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SUSTAINABLE MICROFINANCE:
Developing a Sector Strategy and Building Institutional
Capacity
MICROFINANCE WORKSHOP REPORT
World Bank Office in Jakarta February 11 – 12, 2002
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Table of Contents
Executive Summary English Indonesian Workshop Agenda Opening Remarks • Mr. Mark Baird, Country Director, World Bank Office in
Jakarta
• His Excellency, DR. Boediono, Minister of Finance, Indonesia (See Executive Summary)
Presentations (In separate files)
1 Ms. Marguerite S. Robinson • THE IMPORTANCE OF A CLEAR VISION AND
STRATEGY IN DEVELOPING SUSTAINABLE MICROFINANCE ALONG THE FINANCIAL SYSTEMS APPROACH
• DEVELOPING INSTITUTIONAL CAPACITY FOR COMMERCIAL MICROFINANCE
2 Mr. Ricardo P. Lirio, Managing Director – Supervision and
Examination II, Bangko Sentral ng Pilipinas
• THE PHILIPPINE EXPERIENCE IN DEVELOPING A VISION/STRATEGY FOR FINANCIAL SERVICES TO THE POOR AND ADJUSTING THE REGULATORY FRAMEWORK
3 Mr. Abdul Salam, Director, BPR Directorate, Bank Indonesia • A REGULATORY FRAMEWORK FOR NON-BANK
MICROFINACNE INSTITUTIONS AS A STRATEGY TO PROMOTE MICROFINANCE IN INDONESIA
4 Mr. Darmin Nasution, Director General, Financial Institutions,
Ministry of Finance, Indonesia
• STATUS OF EFFORTS TO FORMULATE A NATIONAL STRATEGY FOR MICROFINANCE IN INDONESIA
5 Ms. Jennifer Isern, Senior Private Sector Development Specialist,
CGAP, Washington, DC
• MICROFINANCE TRANSPARENCY AND CAPACITY • OVERVIEW: WHAT IS CGAP?
6 Mr. Sanjay Sinha, Managing Director, M-CRIL, India • KEY ISSUES IN DEVELOPING INSTITUTIONAL
CAPACITY OF MICROFINANCE INSTITUTIONS
7 Mr. Dominique Gallmann, Deputy Team Leader, GTZ, Bali • OVERVIEW ON MFIs IN INDONESIA AND GTZ
STRATEGY IN CAPACITY BUILDING
Working Group Summaries (See Executive Summary in English)
List of Participants
Executive Summary
WORKSHOP ON SUSTAINABLE MICROFINANCE: DEVELOPING A SECTOR STRATEGY AND BUILDING INSTITUTIONAL CAPACITY (FEBRUARY 11-12,2002)
I. Background In the context of the financial sector work that the World Bank has been heading in Indonesia, the Bank has been providing assistance to the government microfinance issues since 2000. The request to undertake this area of work as part of the overall financial sector strategy work was made by the government to ensure that the provision of financial services to the poor is an integral part of the overall sector strategy. The World Bank has identified the following three components as part of its work program: (1) clarifying and unifying the legal and regulatory framework for rural finance/microfinance institutions; (2) assessing the capacity of existing institutions which provide financial services to the poor; and (3) assisting the government in developing a vision and strategy for providing sustainable financial services to the poor. The objective of the workshop was to provide and disseminate information about global best practices on the two components highlighted above which have not progressed as rapidly as the component on the regulatory framework. The workshop provided a forum for a discussion of global best practices on lessons learnt on how countries have formulated a vision and strategy for the development of sustainable financial services to the poor and the process by which a lead ministry takes on this role. The workshop was attended by about 70 participants from government, non government organizations and donors. II. Speakers – Key Messages Opening Remarks: Mr. Mark Baird, Vice President and Country Director for Indonesia, The World
Bank: * Primary objective of the World Bank’s work in Indonesia is to reduce poverty and one component of the overall work on poverty is increasing access to financial services to those segments of the population who are underserved; * Microfinance is one of the instruments available for alleviating poverty, however, microfinance cannot be the cure for all segments of the poor; * Indonesia has a rich experience in building a successful microfinance model through the BRI Unit desa network. What is required is to build on such lessons of success and add to the models which work such that outreach to the poor can be expanded and additional institutions which are sustainable can be added to the landscape of microfinance.
His Excellency, DR. Boediono, Minister of Finance, Indonesia: * Microfinance has played a critical role promoting economic development among low-income households in Indonesia and we hope that it will play an even more significant role in the future; * One of the foundations of the poverty reduction strategy that the government is in the process of developing must be to improve the access of low-income households to financial services, this will require a well thought out microfinance strategy; * Points to consider during the workshop discussions: (a) Know what has worked in microfinance and what has not and develop practical recommendations on developing the sector and how the government can support its development; (b) Recognize that that will be a need for a wide range of different types of MFIs and different types of institutions may face different regulatory environments; (c) Need to think of ways to improve the ability of borrowers to move between programs as their needs change, establishing credit bureaus may be one way to improve the transfer of knowledge of an individual’s financial background; (d) Microfinance is a service industry that depends on the quality of its human resources; (e) Recognize the fiscal constraints that face Indonesia, need to follow commercially viable strategies; (f) Examine how to encourage MFIs to all geographic areas of the country; (g) Avoid the fallacy of equating microfinance with microcredit; (h) The role that competition should play in this industry, i.e. horizontal (competition among different MFIs for the same borrowers) and vertical competition (competition between MFIs to give clients a wider range of products). Presenter: Ms. Marguerite S. Robinson, Institute Fellow Emeritus, Harvard
Institute for International Development Topic: The importance of a clear vision and strategy in developing sustainable microfinance along the financial systems approach * What is commercial microfinace – small scale financial services, the clients are economically active poor and lower-middle income (both borrowers and savers); * Poverty alleviation toolbox – the economically active need microfinance, however, the extremely poor and displaced household need poverty programs (social safety nets); * The old versus (subsidized microcredit) versus the new paradigm (financial systems approach to microfinance) Presenter: Mr. Ricardo P. Lirio, Managing Director – Supervision and Examination
II, Bangko Sentral ng Pilipinas Topic: The Philippine experience in developing a vision/ strategy for financial services to the poor and adjusting the regulatory framework * The role of the National Credit Council in the Department of Finance in developing a national strategy for microfinance (a market oriented approach which provides for a greater role of the private sector); changes in the banking law and circulars to accommodate microfinance; * Key lessons – (a) differentiate social financial intermediation programs; (b) initiate reforms that will create a financial system conducive to operations of financing conduits; (c) enact laws upholding the fight against poverty through microfinance and (d) synergize anti-poverty efforts with non-governemental organizations and other stakeholders.
