IFC Provides $77 Million to Support Small and Medium Entrepreneurs in Indonesia

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JAKARTA, presidentpost.com – IFC (International Finance Corporation), a member of the World Bank Group, today announced a $77 million senior loan facility to PT.Indosurya Inti Finance (Indosurya), a local multifinance company. The IFC-led financing package aims to bolsterthe country’s small and medium enterprises (SMEs), which serves as the engine of job creation and economic growth.

With financial institutions focusing on the largest and the smallest businesses, Indonesia facesadilemma of the ‘missing middle.’ Around 700,000 SMEs in the country are often neglected, despite contributing an estimated 22 percent to Indonesia’s GDP. Also, SMEs and microenterprisesjointly employ over 89 percent of the nation’s workforce.

IFC’s funding commitment — along with advisory assistance —is part of its broader effortsto foster private sectorfinance tothe underserved and help drive investments in Indonesia’s SME sector. This will help Indosuryato increase its lending for SMEs across the islands of Java, Bali and Sumatra, while adopting best practices in risk management.

“Financial inclusion is vital to economic growth. IFC pays particular attention to the strong business case being made for investing in SMEs, as it increases employment and drives growth in Indonesia,” said Azam Khan, IFC Country Manager for Indonesia, Malaysia and Timor-Leste.“Indosurya’s commitment to banking SMEsis expected to set a high benchmark for other financial institutions in Indonesia and we look forward to a long and mutually beneficial relationship.”

According to a study commissioned by IFC in 2016, an estimated54 percent of SMEs was keen for a bank loan, and the potential demand for credit from Indonesia’s SME market stood at a substantial $11 billion. It is,therefore,imperative that Indonesia cultivates a sustainable non-banking financial institutions sector, whichcaters better to smaller sized customers and providestargeted financing efficiently.

The financing package comprises $20 million from IFC’s own account and another $57 million that IFC helped mobilize from seven other lenders. This includes two development finance organizations — Oesterreichische Entwicklungsbank AG (OeEB) and Swiss Investment Fund for Emerging Markets (SIFEM), four impact investors— responsAbility SICAV (Lux), BlueOrchard Finance, MicroVest Short Duration Fund, LP and Oikocredit Ecumenical Development Cooperative Society U.A. — and one commercial bank,AfrAsia Bank Limited.

Henry Surya, CEO of Indosurya Inti Finance, said, “We are delighted with the commencement of our strategic partnership with IFC and all respective lenders. As amultifinance company that focuses on the SME sector, we envision this cooperation as a long-term relationship, where IFC can bring in global standards and experiences, extensive networks, best practices, and wide-ranging knowledge, through its programs around the world.”

The World Bank Group has taken on an ambitious goal of universal financial inclusion by 2020. IFC is providing investments and advisory services to financial intermediaries catering to small businesses, and promotes the use of credit bureaus and collateral registries, as well as financial technology. Present in Indonesia since 1968, IFC has financed and mobilized over $7.7 billion for private sector projects over the past 49 years.

Indosurya, part of the Indosurya Group of companies,began operations in 2011, and provides multipurpose, working capital and investment financing. The privately-owned company now serves close to 2,000 clients, and provides credit to SMEs through 70 branch offices, with point of sales spread across Java, Bali and Sumatra.

IFC, a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY17, we delivered a record $19.3 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. (TPP)