Bali News

Bali handicraft export is facing difficult period as competition is tightening. Beyond price and quality, Bali export also suffering for weak promotion efforts due to budget constrains. On the other hand high interest rate prevents producers to access bank financing. With regard to impact of interest rate to bank financing, Banking observer Prof. Dr. W Sudhirman, Chairman of handicraft producers association G.W. Arjawa, and head of Bali branch of the central bank Viraguna Bagoes Oka expressed similar opinion in separated occasions.

Prof. Sudirman of Udayana University said it is difficult to set the right interest rate as it very much related to actual condition. However ideally it close to central bank’s rate which at the moment is 7%. If banks operate in effective manner, credit interest rate shoud be below 12%.

Unfortunately as Arjawa, an exporter, said, credit interest is currently way beyond central bank’s rate, wich means decreased central bank’s rate has not helped in pressing down credit rate.

On the other hand, producers needs in capital injection is getting more critical to battle in competition. Unfortunately high interest rate makes banks not viable source for financing. Producers also needs financing for promotion in addition to production. “We are lost in promotion and therefore our dificult to get market penetration”, he said.

Prof. Sudirman believe that there are many ways to push interest rate down. More dan efficiency, banks can also employs third party. Banks can also leverage government fiancing with rather lower interest rate.

Central bank’s Viraguna Bagoes Oka said that by decreasing central bank’s interest rate, Bank Indonesia expects an impact in decreasing credit iterest rate which then helps real sector. With lower interest rate micro enterprises can get sufficient financing to expand their production and market as well.

Whilst he understands that banks can not immediately follow the central banks by decreasing their interest rate due to different circumstances, banks are also expected in getting involved to strengthen micro enterprises. However bankers have their own reasons. In addition to operational cost and tax, they are also burdened with bad debt ratio and their need to make profit.