Presenter: Mr. Abdul Salam, Director, BPR Directorate, Bank Indonesia Topic: Status of efforts to establish a regulatory framework for non-bank microfinance institutions as an integral component of the strategy for microfinance in Indonesia * Many types of MFIs are operating without a legal basis; * Concern of Bank Indonesia - MFIs which are not banks or cooperatives and mobilize savings from the public; * Draft microfinance law completed in September 2001 and sent to Ministry of Finance, major issue to be resolved is which supervisory entity will be responsible for MFIs (Finance Services Authority or a special supervisory entity for microfinance). Presenter: Mr. Darmin Nasution, Director General, Financial Institutions, Ministry
of Finance, Indonesia Topic: Status of efforts to formulate a national strategy for microfinance in Indonesia *MoF is in the process of preparing an agenda for the future, the financial sector supervisory institution (FSSI), not clear if FSSI will cover microfinance institutions; * No expert in MoF dealing with microfinance issues, need to assess carefully if regulation will help develop the microfinance market and the optimal level at which regulation is needed; * Issue of blanket guarantee and the need to decrease this guarantee; * The issue of decentralization and the uncertainties on the role of the regional governments. Presenter: Ms. Marguerite S. Robinson, Institute Fellow Emeritus, Harvard Institute for International Development Topic: Why is continuing development of institutional capacity indispensable for sustainable microfinance? * The evolution of the BRI unit desa model from a pilot in 1984 to market penetration in the mid 1990s; * Who Benefits from mobilizing savings in regulated MFIs – individuals, enterprises, MFIs, governments, donors and the economic development and equity at large. Presenter: Ms. Jennifer Isern, Senior Private Sector Development Specialist, CGAP,
Washington, DC Topic: The use and application of standardized tools for measuring and assessing levels of institutional capacity * Key elements of a MFI – people, clients and products, organization and systems, financial performance and strategic objectives; * Financial information flows include – (a) information system; (b) internal control; (c) audit; (d) assessement; (e) performance measurement; (f) benchmarking; (g) performance standards; (h) rating; (i) supervision; * The Consultative Group to Assist the Poorest (CGAP) arranges consortium funding with donors and investors to the MFI industry for best practices; training and support to MFIs.
Presenter: Mr. Sanjay Sinha, Managing Director, M-CRIL, India Topc: Applying a quantitative techniques ( credit rating systems) to assess the strengths, weaknesses and priority ranking of needs for capacity building for microfinance institutions. * The experience from South Asia shows that ad hoc appraisal systems were being used to assess the performance of MFIs, need for a standardized tool to determine the risk profile and credit worthiness of MFIs and identify their strengths and weaknesses; * The rating instrument was developed to assess governance issues, management/resource resource indicators and financial performance; * The achievements of this rating instrument are: (a) helping to overcome information asymmetry; (b) identifying strengths and weaknesses to prioritize capacity building needs and (c) detailing information on the risk profile of MFIs has facilitated links with investors; * Institutional assessments based on accepted standards can be a very powerful tool in promoting institutional capacity building of MFIs. Presenter: Mr. Dominique Gallmann, Deputy Team Leader, GTZ Topic: Overview of the Indonesian landscape for microfinance: typology of formal, semi-formal and informal institutions providing microfinance services to the poor, and the GTZ experience in capacity building of microfinance institutions in Indonesia. * Typology of MFIs in Indonesia: (a) formal sector comprises commercial banks, BPRs, cooperatives and pawnshops; (b)semi-informal sector includes about 400 NGOs and programs run by various ministries and (c)informal sector includes roscas, moneylenders and family members; * GTZ strategy in MFI capacity building has four components – policy advise, support for associations, training and non-bank MFIs in NTB and NTT. III. Break-out Discussion Groups: Key Issues Raised
Workshop participants were divided into 4 break-out discussion groups in the afternoon and presented their respective group’s consensus at the afternoon plenary. To help focus the discussions, two of the four groups separately addressed one set of questions, while the other two groups separately addressed a second set of questions. The points and issues presented by the discussion groups are summarized below.
Day 1, Theme: Developing a National Vision and Strategy for Sustainable Microfinance.
Questions for Groups 1 and 2: (1) Is there a role for microfinance in Indonesia’s poverty alleviation efforts? If so,
what segments of the population need improved access to financial services. (2) What is the role of government in creating an environment which is conducive
to sustainable microfinance in Indonesia?
Key issues raised and discussed:
♦ Poverty alleviation efforts should distinguish different categories of poverty and identify segments where microfinance is suitable and where non-financial assistance is required.
♦ Lower income employees and the self-employed such as small farmers, petty traders and operators of microenterprises and small businesses need microfinance to help them expand earnings from micro and small-scale economic activities, through working capital loans. They also need convenient and safe facilities for their savings, which should be anchored to a fair and sustainable deposit protection mechanism.
♦ Government needs to define poverty alleviation strategy + components, and establish national microfinance policy which is part of overall strategy for financial sector development. Implementing the national policy requires a regulatory framework for MFIs to be sustainable, and a clear focal point for leadership and coordination. Government should not create competing microfinance programs, such as by channeling cheap sources of funds through retail delivery institutions it promotes.
♦ Important task for government is to address the capacity-building needs of MFIs but also of the operators of microenterprises and small businesses. The capacity-building agenda must include documentation of the extent by which microfinance has alleviated poverty in Indonesia, such that there is readily available information on what works and what has not worked in the microfinance programs of different institutions.
Questions for Groups 3 and 4: (1) Does Indonesia need a national strategy for sustainable microfinance? If so,
which lead agency should take the responsibility for developing the strategy. (2) What is the role of the private sector, including the NGOs, in building
sustainable microfinance in Indonesia?
Key issues raised and discussed:
♦ Past microfinance initiatives were without a central or unifying strategy – although the preparation of a draft microfinance law can be interpreted as one step towards defining a national strategy. With Indonesia’s experience of dominant government presence in microfinance, a “national strategy” envisions a centrally-planned and directed national effort, whereas establishing a “national policy” would connote a larger role for the private sector entities and organizations.
♦ Need for policy to differentiate sustainable microfinance from program or subsidized credits, and follow the principle of “Do no harm” to viable and sustainable microfinance. Responsive national policy should aim at overall regulatory environment where MFIs can find (i) alternative paths to sustainable development and institutional transformation; (ii) productive competition; (iii) opportunities to develop management and staff skills; (iv) incentives to mitigate capital costs for expansion; and (v) regulations that do not inhibit expansion to rural areas or formation of 2nd-level network organizations.
♦ Ministry of Finance should take lead responsibility to develop, formulate and establish national policy on microfinance -- enlisting cooperation of other ministries and agencies with microfinance-oriented technical skills, staff and
physical presence in different parts of the country, and ensuring that microfinance stakeholders from the private sector have access to the consultative process as policies are being drawn up.
