Restructuring MSMEs for Better Credit Access

Jakarta, Aug 4. Micro, Small and Medium-scale Enterprises (MSMEs) face financial restrictions that impede their business expansion. Lack of financing access for MSMEs stipulate impediments for them to grow. The main issue is about collateral treatment issue that does not imposed on big businesses – many of whom have the same propensity to default. The structure of MSMEs that is considered as ‘not-scalable’ that makes them less attractive to financial institutions.

Keynote speaker Tanri Abeng, President Commissioner of PT Pertamina, Indonesia’s state-owned oil and gas company, offers so-called ‘People’s Owned Enterprises’ or Badan Usaha Milik Rakyat (BUMRA) as a solution for both financing and empowering Micro- Small- and Medium-Enterprises (MSMEs).  According to Abeng, BUMRA is set up as a corporatization of cooperatives and MSMEs and has been professionally-managed as scalable enterprises. With a market-driven approach, these BUMRAs will gain access to markets, obtain cost-effective from production to distribution, and will attract for funding.

Dr. Adnan Chilwan, UAE-based Dubai Islamic Bank CEO, supported Mr. Abeng’s BUMRA concept, which basically creates an ecosystem to institutionalize MSMEs. Chilwan underlined how BUMRA will still require government support. As banks will seek for government-back guarantees before lending money to BUMRA-like institutions.

Thione Niang, Co-Founder and President of US-based Solektra International, emphasized that young people going into business should have a defined idea and should be passionate about this business concept. According to him, such passion will encourage young people to do everything they can to make their business idea work. In the funding issue, Niang pointed out how the internet has provided non-traditional funding sources, such as the currently-popular Crowd Funding and other techniques of gathering financial support through campaigns.

Sharing his experience in growing MSMEs, Peniel Uliwa, Managing Partner at Tanzania-based SME Impact Fund, offers the concept of ‘impact Financing’ through which a funding agency not only provides financing and access to specific credit but also business assistance services. Under the concept of Impact Financing, the funding agency focuses on specific type of MSMEs, i.e. the agricultural sector.