Program for Eastern Indonesia SME Assistance (PENSA)

Project Background

Indonesia needs considerable development of its SME sector in order to recover from the financial crisis and develop sustainable employment and economic growth, and address core poverty issues. SMEs face numerous constraints, both internal and external. PENSA aims to address a number of these constraints through indirect and direct technical assistance to the sector, the strengthening of supporting institutions, such as banks, private business service providers and local governments, and working in partnership with donor agencies, NGOs and the private sector.

Description of Goals/Objectives

In September 2003, the International Finance Corporation (IFC), the private sector development arm of the World Bank Group launched the Program for Eastern Indonesia SME Assistance or Pengembangan Usaha (PENSA). PENSA is a new five-year initiative to support the growth of small and medium enterprises (SMEs) in eastern Indonesia. The IFC, Australian, Dutch, Japanese, Canadian and Swiss governments have provided US$22 million, which will be used to strengthen small businesses in eastern Indonesia. Australia's contribution to PENSA is A$ 4 million.

PENSA will focus on three broad issues:

• Improving access to capital - working with local financial institution to upgrade viable SME lending skills and products; assisting SMEs in improving their ability to present qualified lending proposals to banks.
• Improving business performance - working with SMEs, NGO partners, other service providers and large firms to improve the skills and knowledge base of entrepreneurs and managers; and to develop supply chain small firm linkage programs.
• Improving the business environment - working with local government, business association and other stakeholders to improve transparency and the regulatory framework.

PENSA will open five offices across Indonesia, in Denpasar, Surabaya, Balikpapan, Makassar and Jakarta. The facility will be headquartered in Denpasar and each of the branch office will be responsible for capacity building programs and technical assistance initiatives within a specific sector as follows:

Denpasar - Trade and Export Promotion

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 product. By working with sustainably sourced raw materials the program will look to create a new export market opportunity for SMEs.

Surabaya - Access to Finance

The program while initially based in Surabaya will look to extend across the other three offices. The facility will not directly provide capital but will instead working with the banking system to help facilitate an increased extension of credit to SMEs.

Balikpapan - Extractive Industry Linkages

The program will look to improve the local supply management of large multi national 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.

Makassar - Agricultural Linkages

Recognising the importance of agriculture to the Sulawesi economy, 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.

Jakarta - Enabling Environment for Business

The work program for PENSA's business enabling environment (BEE) work will focus on four main areas: deregulation, local economic development, credit bureau and policy reform.

For further information on AusAID support for PENSA, please contact:

Tim Vistarini
Australia-Indonesia Partnership for Reconstruction & Development (AIPRD)
Ph: (62-21) 392 4322 Ext. 524
Fax: (62-21) 392 4373
Email: tim.vistarini@aiprd.or.id

This page was last updated on 14 July 2005

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