"It seems that GBRs are poised to take off in Indonesia in the near future," commented Ibrahim Champion, who heads a new program near Medan, Sumatra. The economic crisis in Indonesia, which has tarnished the banking sector and crippled the lending programs of most rural banks, seems to have led to a revaluation of specially focussed poverty lending, of the Grameen peer group model. The two oldest GBRs -- Karya Usaha Mandiri (KUM) and Mitra Karya East Java (MKEJ) -- are busy training new start-ups.
Dr Djumilah Zain, who heads MKEJ, the host of the FREND II meeting, reports that they have trained four university groups and NGOs in the past year. These include Basungun Karya, a GBR spearheaded by the local university in the mountains of Solo, and Pokmas-Medan, Ibrahim Champion’s new GBR in Sumatra.
Indonesia's oldest GBR, KUM, is already self-supporting and its repayment rates remain very high. It is a program on hold, however. Its status as a project under lnstitut Bankir Indonesia has not allowed it to expand beyond 2,200 members, in its 10th year of operation. Instead, it is sharing its experience to launch new programs in West Java, and train staff of GBRs elsewhere. It is conducting three month training courses at its three branches near Bogor, West Java. "We want to share our experience and the training we received before at Amanah Ikhtiar Malaysia, with organisations which want to implement Grameen banking in other parts of Indonesia," Ghozali, KUM's Manager said.
A key partner with KUM in this effort is a new foundation in south Jakarta called Yayasan Dhartna Bhakti (YDB) which has been set up to promote GB type credit for microbusinesses; and combine this with health and other training through the weekly center meetings. Working with KUM, two projects have been initiated in the greater Jakarta area, and a third is planned to start this August.
FREND's next meeting in August will be hosted in Jakarta by Institut Bankir Indonesia, the research wing of the Central Bank. IBI's renewed interest is itself significant. Top of the list of priorities developed in FREND II were training for new programs, fund raising for GB replication and monitoring of current activities of FREND members.
FREND III will focus on how Grameen replication can be further developed in Indonesia. One hopeful initiative is the US $1 million loan fund agreement between Citicorp and Grameen Trust signed last March. This is intended for microfinance institutions in the countries hit by the economic crisis - of which Indonesia is the worst affected. Several FREND members have applied to GT for these loan funds and are awaiting approvals.
A more disturbing development is the Government’s Social Safety Net Program, which is distributing cheap credit in the rural areas through the village heads. It is reported that most of this credit is going to the non-poor and there are no effective mechanisms for collecting it back. Although this program is not likely to last, it is undermining the credit discipline of NGOs charging unsubsidized interest rates and making their expansion to new clients quite difficult, FREND members report.
by Helen Todd
Extracted from Credit for the Poor # 24, July 1999