MICRO-FINANCE:
The New Paradigm for Empowering the Familly and Community
A Quick Glance at DAMANDIRI Foundation’s Scheme in Micro Financing

Tanggal: 31 Jul 2008
Reporter: Damandiri 2008
 
PREAMBLE
Micro finance in the Indonesian social and economic history has gone through various stages and phases. It has also been founded on various paradigm shifts. Numerous agencies, both government and non-government have made this their domain, oft resulting in duplications and, at times, confusions.

Even before the Indonesian independence in August 17, 1945 the phrase "Peo-ple's Economy" (Ekonomi Kerakyatan) was widely known. In the broadest con-text ''People's Economy" would essentially be based on the spirit of mutual shar-ing of a community's wealth and also their misfortunes.

It was on that base that basis that the a significant proportion of the economy took the populist nuance of "Gotong Royong". Under this societal umbrella co-operatives became the manifestation at the grass-roots, plus the numerous pre-cooperative schemes.

It was also on that foundation that family life and family development estab-lished the paradigm of empowering the family in the deliberate endeavor of bringing them, especially the less privileged, into the mainstream of the econ-omy. One of the strategy to operationalize the paradigm is income generation combined with motivating women in poor families to save and to obtain small loans. All of the above took place in the first half of the 1990's. Since that pe-riod several other consecutive strategies were applied, all towards enhancing family life, breaking the poverty chain and introducing family economics into na-tional macro economics




DATA ON POVERTY
Indonesian data on poverty has caused numerous polemics. In essence poverty data should adhere to those generated by the Indonesian Central Statistics Board (CBS). However, sectoral programs have also generated data on poverty, de-pending on the thrust of each sector or agency.

The current data as used by the Coordinating Ministry of People's Welfare is summarized as the following:

1. Cannot afford to consume adequate meals twice perday or cannot afford animal protein within the week.
2. Donot have access to health service or facility.
3. Head od the family does not a steady employment, or is severed of work.
4. The main occupation of the head of the family earns less than IDR 600,000 per month.
5. Head of family has had no education or has not completed primary school.
6. One or more children in the family dropped out of school due to economic reasons.
7. The larger proportion of floor material is earthen, and is less than 8 sq m per person.
8. Source of lighting is other than electricity.
9. Having unplastered walls
10. Using wood as cooking fuel.
11. Head of family is unable to provide clean water.
12. Family does not have own latrine facilities.
13. Head of family cannot afford one set of clothes per person per year for all members.
14. Family does not posess savings or fixed ownership of materials with mini-mal value at IDR 500,000.

The CBS used operational indicators to determine those belonging to the poor or near poor families as listed below:




PAST and EARLY INTERVENTIONS
Over time various intervention programs have been launched. Important to note is that within the purview of BKKBN (Nationht Family Planning Coordinating Board) and later-on the DAMANDIRI Foundation, interventions were and later, directed towards families. Also worth noting is that almost all other interventions are directed towards households or individuals.

Another principle which deserve highlighting is the emphasis on women. It is not that women are lesser privileged, it is rather for the express reason that women's roles in family development are prime and need to be highlighted.

The following are highlights of those interventions.


Group Spirit for Enhancing Family Income (UPPKS)
As the family is the basis of all past and incumbent interventions, they are en-couraged to form groups of families, preferably with diverse composition, i.e. both the well-to-do and the lesser privileged in the same group. This is essen-tially a manifestation of the GOTONG ROYONG (community togetherness) spirit which is prevailing in Indonesia.





Learning to Save (Takesra)
Whilst families are encouraged to strive in cohesive groups towards betterment, they are also motivated to save any unused portions of their income in the bank-ing institutions.

Again, in groups women are motivated to put their combined excess cash into a group savings account. This group account gives them credibility and strength, especially the eligibility for small scale bank loans.


Motivating to Obtain Micro Credit (Kukesra)
As is common in most traditional societies, the notion of loan and borrowing is considered unholy and unacceptable, and therefore credits to rural communities are somethiny out-of-the-ordinary. Worse is the notion of colateral, which many villagers do not poses.

Most significant in this intervention is that the whole group becomes the bearer of responsibility and collateral should the case arise






THE EMERGING PARADIGM: EMPOWERING THE FAMILY (POSDAYA)
Drawing from lessons of past activities in this realm, the DAMANDIRI Foundation introduced a new paradigm whereby all members of the family are empowered to do their respective parts in family, and thus also their community develop-ment.

The POSDAYA is in reality a community forum in villages and hamlets where families converge, discuss and deliberate on the best course of action to alleviate their underprivileged condition. It is a forum where plans for welfare enhance-ment and poverty alleviation are agreed upon and real actions taken. Indeed, it is the age-old cultural value of mutual help or commonly known as Gotong Royong. The Gotong Royong spirit is based on the foundations of empower-ment of all members of the family and of the society, and further based on the principle of self-reliance or kemandirian. Merging Gotong Royong, Kemandirian and Empowerment together one finds the power within the community come alive and tangibly drives community life towards progress. This has become the concept and societal paradigm of POSDAYA in real life.







