Abstract
The health and performance of the small and medium enterprise (SME) sector is crucial to regional and national economies of most developed countries (Jones, Macpherson and Thorpe, 2010; Thorpe, Cope, Ram and Pedler, 2009). The Global Entrepreneurship Monitor shows that in low income countries necessity entrepreneurship is larger compared to larger income countries (Manuel and Romero, 2006). In addition, small firms represent the largest majority of the population of firms in developing countries (Moro and Kodwani, 2010). In recognition of this, banks in Indonesia have been supported through government policy to provide Corporate Social Responsibility (CSR) and program (KUR) for SMEs, aimed at developing source of funds that will support small business growth (Ian, Eleanor, Sarah, 2010).
In this research I had explore the relationship between loan and collateral policy with national development by examining a program delivered by bank for growth-oriented small business owners. I concern with addressing the overarching questions: what is the impact of KUR and SME engagement on entrepreneurship? And how does KUR engagement impact on a national economy? Why some small business owners failed to get a loan from the bank? Is there any possibility to make a new loan and collateral policy for SMEs? To deal with these questions a qualitative approach to the research had examine the situations of SME owner/managers (Ian, Eleanor, and Sarah, 2010), in a balance sector, structure and business.
To create this research, the data was collected during the period 2006-2009. Evidence shows that collateral in loan requirement delivered a lack to SMEs and national development in developed countries, because loan is one of the most important things to support the growth and the development of the business.
Keywords: Loan, interest rate, collateral, KUR, social entrepreneur
1.Introduction
In this research I explore the relationship between KUR policy and National development. More specifically, I examine a program delivered by bank for growth-oriented small business owners, which has a lack in collateral and its impact on the national economy. This interaction between bank and small business was funded by government, driven by Indonesian policies.
The impact of failure on the individual entrepreneur has been of minimal interest to most theorists (Gladstone and Lee, p. 27, 1995). Else, further research should be dedicated to the subject of failure (Cope, Cave and Eccles, 2004). Therefore, by trying to answer what is the impact of KUR engagement on entrepreneurship? And how does KUR engagement impact on a national economy? Why some small business owners still failed to get a loan from the bank? And is there any possibility to make a new loan and collateral policy for SMEs?I will contribute to the effort aimed at understanding the process which determines the survival of small firms, types of failureand I also attempt to reduce the gap in the study of the forces which influence the failure and survival of entrepreneur.
Why is the entire question relevant? It is relevant because loan is the most important thing in SMEs growth, and it also provides two conflicting hypotheses as answers (Manuel, 2006).On one hand, we can argue that the small firm owners will make non performing loan if they received loan, so the bank need collateral to prevent it. On the other hands, we can argue that small firm owners will not make non performing loan if they received loan, but they don’t have any collateral to prove it.
2.The impact and the lack of KUR (Kredit Usaha Rakyat)
The health and performance of the small and medium enterprise (SME) sector is crucial to regional and national economies of most developed countries (Jones, Macpherson and Thorpe, 2010; Thorpe, Cope, Ram and Pedler, 2009). In addition, small firms represent the largest majority of the population of firms in developing countries (Moro and Kodwani, 2010). Often seen as “tiny acorns” from which large oak trees can grow (Thorpe et al., 2009: 201), the view the view of government throughout the developed world is that this sector should be supported and encourage (Ian, Eleanor, Sarah, 2010).In order to achieve this, a number of government schemes and policies have been introduced in Indonesia to develop interaction between bank and SMEs. Alike the United Kingdom (UK) released HEIs to train SMEs, the government in Indonesia released KUR (kredit usaha rakyat) policy to develop source of fund for SMEs from the bank.
Unfortunately, there is a lack between social entrepreneurs, advisers, policy makers and others – including researchers (Carole-Howorth, 2007). For example, I never got a loan from 5 National Bank if used “the normal process or business as usual”, even though I could pay the cost of fund and had the entire bank requirement such as, 2 years legal business license, financial statement with positive cash flow, and 30% of collateral in deposit as stated on the government policy. I know the bank had positive motive that collateral could reduce the non performing loan possibilities. Others, if I pay at least 70$ same as the government regulation, I have to spend more than 3 months to get a small business enterprise license, but if I pay 250$ or more the license lead time is one month or less, although not all of the government employees did it but it also make entrepreneur could not get the loan from the bank, because the bank would always request it. Both of examples had made my business and other entrepreneur grow slowly.
