 Poverty is a social phenomenon that happens not only in Indonesia or developing countries but also in modern countries with more stable economies. The phenomenon that spreads in various countries of the world demands global attention. The World Summit on Social Development in Copenhagen in 1995 discussed world poverty, unemployment and social excommunicating
And so in Indonesia, the government is obliged to alleviate poverty. Its program implementation always puts social (or family) development in it. In Soeharto’s era, the government developed instruments and facilities such as obligations for small business or micro and medium credit besides empowerment programs by providing food, health, housing, education and family planning.
Like BIMAS / INMAS, Farmer Business Credit, and also Micro and Small Business Credit that are produced by Minister of Cooperative and Medium Small Business, they have the same condition with credit in other public banks, but with low interest.
Now demands for business “capitalization” fulfillment are getting stronger and becomes the government’s consideration, especially in this global economic crisis. With facilities for borrowing business capital, it is expected that people’s economy can grow stronger so that it can empower national economy.
With the government’s aid small and medium business can bloom and become independent and be followed by an enhancement of their income and social level. They change their status from pre prosperous family into first level of prosperous and prosperous family, in BPS’ terms as Very Poor Household (RTSM), Poor Household (RTM), and Nearly Poor Household (RTHM). In these times of global economic crisis the condition of poor families in Indonesia, according to BPS 2005, is 9.1 million, and unemployment level is 10.55 million (BPS – 2007) then we realize that the fulfillment of business capital for poor families becomes more urgent.
In this situation, where the social development program is the government’s responsibility and the number of poor families is large, LKM (Institution of Micro Finance) has an opportunity to be active in helping poor families by providing business credit that they can not get from official financial institutions like public banks or BPR The formal financial institutions concentrate more on the market, bigger business and like to make profit from the capital loans so that they demand insurance and other conditions that are impossible for small and micro businessmen.
Business loans through small and micro credit are proper efforts to manage and alleviate poverty as the key to empowering poor families to transform them into tough entrepreneurs. We can say that this government program for economically active working poor and lower income people as an incentive and also stimulus for them. We have high hopes that they can one day become small entrepreneurs at various social levels (especially in villages) that can improve national productivity when they cooperate with other businessmen in different sectors.
LKM as an alternative financial institution plays a strategic role not only in providing capital loans to poor families but also enhancing their social status levels. LKM as a social institution is entwined with the people’s economic tradition. In Nusantara – before this country’s independence, LKM existence and successfulness in surpassing capital obstacles have been studied since 1903, and after the existence of the Republic of Indonesia the concept became a formal financial institution.
Now in global economic crisis LKM should step forward to participate in developing the people’s economy especially the poor people’s economy. And with its experience in serving and managing micro business and the existence of Law number 25 year 1992 and Law number 20 year 2008 over UKMK, Micro Financial Institutions are able to do several things, such as to motivate poor families to save and work together in groups building small businesses. LKM can guide poor families to build business groups based on savings, and in the future will become “cooperatives” as joint ventures or become its members.
Another point, LKM with its networking builds an awareness of a financial system called “tanggung renteng” that the whole dynamics of their business group are the joint responsibility of all the members. In this case LKM is responsible for the empowerment of the group, cooperative or others; LKM serves as a networking in and between groups. Integrating groups in formal financial institutions such as BRI and Bukopin are building the economic pillar National Micro Financial System (Sistem Keuangan Mikro Nasional) in attempt to enhance efficiency and national “productivity” competing power.
Cooperation between LKM and poor families’ small business groups and formal financial institutions is a endeavor to establish price insurance and market to people’s products, especially poor family products – in cooperatives. As a significant step LKM can become the trading house of one or more national companies and become the base of a National Distribution System. This is an open opportunity for LKM in fulfilling demands and nationalism in empowering national products and creating the domestic market as an effort in developing the Indonesian poor family economy in the future. |
