Indonesia needs rating agency for small credits

Indonesia needs rating agency for small credits

A small scale industry. (ANTARA FOTO/Yulius Satria Wijaya/nz.)

Solo, C Java (ANTARA News) - Indonesia, which has tens of millions of units of small business, needs to have a credit rating agency specially for micro, small and medium enterprises.

Small business observer Sugiarso said here on Wednesday, the credit rating agency would be useful for the banking industry and small enterprises.

"If the agency functions effectively, it could cut a lot of costs, both for the credit providers and the micro and small businesses," Sugiarso said.

The number of micro and small enterprises in Indonesia are estimated to exceed 50 million units. They have become the backbone saving the national economy amid limited availability of jobs in the formal sector, he said.

He said so far there has been no database for the feasibility of micro and small enterprises to serve as a reference for banks or credit providers in extending credits to the small enterprises.

Therefore, every credit proposal by micro and small enterprises would need analysis of the their feasibility that would cost a lot. As a result, the cost of credit procurement would be high.

Banks could work faster and more efficiently in deciding whether to approve or not the credit proposals if they have the data base.

The idea of establishing credit rating agency is already initiated and tried in the past several years, but could not be implemented in large scale on a number of factors.

Sugiarso said he had once carried out comparative study in South Korea, which already has credit rating agency in operation.

"In South Korea, credit rating agency has been operational effectively as the Korean community has high level of compliance with regulations. Here, it is difficult even to ask the people to have tax registration number (NPWP)," he said.

He said despite the difficulty Indonesia will in time begin to see the need for credit rating agency.

Therefore, the policy already once implemented by the government should be realized soon," he said.

Reporting by Achmad Zaenal, A Saragih
Editing by Eliswan Azly