2.1The driver of KUR (Kredit Usaha Rakyat)
KUR was released to minimize the negative effect from the unemployed people explosion, with supporting health and performance of the small and medium enterprise (SME).The banking system is essential for the life of firms and especially for small and medium enterprises as they do not have access to capital markets (Moro and Kodwani, 2010).
2.1.1Low opportunity in labor market
When the labour market is depressed, such as a period of high unemployment, we would expect the rates of entrepreneurship to be higher, as individuals would be pushed into this level activity due to the lack of proper income from paid-employment (Manuel and Romero, 2006).
The Global Entrepreneurship Monitor shows that in low income countries necessity entrepreneurship is larger compared to larger income countries (Manuel and Romero, 2006). According to Acs et. Al. 2004 “this is because people in richer countries tend to have access to more diversified labour market…”therefore suggesting that individuals in poor countries face few or low quality labour market option which forces them to try self-employed out of necessity. In Indonesia, more than millions unemployed people are undergraduate students, while the rest of it is senior high school or lower.
Picture 1. 120.000 candidates with GPA 2.72 for 500 opportunities in Indonesian National Television, 2006 (Dhani, 2006)
2.1.2Highly interest rate
The crisis in 2008, force the bank to raise its loan interest rate to reduce the loan volume and transaction, working capital and investment loan proportion. In Indonesia, the working capital and investment loan proportion are taking only 20% of total loan, while the consumer loan takes the rest of it (80%) with interest rate start from 16 % up to 300% in a year andrequire collateral.
Table 1. Consumer Loan Type and Interest Rate (Edited from many sources, Dhani, 2010)
Institution
Type of Loan
Interest Rate
Access
Easy
Medium
Hard
RENTENIR / KOPERASI
KTA
250
-
300
✔
BANK or
BPR
LEASING
45-50
✔
✔
CREDIT CARD
35-45
✔
KTA
30-33
✔
CONSUMER
20-24
✔
PERSONAL
24-33
✔
KPR
15-20
✔
✔
PEGADAIAN
PERSONAL
36-38
✔
✔
Note: Usually, BPR have interest rate up 2 – 5 % from National Bank.
Table 2. Micro Financing / Loan for SME (Edited from many sources, Dhani, 2010)
Institution
Type of Loan
LIMIT
Interest Rate
Access
Collateral
Easy
Medium
Hard
BANK or
CSR BUMN
PUKK,
PKBL
< Rp. 5.000.000
6-9%
✔
5 < x < Rp 20.000.0000
✔
✔
20 < x < Rp 75.000.0000
✔
✔
2.2The lack and the evidence of KUR (Kredit Usaha Rakyat)
2.2.1Lack of information from the university
Criticism that probably stems from the fact that such schools were established to serve the needs of large organizations, but since 1990s as structure have changed, entrepreneurship has appeared in curriculum (Pittway and Cope, 2007; Gibb, 2009). Unfortunately, it still happens in Indonesia and the fact is the external factors like public policy, bureaucracy, loan and collateral system has never been appeared in curriculum. Others, most of university, business school or school of business and economic, does not have any Small Medium Enterprise incubator or pilot project, whether it gives overall business knowledge for its undergraduate and graduate students.
For example, in my previous study, I have never got an education to make business license like SKDU, SIUP, NPWP and TDP, and it had made my business grow slowly because I have to spend 1 year to make the business license and wait 2 more years before I can get loan from the bank. This is also had made a lack in entrepreneurship development, because if I or other graduate student have a low passion in entrepreneurship, then I or they will change their career to be an employee.
2.2.2Lack of Bureaucracy
In my previous business experience, I had a fact that Indonesian bureaucracy is very corrupt and make negative contribution to the entrepreneur development (see table 1).
