The belief that small and medium scale enterprises can contribute significantly to the economic growth of local Indonesian communities as well as the Indonesia economy as a whole is not a new phenomenon or policy initiative. However, the ability of small and medium scale enterprises to contribute is heavily reliant on access to funding and capital. The State Minister of Cooperatives and Small and Medium Scale Enterprise has issued Regulation No. 03/Per/M.KUKM/III/2009 to set out the guidelines that constitute the Linkage Program between conventional banks and cooperatives.
The linkage program is between conventional banks and cooperatives. The cooperatives are those that are engaged in lending. Specifically, the regulation defines the linkage program as a cooperation program between banks, including banks that are members of a Community Credit Enterprise (Kredit Usaha Rakyat / KUR), and cooperatives to enhance the financial access to UMK. Cooperative for the purpose of the Regulation consists of Savings and Loans Cooperatives (Koperasi Simpan Pinjam/ KSP) and Savings and Loans Units (Unit Simpan Pinjam / USP), or Syariah Financial Services Cooperatives (Koperasi Jasa Keuangan Syariah / KJKS) and Syariah Financial Services Units (UnitJasa Keuangan Syariah / UJKS).
The guidelines are an attachment to the regulation and consist of 14 Chapters. The Introduction provides the rationale and background on the needs for the guidelines. The introduction also defines all of the key terms. Chapter II stipulates the basic criteria for a cooperative before it can become involved in the linkage program. These basic criteria include, among others, the following for conventional banks:
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The cooperative has been incorporated for at least two years;
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The cooperative has been sound for two consecutive years;
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Cooperatives with outstanding loans of more than IDR 1 billion must be audited;
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Non-performing loans must not exceed 5%; and
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The cooperative must have at least 100 members.
For Syariah based cooperatives these criteria include the use of Syariah-based contracts.
The regulation sets out three basic models for the linkage program, namely: (i) executing—the banks give directly to members of the cooperative; (ii) channeling—the banks give to members of cooperative via the cooperative acting as agent, and; (iii) joint financing—it is given to members of the cooperative by both the bank and cooperative. Each of these is then further enumerated for both conventional and Syariah-based cooperatives.
The guidelines include separate Codes of Ethics for both conventional and Syariah-based cooperatives.
In addition, the guidelines provide for consultants to assist cooperatives in the process of compiling proposals for credit and funding. The services of consultants can also be used in order to manage finances.
The Regulation has been in force since 13 March 2009.
The belief that small and medium scale enterprises can contribute significantly to the economic growth of local Indonesian communities as well as the Indonesia economy as a whole is not a new phenomenon or policy initiative. However, the ability of small and medium scale enterprises to contribute is heavily reliant on access to funding and capital. The State Minister of Cooperatives and Small and Medium Scale Enterprise has issued Regulation No. 03/Per/M.KUKM/III/2009 to set out the guidelines that constitute the Linkage Program between conventional banks and cooperatives.
The linkage program is between conventional banks and cooperatives. The cooperatives are those that are engaged in lending. Specifically, the regulation defines the linkage program as a cooperation program between banks, including banks that are members of a Community Credit Enterprise (Kredit Usaha Rakyat / KUR), and cooperatives to enhance the financial access to UMK. Cooperative for the purpose of the Regulation consists of Savings and Loans Cooperatives (Koperasi Simpan Pinjam/ KSP) and Savings and Loans Units (Unit Simpan Pinjam / USP), or Syariah Financial Services Cooperatives (Koperasi Jasa Keuangan Syariah / KJKS) and Syariah Financial Services Units (UnitJasa Keuangan Syariah / UJKS).
The guidelines are an attachment to the regulation and consist of 14 Chapters. The Introduction provides the rationale and background on the needs for the guidelines. The introduction also defines all of the key terms. Chapter II stipulates the basic criteria for a cooperative before it can become involved in the linkage program. These basic criteria include, among others, the following for conventional banks:
-
The cooperative has been incorporated for at least two years;
-
The cooperative has been sound for two consecutive years;
-
Cooperatives with outstanding loans of more than IDR 1 billion must be audited;
-
Non-performing loans must not exceed 5%; and
-
The cooperative must have at least 100 members.
For Syariah based cooperatives these criteria include the use of Syariah-based contracts.
The regulation sets out three basic models for the linkage program, namely: (i) executing—the banks give directly to members of the cooperative; (ii) channeling—the banks give to members of cooperative via the cooperative acting as agent, and; (iii) joint financing—it is given to members of the cooperative by both the bank and cooperative. Each of these is then further enumerated for both conventional and Syariah-based cooperatives.
The guidelines include separate Codes of Ethics for both conventional and Syariah-based cooperatives.
In addition, the guidelines provide for consultants to assist cooperatives in the process of compiling proposals for credit and funding. The services of consultants can also be used in order to manage finances.
The Regulation has been in force since 13 March 2009.
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