♦ Dominant government and public sector role in poverty alleviation interventions and microfinance have often crowded out private sector operations and initiatives which has played only a small (but now growing) role in providing commercial microfinance. Private sector stakeholders (including banks and domestic and international NGOs), are indispensable as (i) pivotal investors in commercial microfinance entities; (ii) sources of commercial loan capital; and (iii) providers of knowledge and innovations on best practice and technology.
♦ A larger role for the private sector is hindered mainly by (i) prohibition on the participation of foreign entities in the equity of microfinance institutions (including BPRs), even in a minority position; (ii) obstacles to the use of foreigners in the operations of MFIs; (iii) constraints to the process of establishing legal identity for MFIs, including the setting up of 2nd-tier corporate entities as umbrella organizations for primary-level MFIs; and (iv) legal and capital constraints to the expansion of MFI presences in the rural areas.
Day 2, Theme: Building Institutional Capacity for Sustainable Microfinance.
Questions for Groups 1 and 2:
(1) Is the development of institutional capacity important for sustainable microfinance in Indonesia? If so, what steps can the microfinance industry take to improve sustainable microfinance in Indonesia?
Key issues raised and discussed: ♦ Need to focus on the capacity-building needs of a wide range of MFIs with
differing organizational formats, ownership and sponsorship; sources of funding and technical support; market niche and regional area of operations. Equally important are the capacity-building needs (management, operations, marketing, quality control) of the micro enterprise and small business client-base of MFIs. A number of government agencies and ministries – especially the Ministry of Finance as well as the Ministry of Home Affairs (because of the decentralization program) – have urgent need to acquire knowledge and familiarity with microfinance processes and operations.
♦ Institutional capacity-building needs of Indonesian MFIs differ much according to their organization format and the regions they operate in. Designing appropriate programs for capacity building should not be undertaken without preparing the necessary database on MFIs in Indonesia – an inventory and assessment of the different types of MFIs in the different markets they operate in, their relative size of operations, outreach, financial structure, etc., in order to identify and catalogue principal strengths and weaknesses.
♦ Different components of the microfinance industry, with active assistance and encouragement from government, should take the initiative in organizing network associations for their respective organizations. Many lessons can be learned and adapted from the experience of successful MFIs and associations
within Indonesia itself, but also from other countries which have strong similarities with Indonesia.
Network associations for different types of MFIs are needed to (i) generate focused discussions and consensus of capacity-building needs, (ii) access technical assistance available from international organizations, (iii) simplify dialogue with relevant government ministries and agencies such as the Ministry of Finance and/or the Bank of Indonesia on the provisions of the present Draft Microfinance Law, the Supervisory Body for MFIs, the basic prudential regulations to guide the operations of MFIs, and an appropriate deposit protection framework, and (iv) open dialogue with government on the question of foreign equity investment and ownership content as well as the limited engagement/employment of foreign professionals/technicians/experts in microfinance in Indonesia MFIS (including BPRs).
Network organizations are indispensable in disseminating best practice experience and promoting the use of common “standards”, “principles” and “guidelines” of prudent operation (including credit administration, fund management, internal control systems, staff development, etc.) and performance measurement of MFIs.
Main obstacle in forming network organizations: Indonesian law currently does not permit legal entities (the primary-level MFIs) to own shares of stock in a 2nd-level network organization set up as a corporate entity.
Questions for Groups 3 and 4: (2) What steps should the microfinance industry take to establish standards to
improve the financial performance of institutions? What tools to develop institutional capacity are relevant for the Indonesian context?
Key issues raised and discussed: ♦ Microfinance industry can provide valuable inputs to government agencies
involved in setting the policy, regulatory and prudential supervision environment for microfinance, disseminating and promoting the voluntary use and mandatory observance of “standards” for controlling quality, measuring performance and exercising effective governance. The term “standards” has certain meanings in Bahasa, so the term “principles” is preferred. The principles to be observed should take into account that there are different stakeholders for the different categories of MFIs.
It is desirable to have a common, basic set of prudential principles which are consistent with international best practice. For instance, accounting records and reports should uniformly be presented only on cash basis rather than a mixture of accruals and cash.
Network organizations could have a critical role in forming consensus among practitioners (with technical assistance from professionals and experts in international agencies) on minimum prudential operating principles for each MFI category. The core principles could progressively increase, based on MFIs’ levels of operating and financial intermediation activity.
♦ Prudential principles on a compulsory basis require government to mandate regulations and instructions for compliance. However, prudential principles on a non-compulsory basis require definition of the process for generating consensus and compliance
The microfinance industry should look beyond Indonesia for relevant comparable experience in other countries on three possible scenarios: (i) compulsory basis only, as mandated by government; or (ii) voluntary compliance only, which implies self-regulation; or (iii) a combination of compulsory/mandated regulatory principles together with voluntary compliance with prudential guidelines.
The Credit Union rating system in Guatemala, Komodo risk rating system of PT Ukabima, credit rating system of M-CRIL India, and the performance indicators applied by the Philippine Coalition for Microfinance Standards arerelevant examples for the microfinance industry and existing associations to consider.
Other sources for applied information or patterns for performance measurement useful for the Indonesian microfinance industry may be found in the Micro Banking Bulletin as well as in several technical manuals available from CGAP.
♦ The performance and operating principles to be observed and complied with will help determine the forms and priorities of the needs for technical assistance and training for capacity building.
IV. Summary and Wrap Up Microfinance is One of the Tools in Poverty Alleviation ♦ In moving from principle to practice, it is not easy to define the lower poverty
boundary below which microfinance is inadvisable. It is clear that the costs of social intermediation go up as extension of sustainable microfinance to the very poor is deepened.
♦ The political urgency to demonstrate action on poverty alleviation presents a dilemma for microfinance proponents. The old paradigm (subsidized program credits for the poor) is quickly implemented and visible while its unsustainability only becomes evident longer term. The new paradigm (financial systems approach) will ultimately benefit the poor more but is institutionally more difficult and slower to achieve visible results.
♦ Faced with this political reality, advocates of the new paradigm need to engage fully with Government and Parliament in constructive discussion on the failures of the old paradigm and priorities for attaining the benefits of the new paradigm.
Microfinance is a Component of a Financial System Strategy ♦ A financial systems approach to microfinance will yield the largest and most
sustainable results. ♦ Indonesia needs a lead agency to promote microfinance, and because of the important
financial system links and the Bank Indonesia’s redefined role, the Ministry of Finance is a sound choice.
Role of Government ♦ The Ministry of Finance is needed to play greater leadership in defining a
microfinance strategy, with the Coordinating Ministry for the Economy assisting. ♦ The Ministry of Finance’s processing of the draft microfinance law needs to review,
in particular, the thresholds regarding registration and maximum savings permitted for non-banks, the prohibition of any non-Indonesian ownership. This most credible and beneficial review would include wide consultation of stakeholders.
♦ The proposed microfinance law needs accompanying definition of the supervisory framework for its implementation. Issues to resolve include coverage (microfinance banks, non-banks, financial cooperatives), decentralized implementation capacity, and relation to the LOJK.