Table 3. Business License Process (Edited from many sources, Dhani, 2010)
Legal Letter
Dept in Charge / Authority
Period of Complement
The Source of lack /
The Barrier
The Cost (x 1.000)
Policy
Fact
Policy
Fact
Akta Notaris
Notaris
Max 7 Days
1 – 2 Month
·University Curriculum
·Less requirement Information
·No standard.
·Rp 500 – Rp 1.000
·No standard.
·>Rp 1.000 – Rp 2.500
SKDU
RT = 1 Days,
RW = 1 Days,
Kelurahan = No Guarantee.
Max 7 Days
1 - 2 Month
·University Curriculum
·Less Requirement Information
·Too many Requirement(KTP, Surat Pengantar, PBB copy, KK)
·Disputed information.
·Time and Money Corruption in “Kelurahan”
·Local Government
·Minister = Rp.0
·Rp. 75 – Rp. 300.
NPWP
Tax Dept / Pajak
2 Days
2 – 7 Day’s
·University Curriculum
·Disputed information
Minister = Rp.0
Rp 0.
Law
Law Dept.
1 Days
1 Days
·University Curriculum
·Disputed information
·Local Government
·Minister = Rp.0
·No Standards
·Rp 75-100
SIUP
Industrial Dept or One Single Window
3 Days
1 Years
·University Curriculum
·Less Requirement Information
·Too many Requirement(KTP, Registered Akta, PBB copy, KK)
·Disputed information.
·Time and Money Corruption in “Industrial Dept.”
·Local Government = Rp. 0 – Rp 25
·Minister = Rp.0
·No Standards
·Rp 600
TDP
Industrial Dept or One Single Window
3 Days
1 Years
·University Curriculum
·Less Requirement Information
·Too many requirement(KTP, Registered Akta, PBB copy, KK)
·Disputed information.
·Time and Money Corruption in “Industrial Dept.”
·Local Government = Rp. 0 – Rp 25
·Minister = Rp.0
·No Standards
·Rp 600
2.2.3Lack of collateral and low independent employee
I have evidence that most of incumbent and prospective SMEs don’t have enough collateral. They also did not have license or legal letter, and bank account or journal to indicate their cash flow, so they could not get loan from the capital market or the bank, while the banking system or loan is essential for the life of firms and especially for small and medium enterprises as they do not have access to capital markets (Moro and Kodwani, 2010). I
In most undergraduate student cases, which choose their career as an entrepreneur, have to fight with bureaucracy for one year if they want to get business license from government, while running their business. They also have to maintain and sustain their business for 2 years more, if they want to proposed loan to the bank. Else, most of them also have a low knowledge and interest about the financial management, so they usually don’t have any bank account number or journal to indicate their business financial statement. But, from the entire requirement, collateral is the hardest requirement from the bankers, because it is almost impossible for them to buy fixed asset such as land or house or car, in the first three year age of their business.
Others, many people who choose their career as an employee, also have a hard way to change their career when their age is more than 30 years old. Table 4 shows that, even after work for 12 years, the unskilled labor have an account is less than Rp 4.000.000,-, unless they have a good financial management and not consumptives. It also shown, that their psychological effect, to work independent or being a self employed people or entrepreneur decrease significantly, and had a positive correlation with bargaining power to their employer.
In most case, event they have the entire requirement to get the loan from the bank (Mandiri, BNI, BRI and BUKOPIN) and BUMN such as ANTAM and PELINDO II which release KUR and guarantee from the government trough ASKRINDO, they still could not get it.
