Government’s RolesGovernment’s Rolesin SMEin SME Credit GuaranteeCredit Guarantee SystemSystemin SME in SME Credit GuaranteeCredit Guarantee System System

Prepared for APEC Workshop in Hangzhou, ChinaJune 16-18, 2010

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INDONESIAINDONESIA

• Total area : 1,910,931.32 km2

• Population (2009) : 231,370,000 people (no. 4)• GDP (2009) : Rp 5.613 Trillions

(USD561 billion)• GDP Growth (2009) : 4.55%• Inflation rate (yoy – Mar 2010) : 3.43%• Number of MSME : 51.26 millions• Number of banks : 122 commercial banks• Number of banks : 122 commercial banks

1.760 rural banks Data source: Statistics Indonesia, 2009 & BPS Statistics, 2009

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MSMEs IN INDONESIAMSMEs IN INDONESIA

• Net assets: more than IDR10 billion (USD1 million), or

• Number of entity: ±4,372 unit or 0,01%• Share to : ( ),

• Annual sales: more than IDR50 billion (USD 5 million)

- total employment : 2,96%- GDP: 44,44%- non oil export: 79.83%- total Investment : 47,11%

• Net assets: more than IDR500 million (USD50.000) up to IDR10 billion (USD1 million), or

• Annual sales: more than IDR2,5 billion (USD250.000) up to IDR50 billion (USD5

• Number of entity: ± 39,657 unit or 0,08%• Share to :

- total employment: 3,48%- GDP: 13,43%- non oil export : 13,10%( ) p (

million)

• Net assets: more than IDR50 million (USD5.000) up to IDR500 million (USD50.000), or

• Annual sales: more than IDR300 million

p ,- total Investment : 23,81%

• Number of entity: ± 520.221 unit or 1,01%• Share to :

- total employment : 4,26%GDP 10 08%• Annual sales: more than IDR300 million

(USD30.000) up to IDR2,5 billion (USD250.000)

• Max net worth (excl. land & building) : IDR

- GDP: 10,08%- non oil export : 4,85%- total Investment : 20,69%

• Number of entity : ± 50,697,659 unit or98,90%Max net worth (excl. land & building) : IDR

50 million (USD 5,000)• Max. annual sales : IDR 300 million (USD

30,000)

, %• Share to :

- total employment : 89,30%- GDP : 32,05%- non oil export : 2,22%- total Investment : 8,39%

Data source: Statistics Indonesia, 2009 (data as of 2008)MSME definition refers to MSME Act No. 20/2008

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FINANCIAL SERVICE PROVIDERS OF FINANCIAL SERVICE PROVIDERS OF MSMEsMSMEs

S i dSaving and Loan

Cooperative

PawnshopMulti finance/

Leasing Company

Rural Bank

Non Bank/CooperativeM

icrofinanceInstitution

(BMT/LDKP/LPD/B Non

SMEs

(BMT/LDKP/LPD/BKK/LPK)

BankBank

SMEs(incl. micro enterprises)51.26 millions b i it*

Commercial Bank Money Lender

business unit*

*) Statistics Indonesia, 2009 (data as of 2008)

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INDONESIAN BANKING SECTOR OVERVIEWINDONESIAN BANKING SECTOR OVERVIEW

BANKING SECTOR

COMMERCIAL BANK RURAL BANK

COMMERCIAL BANK (CONV.)

SHARIA COMMERCIAL BANK

RURAL BANK (CONV.)

SHARIA RURAL BANK

Number of Banks (as of March 2010)2010) :No. Category Total Banks Total Offices

1 Commercial Banks (conventional) 121 12.933

2 Rural Banks (conventional) 1.718 3.718

3 Sharia Commercial Banks :3 Sharia Commercial Banks :- Sharia Commercial Banks- Sharia Business Unit of Commercial Banks

825

934299

4 Sharia Rural Banks 143 266

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Grand Total 2.015 17.903

PROBLEMS OF MSMEsPROBLEMS OF MSMEs

In real sector Limited Financial access due to :

Market (export &Limited information on banks product & Market (export &

domestic)p

services

Limited information

Infrastructure

Limited information on potential SMEs

Li it d bilitiast uctu e

(road, power)Limited capabilities of SME in meeting bank requirement

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WHY DO WE NEEDWHY DO WE NEED CREDIT GUARANTEECREDIT GUARANTEE ??