♦ The Government should shift resources from subsidized program credits to capacity building for expanded outreach and sustainability by microfinance providers, including banks.
♦ Access to Central Government is still difficult for NGO microfinance providers. Government would benefit from a more open-door policy in partnering with these NGOs and integration of their breadth of experience and local presence in developing microfinance strategy and capacity.
Role of Microfinance Practitioners ♦ Both banks and non-banks are important to microfinance in Indonesia. For non-
banks, building professional capacity is a priority, including internal checks and controls, incentive systems, management information systems, and risk management.
♦ Stronger national networks and associations are needed, particularly to articulate and support autonomous views on the “industry’s” interests regarding standards, capacities and policy regimes. For non-banks, a stronger network would be a vehicle for building absorptive capacity for service providers and partners on technical assistance of capital provision. For banks, stronger professional associations would contribute to building the foundation for supporting financial system capacities, e.g. deposit insurance and credit bureaus.
Role of External Actors ♦ Different types of external actors bring various strengths to partnerships in building
Indonesia’s microfinance capacity, including international financial institutions (ADB, WB, IDB…), bilateral aid programs, international NGOs and direct service providers to the microfinance sector (CGAP, M-CRIL…).
♦ External actors need to be careful to “do no harm” by adhering to the principles of good microfinance practice, on which there is good international consensus.
♦ Ministry of Finance leadership on microfinance will require attention to capacity building within that organization, and donor support to this effort would be invaluable.
♦ Partnerships between Indonesia’s microfinance providers and external actors -- particularly bilaterals and international NGOs -- can serve as conduits of both international best practice and finance.
♦ An “industry” of professional support services in microfinance is emerging internationally and can work directly with Indonesia’s microfinance providers.
♦ Finance from external actors should focus on: (i) capacity building throughout the microfinance system (providers, services, regulators, policy framers); (ii) capacity building programs that promote outreach of commercial microfinance institutions , not interest rates to the clients; and (iii) direct financing of microfinance providers in the form of capital, loans or grants.
Executive Summary in Indonesian
Ringkasan Umum
LOKAKARYA “KEUANGAN-MIKRO YANG BERKESINAMBUNGAN : PENGEMBANGAN STRATEGI SEKTOR DAN KAPASITAS INSTITUSI” (PEBRUARI 11 – 12, 2002)
I. Latar Belakang Didalam kerangka kegiatan sektor keuangan yang ditempuh oleh Bank Dunia di Indonesia, Bank
telah memberikan bantuan kepada pemerintah sehubungan dengan pokok2 persoalan keuangan-mikro sejak tahun 2000. Permintaan untuk penanganan kegiatan di bidang ini datang dari pemerintah, sebagai bagian dari keseluruhan kegiatan strategi di sektor keuangan, untuk memastikan bahwa penyediaan pelayanan keuangan bagi golongan miskin merupakan suatu bagian yang integral dari strategi keseluruhan di sektor ini. Bank Dunia telah mengidentifikasi tiga komponen berikut ini, sebagai bagian dari program kerjanya : (1) memperjelas dan menyatukan kerangka hukum dan peraturan yang menyangkut institusi keuangan/keuangan-mikro pedesaan; (2) penilaian kemampuan dari institusi2 penyedia jasa2 keuangan untuk golongan miskin yang ada; (3) membantu pemerintah dalam pengembangan visi dan strategi untuk penyediaan jasa2 keuangan yang berkesinambungan bagi golongan miskin.
Tujuan dari lokakarya ini adalah untuk memberikan dan menyebarkan informasi mengenai praktek-2 global yang terbaik mengenai dua komponen pokok diatas, yang tidak mengalami kemajuan secepat komponen yang menyangkut kerangka peraturan. Lokakarya ini menyediakan suatu forum diskusi untuk praktek2 global yang terbaik mengenai pelajaran2 yang dialami negara-negara lain dalam memformulasikan visi dan strategi untuk pengembangan jasa2 keuangan yang berkesinambungan bagi golongan miskin serta proses pelaksanaan peran ini oleh suatu departemen utama pemerintah. Lokakarya ini diikuti oleh 70 peserta dari kalangan pemerintah, organisasi2 non-pemerintah, serta donor. II. Pembicara – Pesan Utama Kata-Kata Pembuka: Mr. Mark Baird, Vice President and Country Director for Indonesia, Bank Dunia. ∗ Tujuan utama kegiatan2 Bank Dunia di Indonesia adalah untuk mengentaskan
kemiskinan, dan salah satu komponen dari keseluruhan kegiatan mengenai kemiskinan adalah meningkatkan akses kepada jasa2 keuangan bagi segmen2 penduduk yang kurang terlayani;
∗ Keuangan-mikro merupakan satu dari instrumen2 yang tersedia bagi pengentasan kemiskinan. Namun demikian, keuangan-mikro tidak dapat menjadi solusi bagi semua segmen2 golongan miskin;
∗ Indonesia mempunyai pengalaman yang kaya dalam pembentukan suatu model keuangan-mikro yang sukses melalui jaringan BRI unit desa. Yang dibutuhkan adalah membangun diatas pelajaran2 sukses tersebut dan menambah terhadap model2 yang terbukti dapat diterapkan, sehingga jangkauan kepada golongan miskin dapat diperluas serta penambahan institusi2 yang berkesinambungan dapat dilakukan pada keuangan-mikro secara luas.
Yang terhormat, Dr. Boediono, Menteri Keuangan, Indonesia : ∗ Keuangan-mikro telah memainkan suatu peran yang utama didalam mendorong
pengembangan ekonomi dikalangan rumah-tangga2 berpendapatan rendah di Indonesia dan kami mengharapkan agar keuangan-mikro dapat memainkan peran yang lebih nyata lagi di masa mendatang;
∗ Salah satu landasan dari strategi pengentasan kemiskinan yang sedang dalam proses pengembangan oleh pemerintah harus merupakan peningkatan akses jasa2 keuangan bagi rumah-tangga2 berpendapatan rendah; Hal ini membutuhkan suatu strategi keuangan-mikro berdasarkan suatu pemikiran yang baik;
∗ Hal2 yang perlu dipertimbangkan dalam diskusi lokakarya : (a) Mengetahui apa yang telah berhasil dan yang tidak berhasil diterapkan dalam keuangan-mikro, serta mengembangkan rekomendasi2 praktis mengenai pengembangan sektor ini dan bagaimana pemerintah dapat mendukung pengembangan tsb.; (b) Menyadari bahwa akan dibutuhkan suatu cakupan yang luas dari berbagai jenis institusi keuangan-mikro dan institusi2 yang berbeda jenis ini mungkin akan menghadapi lingkungan peraturan yang berbeda pula; (c) Perlu dipikirkan cara2 untuk meningkatkan kemampuan para peminjam untuk bergerak diantara program2 sesuai perubahan kebutuhan mereka; Pembentukan biro2 kredit mungkin merupakan satu cara untuk meningkatkan pengalihan pengetahuan mengenai latar belakang keuangan seorang individu; (d) Keuangan-mikro merupakan suatu industri jasa yang bergantung pada kualitas sumber-daya manusianya; (e) Menyadari kendala2 fiskal yang dihadapi Indonesia; Perlu mengikuti strategi2 yang dapat dijalankan secara komersial; (f) Meneliti cara untuk mendorong institusi2 keuangan-mikro ke seluruh daerah geografis dari negara ini; (g) Hindari pemikiran keliru yang menyamakan keuangan-mikro dengan kredit-mikro; (h) Peran persaingan dalam industri ini, misalnya secara horisontal (persaingan antar institusi2 keuangan-mikro yang berbeda untuk peminjam2 yang sama) dan secara vertikal (persaingan antar institusi2 keuangan-mikro dalam memberikan cakupan produk yang lebih luas).