Table 4. Income Vs Outcome/Expense, (x1.000) (Edited from many sources, Dhani, 2010)
Grade
Status
Type of Employee
Gross Income / Salary (Rate)
Outcome / Expense = > 70% from Salary
Monthly Saving
Annual Expense /Extraordinary
Annual Saving
Bargaining Period
UU 2003
Dead Line Saving
Food
House Rent
Transport
Tax
PPN
Leisure
PPh
Inflation Rate
< 30
< 35
> 35
H
M
L
D3/S1
Employee
Skilled
1.000 – 2.000
400 - 750
200 - 450
200 - 450
10%
20%
5-20%
5-7 %
Max 500
5.000
1.000
< 30 Years Olds
30 < X < 35 Years Olds
> 35 Years Olds
12.000
Senior High Scholl
Employee
Unskilled
600 – 1.200
Max 200
2.000
400
4.000
Junior High Scholl
Employee
Unskilled
600 – 1.000
Max 100
1.000
200
4.000
Note:
H = High, or Independent Employee
M = Medium,or Medium Independent or 50% dependent to their employer
L = Low,or Low Independent, or highly dependent to their employer
3The Gap Summary
3.1.1Bank and Entrepreneur in asset based lending Perspective
Basically, collateral in loan requirement provides two conflicting hypotheses as answers (Manuel, 2006).On one hand, we can argue that the small firm owners will make non performing loan if they received loan, so the bank need collateral to prevent it. On the other hands, we can argue that small firm owners will not make non performing loan if they received loan, but they don’t have any collateral to prove it.
3.1.2Student and University Perspective
Most of University in Indonesia was established to serve the needs of large organizations; even they had rebranding their school as Entrepreneur University. The fact is the external factors like public policy, bureaucracy, loan and collateral system for entrepreneur has never been appeared in curriculum. Others, most of university, business school or school of business and economic, does not have any Small Medium Enterprise incubator or pilot project, whether it gives overall business knowledge for its undergraduate and graduate students.
Else, most of their lecturer was also had less experience in entrepreneurship and Indonesia has few Professors in Entrepreneurship. Therefore, the student who have passion in entrepreneurship, could not start their own business career as entrepreneur as soon as possible after they had graduated.
3.1.3Policy Maker and Bureaucracy Staff Perspective
According to detailed explanation above, Indonesia have a gap between policy maker and their bureaucracy staff in the field. The gap had been make constraint during the independent district era (otonomi). The length of the license process has made significant constraint to the entrepreneur development.
3.1.4Credit Proportion and Interest Rate in Global Financial Market Period
The interest rate and the credit proportion during the Global financial market has made the lack in entrepreneurship development. In this period, the government has low control to the credit and interest rate policy, for example the hierarchy of credit. Every citizen, including entrepreneur have to pass the hierarchy of credit, which are Credit Card (45%), KTA (33%), and Consumer (24%), before they could proposed to take the KUR (16%) or working capital (12%) and investment loan (12%). Else, the proportion of consumer loan is very high around 80%, which could not give additional value to the entrepreneurship development, although we know that the basic rules of business is profit oriented.
4Research Aim
My objective in this research is:
- Investigate the impact of KUR policy for National economies development.
- Analyses the gap perceptions in collateral between SME owners and the banks manager/account officer,
- Identify the lack of loan for SMEs in asset based lending perspective.
- Identify the potential collateral or alternative collateral for future collateral policy for SMEs in this sector, or other loan technique such as credit scoring lending, relationship lending or trust leverage, and financial statement lending (Moro and Kodwani, 2010).
5Method
This research had used two methods, focus groups with phenomenological interviewing and a survey of firms in Jakarta and Bekasi, Indonesia and had been collected during the period 2006-2009. Data from the focus groups and interview had been transcribed (Luke and Jon, 2003).
Qualitative technique had been deemed appropriate for this study because I am dealing with soft and complex issues involving elements of process over time (Curran and Blackburn, 2001; Oinas, 1999). Such issues are difficult to quantify (Hammersley, 1992). A framework for data collection and analysis had been developed from the literature review (Ian, Eleanor, and Sarah, 2010). Two research approach had been used in these research are 1) Informal phenomenological interviewing of SMEs owner/managers 2) Focus group discussion with bank manager / account officer.
5.1Respondent
Firms employing less than ten people dominated the study, which coincides with the number of micro businesses in Indonesia business and sector profiles. In addition, small firms represent the largest majority of the population of firms in developing countries (Moro and Kodwani, 2010), and the data had been collected during the period 2006-2009.