Problems of MSMEs:1. Lack of formal business licenses

’

A. MSMENot Bankable but F ibl 2. Non- compliance to bank’s requirements or

procedure3. High interest rate

Feasible

4. Collateral:Do not have any collateralDo not have enough collateral

Solved by dit Do not have enough collateral

Have collateral but no formal license (forinstance: the land certificate)

credit guarantee program

B. BANK Risk mitigation

C. Regulator and Promoting banking intermediation function and

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Government supporting economic activities

REGULATION ON REGULATION ON ESTABLISHMENT OF CREDIT ESTABLISHMENT OF CREDIT GUARANTEE CORPORATIONGUARANTEE CORPORATIONGUARANTEE CORPORATION GUARANTEE CORPORATION

(CGC)(CGC)( )( )Presidential Intruction (Inpres) No. 6/2007 of Real Sector and MSMEs Development Policy on June 2007Sector and MSMEs Development Policy on June 2007 which mention the task to strengthen credit guarantee system for MSMEs

P id ti l R l ti (P ) N 2/2008 fPresidential Regulation (Perpres) No. 2/2008 of Guarantee Corporations

Regulation of MOF No. 222/PMK.010/2008 of Credit Guarantee Company and Credit Re‐guarantee Company.

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SME CREDIT GUARANTEE SYSTEM IN INDONESIA

SME CREDIT GUARANTEE SYSTEM IN INDONESIAIN INDONESIAIN INDONESIA

National l l

JamkrindoAskrindolevel

technical assistance

Provincial regional credit guarantee Provincial level corporation (CGC)

such as : Jamkrida Jatim

Anke Green, 2003 : ,Guarantees extended by department of Ministry of SME or of Industry has a number of drawbacks i.e:a.Lack of transparency with respect to the finances needed to sustain the scheme.b.Public officials might be unmotivated and inexperienced in working with small firms and with guarantee schemes.c.The bureaucratic procedures inherent in goverment set‐ups will increase the unwillingness of banks to participate.

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Establishment of Regional CGCEstablishment of Regional CGC

Approval to invest

Others

RegionalParlianment

Regional Government

Approval to invest

Others

Banks

Initial capitalSupervision

Regional CGCASKRINDO

Technical Assistance

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Roles of Stakeholders in the establishment of the Regional CGC

Central Government1. As a regulator for regional government budgetting2 A l t t t bli h t i bl dit t i tit ti2. As a regulator to establish sustainable credit guarantee institution3. As a regulator to support the operational of credit guarantee institution4. As a facilitator to pomote the human resource capacity building

Regional GovernmentRegional Government1. To build the supporting financial infrastructure2. To provide initial investment for the establishment of CGC3. To provide partial subsidy of the premium fee, especially for micro enterprises4 T f ilit t d ti f MSME i i dit4. To favilitate education for MSMEs in managing credit

Regional Parliament1. To grant approval for the establishment of the CGC2 To grant approval to the regional government for investment in the CGC

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2. To grant approval to the regional government for investment in the CGC

13Roles of Stakeholders

Bank Indonesia1 To facilitate the communication among stakeholders1. To facilitate the communication among stakeholders2. To issue regulation in providing incentive to bank to utilise CGC3. To motivate banks to use credit guarantee services4. To facilitate technical assistance for capacity building of CGC people

Insurance institutions (PT. ASKRINDO, PT. JAMKRINDO, other insurance institutions)

1. To provide technical assistance to CGC2. To provide reguarantee services3. To provide investment in CGC

Banks1. As a potential investor in CGC2. As the customers of CGC

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2. As the customers of CGC

End of PresentationEnd of PresentationThank You

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