Presentor : Ms. Marguerite S. Robinson, Institute Fellow Emeritus, Harvard Institute for International Development Topik : Pentingnya visi dan strategi yang jelas dalam pengembangan keuangan-mikro yang berkesinambungan, sejalan dengan pendekatan sistem2 keuangan. ∗ Apa keuangan-mikro komersial itu ? – Jasa2 keuangan berskala kecil; Nasabah2nya
adalah golongan miskin dan golongan berpendapatan rendah-menengah yang aktif secara ekonomis (sebagai peminjam dan sebagai penabung);
∗ Merupakan alat pengentasan kemiskinan – orang2 yang aktif secara ekonomis memerlukan keuangan-mikro, sedangkan mereka yang sangat miskin maupun rumah2 tangga yang tergusur memerlukan program2 penanggulangan kemiskinan (jaringan2 pengamanan sosial);
∗ Paradigma lama (kredit-mikro bersubsidi) dan paradigma baru (pendekatan sistem2 keuangan terhadap keuangan-mikro).
Presentor : Mr. Ricardo P. Lirio, Managing Director – Supervision and Examination II, Bangko Sentral ng Pilipinas Topik : Pengalaman Filipina dalam pengembangan visi/strategi untuk jasa2 keuangan bagi golongan miskin dan penyesuaian kerangka peraturan. ∗ Peran dari Dewan Kredit Nasional di Departemen Keuangan dalam pengembangan
suatu strategi nasional untuk keuangan-mikro (suatu pendekatan berorientasi pasar yang memberikan peran yang lebih besar bagi sektor swasta); Perubahan2 pada undang2 dan surat2 edaran perbankan untuk mengakomodasi keuangan-mikro.
∗ Pelajaran2 utama – (a) bedakan antara program2 intermediasi keuangan dan sosial; (b) prakarsai reformasi2 yang akan menciptakan suatu sistem keuangan yang kondusif bagi beroperasinya saluran2 keuangan; (c) keluarkan undang2 untuk menyokong pemberantasan kemiskinan melalui keuangan-mikro; dan (d) lakukan sinergi atas usaha2 anti-kemiskinan dengan organisasi2 non-pemerintah serta para “stakeholder” (pihak2 yang berkepentingan) lainnya.
Presentor : Bapak Abdul Salam, Direktur, Direktorat BPR, Bank Indonesia. Topik : Status dari usaha2 yang menyangkut pembentukan suatu kerangka peraturan bagi institusi2 keuangan-mikro bukan-bank sebagai suatu komponen yang integral dari strategi keuangan-mikro di Indonesia. ∗ Banyak jenis institusi2 keuangan-mikro yang beroperasi tanpa dasar hukum; ∗ Masalah bagi Bank Indonesia - institusi2 keuangan-mikro ini bukan-bank maupun
koperasi tetapi memobilisasi tabungan dari masyarakat; ∗ Konsep undang2 mengenai keuangan-mikro telah selesai bulan September 2001 dan
telah dikirim ke Menteri Keuangan; Isu utama yang perlu diputuskan adalah mengenai badan pengawas yang akan bertanggung-jawab atas institusi2 keuangan-mikro ini. (Lembaga pengawas sektor jasa keuangan atau suatu lembaga pengawas khusus untuk sektor keuangan-mikro).
Presentor : Bapak Darmin Nasution, Direktur Jenderal, Lembaga2 Keuangan, Departemen Keuangan, Indonesia. Topik : Status dari usaha2 yang menyangkut pembentukan suatu strategi nasional bagi institusi2 keuangan-mikro di Indonesia. ∗ Departemen Keuangan sedang dalam proses menyiapkan suatu agenda bagi suatu
lembaga pengawas sektor keuangan (LPSK) di masa mendatang; Belum jelas apakah LPSK akan juga mencakup institusi2 keuangan-mikro;
∗ Di Departemen Keuangan, saat ini tidak ada ahli untuk menangani isu2 keuangan-mikro; Perlu di teliti dengan hati2 mengenai apakah peraturan akan membantu dalam pengembangan pasar keuangan-mikro dan mengenai tingkat yang optimal dimana peraturan dibutuhkan;
∗ Isu mengenai garansi payung (“blanket guarantee”) dan perlunya mengurangi garansi ini;
∗ Isu mengenai desentralisasi serta ketidak-pastian mengenai peran pemerintah daerah;
Presentor : Ms. Marguerite S. Robinson, Institute Fellow Emeritus, Harvard Institute for International Development Topik : Mengapa pengembangan kapasitas institusi yang berlanjut sangat diperlukan bagi keuangan-mikro yang berkesinambungan ? ∗ Evolusi BRI unit desa dari proyek percontohan di tahun 1984 ke penetrasi pasar di
pertengahan tahun 1990; ∗ Siapa yang mendapatkan manfaat dari mobilisasi tabungan pada institusi2
keuangan-mikro yang diregulasi ? – individu2, perusahaan2, institusi2 keuangan-mikro, pemerintah2, donor2, dan secara luas, perkembangan ekonomi dan modal;
Presentor : Ms. Jennifer Isern, Senior Private Sector Development Specialist, CGAP, Washington DC. Topik : Penggunaan dan aplikasi alat2 standar dalam mengukur dan menilai tingkat2 kapasitas institusi. ∗ Unsur2 utama dari suatu institusi keuangan-mikro – sumber-daya manusia, nasabah
dan produk, organisasi dan sistem, kinerja keuangan dan tujuan yang strategis; ∗ Arus informasi keuangan mencakup : (a) sistem informasi; (b) pengendalian
internal; (c) audit; (d) penilaian; (e) pengukuran kinerja; (f) “benchmarking” (perbandingan terhadap standar); (g) standar2 kinerja; (h) pemberian peringkat; (i) pengawasan;
∗ Kelompok konsultasi untuk membantu mereka yang sangat miskin atau disebut Consultative Group to Assist The Poorest (CGAP) mengatur konsorsium pendanaan dengan para donor dan investor untuk industry institusi keuangan-mikro untuk praktek2 terbaik, pelatihan, serta dukungan bagi institusi2 keuangan-mikro.