POSDAYA AND THE MDGs
Being a family empowerment forum in the grass roots community, the thrust of the empowerment is centered on enhancing family welfare adhering to the glob-ally adopted indicators of MDGs. Those goals are:

1. Alleviating poverty,
2. Universal education,
3. Reducing Infant and Child Mortality,
4. Reducing Maternal Mortality and making pregnancy safer,
5. Enhancing gender mainstreaming,
6. Prevention and combating diseases of poverty, e.g. HIV/AIDS, TB and Di-arrheal diseases.
7. Protecting and preserving the environment (physical and non-physical)
8. Creating regional and inter-regional partnerships..

In its tangible format, at the grassroots the Family Empowerment Posts of com-monly known as the POSDAYA, embraces three major operational activities, i.e. economic entrepreneurship, universal education for all, including non-formal schooling for the drop outs who belong to the school-going ages, and extending basic health services to families who otherwise would not have access.



FAMILY & COMMUNITY ENTREPRENEURSHIP MICRO CREDIT AND FINANCING
The intermediate road to longer term sustainable progress in enhancing eco-nomic welbeing of families is the mindset-change from utter dependence to in-novation and initiative. This is a most challenging proposition, requiring patience on the part of the facilitators and continuous encouragement to individual fami-lies in need. The following are some highlights.

Targeting women ...
The greater part of POSDAYA and Micro Finance activities are targeting women. They are the fulnerable segment of the population and hence would need more emphasis.

Examples are small loans given to women are apt to have higher loan per-formance and debt repayments.

Another example is giving lifeskills to women have higher evidence of ap-plicability. Even simple skills such as candle making have resulted in great overseas market possibilities.


Targeting self-employment ...
Small and micro enterprises are essentially family businesses with workers consisting of family members. As they belong to the informal sector of the economy, they are indeed absorbers of the unemployed and, in turn, are catering to the poor and underprivileged. An example is the role of small food stalls which serve the masses at the most affordable prices. This is the role of microcredit schemes.

Life-skills for the youth …
The youth are in fact one of the most vulnerable segment of the popula-tion. They are susceptible to errand behavior in the society, and at the same time also apt to resort to errand behavior themselves if their needs are not fulfilled. Hence, the reason for providing them with life skills so that they can employ themselves and be more prepared to face their fu-ture.

Targeting cooperatives ...
Cooperatives are the best economic vehicle to carry the majority of the population into the mainstream of the economy. “People’s Economics” or popularly known as Ekonomi Kerakyatan is based on the cohesiveness of small and medium economic efforts, which in turn, can best be grouped into cooperatives. Cooperatives provide them with economic bargaining power to sustain them through difficult times, and even give them oppor-tunities for growth.





WHAT ARE IN STORE FOR INDONESIA?
As Indonesia has in exess of 220 million population, when one talk about per-centages the absolute magnitude would be tens of millions human beings. For example, a 7% unemployment rate would mean circa 14 million people who are seeking work, plus their dependents who would need support. Indeed, a formi-dable challenge for policy decision makers.

The above bring to the conclusion that most interventions to enhance family wellbeing will need large scale efforts, both in terms of geographic coverage as well in the magnitude of the program(s).

The underlying principle is that poverty alleviation or enhancing family wellbeing is essentially a major and sustained behavior and mind change. A total depar-ture from fatalism to empowerment, from individualism to community cohesive-ness (GOTONG ROYONG), from dependence on alms to economic independence and entrepreneurship. The above are manifested in the new paradigm of POSDAYA, the family empowerment post, wherein all members of the family are empowered to strive for sustained betterment.







WHAT CAN WE DO TO FURTHER THIS EFFORT?
Facing all those challenges, DAMANDIRI Foundation stays on course with her vi-sion and mission, i.e. to break the poverty chain and to enhance the welfare of families, particularly the underprivileged and the disadvantaged.

In that respect DAMANDIRI Foundation collaborates with the banking system in-volving more than 25 banks, large and small, particularly those accessible to the poor. Most of those banks are small and located in villages. Even bigger banks are chosen with branches extending down to the villagers.

As much as bank funding goes, the biggest obstacle to the people in need are collaterals, although joint collaterals are seemingly the most feasible way out. It is in that respect that the forming of cooperatives are greatly encouraged. Through cooperatives the issue of collateral is solved. Indeed, there are exam-ples where wholesale bank loans can be obtained with virtually minute amounts of collateral, i.e. the Savings and Loan Bank of Pegadaian. The majority of this banking system are women, and amount of loan that they can obtain is an af-fordable equivalent of USD 100, and virtually interest free.

Other examples are the Bazaar Credit Institutions or known as Bank Perkreditan Rakyat. The amount of loan has a ceiling of the equivalent of USD 1,000 with variable interest depending on the market rates.

Those two examples are the schemes used by DAMANDIRI Foundation. Impor-tant to note is that as DAMANDIRI Foundation is a non-banking institution, the funds the Foundation is providing are channeled to the partner banks, i.e. the more than 25 earlier mentioned. At the present moment, the DAMANDIRI Foun-dation is catering to the needs of more than 180 thousand debtors with a total amount of outstanding loan of IDR 520 billion.

DAMANDIRI Foundation is most encouraged by this microcredit scheme, and sees the future as deserving an optimistic view.

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