Asia and Australia/Oceania , it
  has a total of 17.508 islands. This strategic
  location has a significant influence towards its
  Culture, Social conditions, Politics and Economy.

• Area 
• -  Total 1,919,440 (land) km² 
  735,355 sq mi  
• -  Water () 48,5
• Population 
• -  July 2007 234,693,997  
• -  2000 census 206,264,595  
• -  Density 134/km²  347/sq mi

• GDP (nominal)2007  
• -  Total 438.1 billion  
• -  Per capita 1,947.1 

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ROLES OF MSMEs IN THE ECONOMY
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Definitions of MSMEs

• Micro enterprise
• Annual turn over of IDR 100 million (USD 10,000)
• Net worth (excl. land n building) of max IDR 25
  million (USD 2500)
• Max. employees of 5 persons
• Small enterprise
• Max. annual sales of IDR 1 billion (USD 100,000)
• Max. net assets of IDR 200 million (USD 20,000)
• Medium enterprise
• Annual sales range between IDR 1 billion
  (USD100,000) up to IDR 50 billion (USD 5,000,000)
• Net assets range between IDR 200 million (USD
  20,000) up to IDR10 billion (USD 1,000,000).

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Number and Credit Outstanding of MSMEs
MSMEs Credit Outstanding (2004-March 2008)
Number of SME
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Financial Accessibility Problem for MSMEs

• Financial Institution
• Feasible
• Bankable

• Regulator
• BI
• Insentive to Financial Institution
• Technical Assistance to MSMEs

Only 33,8 MSMEs are Banks debtor

• MSMEs
• Feasible
• Not Bankable

) Not bankable MSMEs dont have sufficient
collateral, limited access to market information,
bookkeeping and limited formal legal status
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BIs Approach to MSMEs
1999
Before 1999
After 1999
Central Bank Act 1968 Direct Indirect Policy
in Financing MSMEs
Central Bank Act 1999 Indirect Policy in
Financing MSMEs

• Based BIs act No. 13 year 1968, The objective of
  Bank Indonesia is to achieve and maintain the
  stability of the Rupiah and to improve
  sustainable growth of production and economic
  development along with increasing of job
  opportunity that leads to raise the peoples
  welfare
• ? Providing liquidity credits (financial
  assistance) and technical assistance to MSMEs
  through the banks

• Based BIs act No. 23 year 1999, The Objective of
  bank Indonesia is to achieve and maintain the
  stability of the Rupiah

• Only provides technical assistance

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BIs Policy in Financing MSMEs as a
regulator/Supervisor
Before 1999

• Subsidized Credit Program
• Priority sectors (MSMEs, plantation, and housing
  for low income people)
• Lower interest rate and long-term funding
• Funded by Govt. budget and BI
• About 20 schemes of credit programs had been
  introduced

• Banks Regulation
• Quota on lending to micro and small enterprise
• Lending to MSMEs was required to be min. 20 of
  net credit expansion

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BIs Policy in Financing MSMEs as a
regulator/Supervisor
(Cont.)

• Technical Assistance
• Micro Credit Project
• The Self-Help Group Linkages to Banks
• To link group of micro entrepreneurs to banks

• Institutional Development
• Promoting the establishment of rural banks
• Promoting the syariah based banking operation

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BIs Policy in Financing MSMEs as a
regulator/Supervisor
(Cont.)

• 1. Regulation on MSMEs credit
• Advised banks to allocate part of its lending to
  MSMEs
• Advised banks to submit business plan to BI and
  publish the quarterly report on realization of
  the business plan.
• 2. Easing Banking regulation within the
  prudential banking framework
• Credit performance of loan up to IDR 500 million
  (USD 50.000) is based only on prompt repayment of
  principal and/or interest.
• Riskweighted Assets for Small Business Loan is
  calculated of 85
• The Risk-weighted Assets is calculated of 50
  for credit which guaranteed by governments
  guarantee firms.

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BIs Policy in Financing MSMEs as a Mediator

• Technical Assistance
• Training for bank officers and Business
  Development Services Provider (BDSP)
• Researches to support policy formulation
• Building an SMEs Development Information System
  (SIPUK)
• Training with certification (CERTIF) for
  candidate of directors and directors BPR/BPRS
• Training on productive sector financing for Rural
  Bank officer

• 2. Linkage Program
• To enhance bank loan to MSMEs via Rural Banks and
  other MFIs
• As of June 2007, 28 financial institution (27
  commercial banks and PT PNM) has linkaged to
  1,156 Rural Banks with total outstanding loan
  amounted Rp2,026 billions (USD 202,6 million)

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BIs Policy in Financing MSMEs as a Mediator
(Cont.)

• Promoting the Role of Credit Guarantee
• BI acts as a facilitator
• To encourage cooperation between credit guarantee
  agency and banks
• To encourage cooperation between regional
  government and credit guarantee agency
• Prerequisite Approval from Regional Parliament
  to place fund in the regional credit guarantee
  agency
• BI as a counterpart of the Government in
  regulated the Credit Guarantee Policy
• BI also acts as a facilitator between the Banking
  Industry and Government in implementing
  Government Program so called Credit for People
  (Kredit Usaha Rakyat KUR)
• The purpose of this program is to enable MSMEs
  without sufficient collateral to get loan IDR 500
  million (USD 50,000). The insufficiency of
  collateral was thus covered by credit guarantee,
  of which the guarantee premium is paid by the
  government

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BIs Policy in Financing MSMEs as a Mediator
(Cont.)

• 4. Facilitating dialogue between banking
  sector, MSMEs sector and government agencies
• In form of bazaar of banking intermediary
• Held by BI branches

• 5. Promoting the establishment of MSME center
• Special unit extending services to MSMEs in
  commercial bank
• Information center for MSMEs clients

• 6. Extending the facilities of Credit Bureau
• Center of data base of all bank borrowers

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BIs Policy in Financing MSMEs as a Mediator
(Cont.)

• 7. Supporting the Establishment of Promoting
  Enterprises Access to Credit (PEAC) units.
• Special unit extending services to BDS Provider
• To improve the quality of BDS Provider services
  and productivity in making MSMEs bankable

• Facilitating the establishment of APEX
  Institutions for Rural Banks (BPR/BPRS)
• - Functioning as a pooling of fund
  from the Rural Bank
• member
• - Providing both financial and
  technical assistance

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MSMEs Credit Outstanding by Type of Utilization
(2004-March 2008)
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MSMEs Credit Outstanding by Economics Sectors
(March 2008)
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Non Performing Loans of MSMEs Credit
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Disbursement Vs Business Plan of MSMEs Credit
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THANK YOU