Presentor : Mr. Sanjay Sinha, Managing Director, M-CRIL, India. Topik : Penerapan teknik2 kuantitatip (sistem2 pemeringkat kredit) dalam menilai “strengths” (kekuatan2), “weaknesses” (kelemahan2), serta penyusunan prioritas kebutuhan dalam pengembangan kapasitas untuk institusi2 keuangan-mikro. ∗ Pengalaman dari Asia Selatan menunjukkan penggunaan sistem2 penilaian “ad-hoc”
(khusus hanya untuk saat itu) dalam menilai kinerja institusi2 keuangan-mikro; Diperlukan suatu alat standar untuk menentukan profil risiko dan kelayakan kredit
dari institusi2 keuangan-mikro, serta untuk mengidentifikasi “kekuatan“ dan “kelemahan” mereka;
∗ Instrumen pemeringkat dikembangkan untuk menilai isu2 pengelolaan, indikator2 manajemen/sumber-daya, serta kinerja keuangan;
∗ Yang dicapai dengan instrumen pemeringkat ini : (a) Membantu dalam mengatasi asimetri informasi; (b) Mengidentifikasi “kekuatan” dan “kelemahan” untuk penyusunan prioritas kebutuhan pengembangan kapasitas; dan (c) informasi yang rinci mengenai profil risiko dari institusi2 keuangan-mikro telah memfasilitasi hubungan2 dengan para investor;
∗ Penilaian institusi berdasarkan standar2 yang diterima dapat menjadi alat yang sangat ampuh dalam mendorong pengembangan kapasitas institusi pada institusi2 keuangan-mikro.
Presentor : Mr. Dominique Gallmann, Deputy Team Leader, GTZ. Topik : Gambaran ringkas mengenai keuangan-mikro secara menyeluruh di Indonesia: penelitian mengenai tipe2 institusi formal, semi-formal, dan informal yang menyediakan jasa2 keuangan-mikro bagi golongan miskin, serta pengalaman GTZ dalam pengembangan kapasitas pada institusi2 keuangan-mikro di Indonesia. ∗ Penelitian tipe2 institusi keuangan-mikro di Indonesia : (a) Sektor formal, terdiri
dari bank komersial, BPR, koperasi, dan pegadaian; (b) Sektor semi-formal, terdiri dari 400 organisasi non-pemerintah serta program2 yang dilaksanakan oleh berbagai departemen; dan (c) Sektor informal, terdiri dari “roscas”, individu2 pemberi pinjaman (lintah darat), dan anggota keluarga;
∗ Strategi GTZ dalam pengembangan kapasitas pada institusi2 keuangan-mikro terdiri atas 4 komponen : advis kebijakan, dukungan asosiasi, pelatihan untuk institusi2 keuangan-mikro bukan-bank di NTB dan NTT.
III. Diskusi Kelompok : Isu2 Utama Yang Dibicarakan Peserta lokakarya dibagi kedalam 4 kelompok diskusi pada sesi siang hari dan memberikan presentasi konsensus kelompok masing2 pada sidang pleno. Untuk membantu memfokuskan diskusi, dua kelompok dari empat kelompok tersebut masing2 menangani sekelompok pertanyaan2, sedangkan dua kelompok lainnya masing2 menangani sekelompok pertanyaan2 lainnya. Butir2 dan isu2 yang dipresentasikan oleh kelompok2 diskusi tersebut diringkas dibawah ini : Hari 1, Tema : Pengembangan Visi dan Strategi Nasional untuk Keuangan-Mikro yang Berkesinambungan. Pertanyaan2 untuk Kelompok 1 dan Kelompok 2 : (1) Apakah keuangan-mikro mempunyai peran dalam usaha2 pengentasan kemiskinan di
Indonesia ? Bila ada, segmen2 penduduk yang mana yang membutuhkan perbaikan akses terhadap jasa2 keuangan ?
(2) Bagaimana peran pemerintah dalam menciptakan lingkungan yang kondusif untuk keuangan-mikro yang berkesinambungan di Indonesia ?
Isu2 utama yang dikemukakan dan didiskusikan :
• Usaha2 pengentasan kemiskinan harus membedakan antara kategori2 kemiskinan dan mengidentifikasi segmen2 dimana keuangan-mikro cocok serta dimana bantuan non-finansial dibutuhkan.
• Pegawai2 berpenghasilan rendah dan orang2 yang bekerja sendiri (self-employed), misalnya petani2 kecil, pedagang2 kecil, serta operator2 dari perusahaan2 mikro dan usaha2 kecil membutuhkan keuangan-mikro untuk membantu mereka dalam memperluas pendapatan atas aktivitas2 yang berskala mikro dan kecil, melalui pinjaman2 modal kerja. Mereka juga membutuhkan fasilitas2 yang mudah dan aman bagi tabungan mereka, yang seharusnya dikaitkan pada mekanisme perlindungan deposito yang adil dan berkesinambungan.
• Pemerintah perlu mendefinisikan strategi pengentasan kemiskinan dan komponen2nya, serta membentuk kebijakan keuangan-mikro nasional, yang merupakan bagian dari strategi keseluruhan bagi pengembangan sektor keuangan. Implementasi dari kebijakan nasional tersebut memerlukan suatu kerangka peraturan agar keuangan-mikro dapat berkesinambungan, serta suatu titik fokus yang jelas sehubungan dengan kepemimpinan dan koordinasi. Pemerintah seharusnya tidak menciptakan program2 keuangan-mikro yang saling bersaing, misalnya dengan menyalurkan sumber2 dana murah melalui institusi2 penyalur eceran (retail delivery institutions) yang didukung pemerintah.
• Tugas penting pemerintah adalah menangani kebutuhan2 pengembangan kapasitas dari institusi2 keuangan-mikro, juga para pelaku perusahaan2 mikro dan usaha2 kecil. Agenda pengembangan kapasitas harus termasuk dokumentasi mengenai luas cakupan dimana keuangan-mikro telah mengentaskan kemiskinan di Indonesia, sedemikian rupa sehingga tersedia informasi mengenai hal2 yang telah terbukti dapat berjalan dan tidak dapat berjalan didalam program2 keuangan-mikro dari berbagai institusi.
Pertanyaan2 untuk Kelompok 3 dan Kelompok 4 : (1) Apakah Indonesia membutuhkan suatu strategi nasional untuk keuangan-mikro yang
berkesinambungan ? Bila membutuhkan, lembaga utama mana yang harus bertangung-jawab atas pengembangan strategi ini ?