Accordingly, I looked to select a balance of owners/managers based on sector, structure of business (Ian, Eleanor, and Sarah, 2010) and bank manager which give the loan. The research focused on SMEs in the ICT retail store and service, food and beverage, printings, pump service and automotive service. The research also focused on 4 largest National banks in Indonesia, which are supported by the government to release KUR such as BNI, BRI, Mandiri, Bukopin, and 2 CSR BUMN, such as PELINDO II, ANTAM.
Others supporting data had been used to this research are ASKRINDO insurance manager, the government insurance company, which is supporting the KUR policy.
6Conclusion and Solution
According to the fact described above, I conclude that there is several fact of lack, which has contributed to the failure of entrepreneur. The failure are :
- Bank and Entrepreneur in asset based lending Perspective,
Solution: Change the lending requirement, for example their graduate certificate. Others change the lending technique. From 4 type or lending technique, relationship lending or trust leverage is more valuable, even it have. We can start with, creating database community development and select their queen bee / leader in every community. The leader or the queen bee will be the personal guarantor. Else, we also can start with creating mass competition in every district or representative office, with a purpose to create entrepreneur database in various community. Last, creating partnership with university or independent consultant or hired professional loan analyst, which has passion and capability in entrepreneurship, to analyst and proposed the potential entrepreneur, and they also work or have a duty as their supervisor or trainer.
- Student and University Perspective
Solution: Change or add new curriculum in the university course. The curriculum or courses have to have a entrepreneur map. The maps should included the internal and the external factor, such as family culture and stereotype constrain, human resources for entrepreneur, join venture or franchise as financing solution for new entrepreneur. The external factors which should be included in the course, such as the policy and the lack of bureaucracy, the interest rate and collateral technique for new entrepreneur.
- Policy Maker and Bureaucracy Staff Perspective
Solution: Change the “oknum or dirty people” in the bureaucracy, creating new criteria for new entrance candidate or employee. Giving and equal punish and reward for the staff in charge. Creating a smart and mass publication, like in the television and the contact number if the entrepreneur has a problem (as long as they are qualified). Making an on-line self assessment or business license track, and proposed credit on-line tracking system. Create a new contract policy, especially for potential entrepreneur, who have less collateral.
- Credit Proportion and Interest Rate
Reduce the interest rate and consumer loan, and enlarge the micro financing. Educate people to maintain their financial, budgeting and controlling their expense. Relocated the potential account officers, who have passion to develop the entrepreneur, to search and handle the potential entrepreneur.
Reference
Ian Gordon, Eleanor Hamilton, and Sarah Jack, ‘A study of the regional economic development impact of a university led entrepreneurship education programme for small business owners’ (Lancaster, 2010)
Manuel Flores-Romero, ‘Survival of the small firm and the entrepreneur under demand and efficiency uncertainty’ (Lancaster, 2006)
Eleanor Hamilton, ‘Entrepreneurial learning in family business’, (Lancaster, 2006)
Luke Pittaway, Richard Thorpe, Robin Holt and Allan Macpherson, ‘Knowledge within small and medium-sized firms: A systematic review of the evidence’, (Lancaster, 2005)
Caroline Parkinson, ‘Meanings behind the language of social entrepreneurship’, (Lancaster, 2005)
Jason Cope, Frank Cave, Sue Eccles, ‘Attitudes of Venture Capital Investors towards Entrepreneurs with Previous Business Failure’, (Lancaster, 2004)
Luke Pittaway and Jon Thedham, ‘"Mind the gap": graduate recruitment in small businesses’, (Lancaster, 2004).
Mary Rose and Mike Parsons,’ the neglected legacy of Lancashire cotton: industrial clusters and the UK outdoor trade, 1960-1990’, (Lancaster, 2005)
Andrea Moro and Devendra Kodwani, ‘Trust me, I’m an entrepreneur! Can trust help SMEs to gain the credit they need?’, (Open University, 2010).
Baca konten-konten menarik Kompasiana langsung dari smartphone kamu. Follow channel WhatsApp Kompasiana sekarang di sini: https://whatsapp.com/channel/0029VaYjYaL4Spk7WflFYJ2H
