Denpasar, Indonesia, September 2, 2003—
Minister for Co-operatives and SMEs Alimarwan Hanan today launched the Program for Eastern Indonesia SME Assistance (PENSA), a new IFC-managed multidonor initiative to support the growth of small and medium enterprises in eastern Indonesia. The facility has a five year mandate and has been jointly funded by IFC and the governments of Australia, Japan, the Netherlands, and Switzerland, with initial funding commitments of $19 million.
"IFC has built significant experience in the field of SME development though its work on other similar facilities around the world," said SME Department Senior Manager Max Aitken, who represented IFC at the Sept. 2nd meeting. "All of the countries in which these facilities are based are challenging environments for small business. This new facility will draw on this expertise, but will also be uniquely adapted to the local environment."
PENSA’s services will be geared toward local businesses with 20–250 employees, which typically have the agility to adjust to the volatile economic, political, and business climate of Indonesia, yet are not well served by existing markets and institutions. The program will not involve direct financing, but rather will build carefully targeted technical assistance and capacity building initiatives that draw on IFC links with the business community, the World Bank Group, donors, nongovernmental organizations and other partners.
"SME development is an important part of IFC's agenda in Indonesia, and we are glad to support this new initiative to help bring it about," said East Asia and the Pacific Department Director Javed Hamid. "Combining PENSA's grant-funded technical assistance with IFC's investment capability gives us a powerful tool to support smaller companies that are so important to poverty reduction."
An important role of the facility will be building links between local SMEs and larger multinational enterprises based in Indonesia. “Strengthening the supply chain linkages between large companies and their local communities is fundamental to increasing SME business growth and local economic participation,” commented Minister Hanan.
PENSA will open four offices across Indonesia in Denpasar, Surabaya, Balikpapan and Makassar. In addition a team in Jakarta will address business enabling environment issues across the program areas. The facility will be headquartered in Denpasar and each of the branch offices will be responsible for capacity building programs and technical assistance initiatives within a specific sector.
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Trade and Export Promotion-Denpasar
: The Denpasar program will work on improving SME’s export competitiveness. The handicraft and furniture sector has been initially targeted and projects will be undertaken which will improve quality, design and marketing of Indonesian products. By working to increase the supply of sustainably sourced raw materials the program will look to create a new export market opportunity for SMEs.
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Access to Finance-Surabaya
: This program, initially based in Surabaya, will look to extend across the other three offices. The facility will not directly provide capital but will instead work with the banking system to help facilitate an increased extension of credit to SMEs through improved credit risk policies and new product development.
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Extractive Industry Linkages-Balikpapan
: The program will look to improve the local supply chain management of large multinational and Indonesian mining, oil and gas companies. The program will help to identify opportunities for local procurement and will then work with SMEs to build capacity capable of meeting this demand.
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Agribusiness Linkages-Makassar
: The program will work to improve the opportunities for small scale producers. It will work on improving yield and supply through more efficient harvesting and crop management. The program will also look to encourage the development of more locally based processing facilities which will capture more value locally and create new opportunities for SMEs.
The program has been welcomed by the Indonesian government at the national, provincial and regional level. The Governor of Bali, on behalf of the regional governors and mayors in whose regions offices will be opened, presented a plaque pledging their joint commitment to the development of SMEs through PENSA.
PENSA is the ninth IFC–managed SME facility, joining others in Africa, the Mekong region of Southeast Asia (Vietnam, Cambodia, and Laos), China’s Sichuan province, Southeast Europe, South Asia, the South Pacific, and North Africa. Another is planned for Latin America, and a related program, the Private Enterprise Partnership, serves the former Soviet Union. Together these facilities have nearly 600 field-based staff and a combined annual budget of approximately $60 million.