(2) Apa peran sektor swasta, termasuk organisasi2 non-pemerintah, dalam pengembangan keuangan-mikro yang berkesinambungan di Indonesia ?
Isu2 utama yang dikemukakan dan didiskusikan : ∗ Di masa lampau, inisiatif2 keuangan-mikro dilakukan tanpa suatu strategi
pokok atau yang mempersatukan – walaupun persiapan suatu konsep undang2 mengenai keuangan-mikro dapat diinterpretasikan sebagai satu langkah kearah pendefinisian suatu strategi nasional. Dengan pengalaman Indonesia mengenai keberadaan pemerintah yang dominan dalam keuangan-mikro, suatu “strategi nasional” memberi bayangan mengenai suatu usaha nasional yang direncanakan dan diarahkan dari pusat, sedangkan pembentukan suatu “kebijakan nasional” dapat berarti peran yang lebih besar bagi unit2 dan organisasi2 sektor swasta.
∗ Perlu kebijakan yang membedakan keuangan-mikro yang berkesinambungan dengan kredit program atau kredit bersubsidi, serta mengikuti prinsip “tidak merusak” keuangan-mikro yang dapat berjalan dan berkesinam-bungan. Kebijakan nasional yang responsif harus mengarah kepada suatu lingkungan peraturan secara keseluruhan, dimana institusi2 keuangan-mikro bisa mendapatkan (i) jalur2 alternatif untuk perkembangan yang berkesinambungan
dan transformasi institusi; (ii) persaingan yang produktif; (iii) kesempatan untuk pengembangan keterampilan manajemen serta keterampilan pegawai; (iv) insentif untuk mengurangi biaya modal bagi perluasan; dan (v) peraturan2 yang tidak menghambat perluasan ke daerah2 pedesaan atau pembentukan organisasi2 jaringan tingkat dua.
∗ Departemen Keuangan harus mengambil tanggung-jawab utama dalam mengembangkan, memformulasikan, serta membentuk kebijakan nasional untuk keuangan-mikro – dengan kerjasama dari departemen2 lain dan lembaga2 yang mempunyai keterampilan tehnis berorientasi keuangan-mikro, serta personil dan keberadaan diberbagai daerah di negara ini, dan dengan memastikan bahwa pihak2 yang berkepentingan (stakeholders) dalam keuangan-mikro dari sektor swasta mempunyai akses terhadap proses konsultatif pada saat kebijakan2 dibuat.
∗ Peran dominan dari pemerintah dan sektor publik dalam intervensi pengentasan kemiskinan dan keuangan-mikro telah sering mendesak operasi2 dan inisiatif2 sektor swasta, yang selama ini hanya memainkan peran yang kecil (tetapi sekarang berkembang) dalam penyediaan keuangan-mikro komersial. Para “stakeholders” sektor swasta (termasuk bank2 serta organisasi2 non-pemerintah domestik dan internasional) sangat diperlukan sebagai (i) investor2 penggerak dalam unit2 keuangan-mikro komersial; (ii) sumber2 modal dari pinjaman komersial; dan (iii) pihak2 yang memberi pengetahuan dan inovasi mengenai praktek2 terbaik serta teknologi.
∗ Peran yang lebih besar bagi sektor swasta terhambat terutama karena (i) larangan bagi partisipasi unit2 asing dalam permodalan institusi2 keuangan-mikro (termasuk BPR), bahkan termasuk untuk posisi minoritas; (ii) hambatan mengenai penggunaan tenaga2 asing dalam operasi institusi2 keuangan-mikro; (iii) hambatan2 sehubungan dengan proses pembentukan identitas hukum bagi institusi2 keuangan-mikro, termasuk pembentukan unit korporasi tingkat dua sebagai organisasi payung bagi institusi2 keuangan-mikro tingkat utama; dan (iv) hambatan2 hukum dan permodalan sehubungan dengan perluasan keberadaan institusi2 keuangan-mikro ke daerah2 pedesaan.
Hari 2, Tema : Pengembangan Kapasitas Institusi untuk Keuangan-Mikro yang Berkesinambungan. Pertanyaan untuk Kelompok 1 dan Kelompok 2 : (1) Apakah pengembangan kapasitas institusi penting bagi keuangan-mikro yang
berkesinambungan di Indonesia ? Bila penting, langkah2 apa yang dapat diambil oleh industri keuangan-makro untuk meningkatkan keuangan-mikro yang berkesinambungan di Indonesia ? Isu2 utama yang dikemukakan dan didiskusikan : ∗ Perlu fokus pada kebutuhan2 pengembangan kapasitas dari suatu cakupan luas
institusi2 keuangan-mikro dengan format organisasi, kepemilikan, dan sponsor yang berbeda-beda; sumber2 pendanaan dan bantuan teknis; “posisi” pasar dan daerah operasi. Yang sama pentingnya adalah pengembangan kapasitas (manajemen, operasi, pemasaran, pengendalian kualitas) dari basis nasabah perusahaan2 mikro dan
usaha2 kecil dari institusi2 keuangan-mikro. Sejumlah lembaga2 dan departemen2 pemerintah -- terutama Departemen Keuangan dan Departemen Dalam Negeri (karena adanya program desentralisasi) -- mempunyai kebutuhan yang mendesak untuk mendapatkan pengetahuan dan pengenalan mengenai proses dan operasi dari keuangan-mikro.
∗ Kebutuhan2 pengembangan kapasitas dari institusi2 keuangan-mikro Indonesia sangat berbeda-beda, tergantung pada format organisasi serta daerah operasi. Mendesain program2 yang tepat bagi pengembangan kapasitas seharusnya tidak dilakukan tanpa menmpersiapkan suatu database yang diperlukan mengenai institusi2 keuangan-mikro di Indonesia – suatu daftar dan penilaian dari berbagai jenis institusi keuangan-mikro di pasar2 yang berbeda dimana institusi2 ini beroperasi, serta ukuran operasi secara relatif, jangkauan, dan structur keuangan, dll. dari institusi2 ini untuk mengidentifikasi dan membuat katalog mengenai “kekuatan” dan “kelemahan” utama.
∗ Berbagai komponen dari industri keuangan-mikro, dengan bantuan dan dukungan aktif dari pemerintah, harus mengambil inisiatif dalam mengatur asosiasi jaringan untuk organisasi mereka masing2. Banyak pelajaran yang dapat dipetik dan disesuaikan dari pengalaman institusi2 keuangan-mikro dan asosiasi2 yang sukses di Indonesia serta dari negara2 lain, yang dalam hal ini sangat mirip dengan Indonesia. ∗ Diperlukan asosiasi2 jaringan untuk berbagai jenis institusi keuangan-mikro
untuk (i) menghasilkan diskusi2 terfokus dan konsensus mengenai kebutuhan2 pengembangan kapasitas; (ii) mengakses bantuan teknis yang tersedia dari organisasi2 internasional; (iii) menyederhanakan dialog dengan departemen2 dan lembaga2 pemerintah terkait, misalnya Departemen Keuangan dan/atau Bank Indonesia, mengenai berbagai klausal yang terdapat dalam konsep undang2 mengenai keuangan mikro saat ini, lembaga pengawas untuk keuangan-mikro, peraturan kehati-hatian dasar sebagai pedoman operasi bagi institusi2 keuangan-mikro serta kerangka yang tepat bagi perlindungan deposit; dan (iv) dialog terbuka dengan pemerintah atas isu2 mengenai kandungan asing pada investasi modal dan kepemilikan, serta penugasan/penempatan profesional/teknisi/tenaga ahli asing secara terbatas pada institusi2 keuangan-mikro Indonesia (termasuk BPR)
∗ Organisasi2 jaringan sangat diperlukan untuk menyebarkan pengalaman2 mengenai praktek2 terbaik serta mendukung penggunaan standar2, prinsip2, dan pedoman2 umum untuk operasi berdasarkan prinsip kehati-hatian (termasuk administrasi kredit, manajemen pendanaan, sistem2 pengendalian intern, pengembangan staff, dll.) serta pengukuran kinerja institusi2 keuangan-mikro.
∗ Hambatan utama dalam pembentukan organisasi2 jaringan adalah bahwa hukum di Indonesia saat ini tidak mengijinkan unit2 yang legal secara hukum (institusi2 keuangan-mikro tingkat utama) untuk memilik saham pada organisasi jaringan tingkat dua yang didirikan sebagai suatu unit korporasi.
Pertanyaan untuk Kelompok 3 dan Kelompok 4 : (2) Langkah2 apa yang harus diambil oleh industri keuangan-mikro dalam menetapkan
standar2 untuk memperbaiki kinerja keuangan institusi2 tersebut ? Alat2 pengembangan kapasitas institusi mana yang relevan untuk konteks Indonesia ? Isu2 utama yang dikemukakan dan didiskusikan : ∗ Industri keuangan-mikro dapat memberikan masukan2 yang berharga bagi
lembaga2 pemerintah yang terlibat dalam pembuatan kebijakan serta lingkungan peraturan dan pengawasan berdasarkan prinsip kehati-hatian untuk keuangan-mikro, menyebarkan dan mendorong penggunaan sukarela serta ketaatan yang diharuskan berdasarkan “standar2” untuk pengendalian kualitas, pengukuran kinerja, serta penerapan pengelolaan yang effektif. Terminologi “standar2” mempunyai arti tertentu dalam bahasa Indonesia, jadi terminologi “prinsip2” lebih dipilih. Prinsip2 yang harus ditaati harus mempertimbangkan adanya “stakeholders” yang berbeda untuk kategori2 institusi keuangan-mikro yang berbeda. ∗ Yang diinginkan adalah adanya satu kelompok prinsip kehati-hatian yang
umum dan mendasar, yang konsisten dengan praktek2 terbaik secara internasional. Sebagai contoh, catatan2 dan laporan2 akuntansi harus secara seragam disajikan berdasarkan prinsip kas saja, daripada berdasarkan campuran antara prinsip pertumbuhan dan prinsip kas.
∗ Organisasi2 jaringan dapat mempunyai peran yang menentukan dalam pembentukan konsensus diantara para praktisi (dengan bantuan teknis oleh profesional2 dan tenaga2 ahli di lembaga2 internasional) mengenai prinsip2 operasi kehati-hatian minimum untuk setiap kategori institusi keuangan-mikro. Prinsip2 utama dapat secara bertahap bertambah berdasarkan tingkat operasi dan aktivitas intermediasi keuangan dari institusi keuangan-mikro.
∗ Prinsip2 kehati-hatian, yang diterapkan sebagai suatu keharusan, mengharuskan pemerintah untuk memandatkan peraturan2 dan instruksi2 untuk memastikan ketaatan. Namun demikian, prinsip2 kehati-hatian, yang diterapkan tidak sebagai suatu keharusan, membutuhkan pendefinisian suatu proses guna menghasilkan konsensus serta ketaatan. ∗ Industri keuangan-mikro harus mencari pengalaman2 relevan bukan
hanya dari Indonesia, tetapi juga dari negara2 lain sebagai perbandingan berdasarkan 3 skenario yang memungkinkan : (i) Diterapkan hanya berdasarkan keharusan, sebagaimana dimandatkan oleh pemerintah; (ii) Diterapkan hanya berdasarkan kesukarelaan, yang berarti pengaturan sendiri; (iii) Diterapkan secara kombinasi berdasarkan prinsip2 pengaturan yang merupakan keharusan bersamaan dengan ketaatan sukarela berdasarkan pedoman2 kehati-hatian.
∗ Sistem peringkat “credit union” di Guatemala, sistem peringkat risiko “Komodo” dari PT Ukabima, sistem peringkat kredit dari M-CRIL di India, serta indikator2 kinerja yang diterapkan oleh Phillipine Coalition for Microfinance Standards merupakan contoh2 relevan untuk dipertimbangkan oleh industri keuangan-mikro serta asosiasi2 yang ada.
∗ Sumber2 lain mengenai informasi atau pola2 terapan untuk pengukuran kinerja yang berguna bagi industri keuangan-mikro di Indonesia dapat ditemukan di “Micro Banking Buletin” serta di beberapa pedoman2 teknis yang tersedia dari CGAP.
∗ Prinsip2 kinerja dan operasi yang akan diikuti serta ditaati akan membantu dalam penentuan bentuk2 dan prioritas2 dari kebutuhan2 akan bantuan teknis serta pelatihan untuk pengembangan kapasitas.
IV. Ringkasan dan Penutup Keuangan-Mikro Merupakan Salah Satu Alat Pengentasan Kemiskinan. ∗ Bergerak dari prinsip ke praktek, tidak mudah untuk mendefinisikan batas bawah
kemiskinan, dibawah mana keuangan-mikro tidak dianjurkan. Jelas bahwa biaya intermediasi sosial akan bertambah, pada saat perluasan keuangan-mikro yang berkesinambungan kepada golongan yang sangat miskin menjadi semakin dalam.
∗ Urgensi politik untuk menunjukkan tindakan dalam pengentasan kemiskinan menimbulkan dilema bagi para pendukung keuangan-mikro. Paradigma lama (kredit program bersubsidi untuk golongan miskin) dapat dengan cepat diimplementasikan dan terlihat hasilnya, sedangkan ketidak-sinambungannya baru terlihat setelah jangka waktu lama. Paradigma baru (pendekatan sistem2 keuangan) pada akhirnya pasti akan lebih bermanfaat bagi golongan miskin, tetapi secara institusi lebih sulit dan lebih lambat mencapai hasil2 yang dapat dilihat.
∗ Berhadapan dengan realitas politis seperti ini, para pendukung paradigma baru perlu sepenuhnya mengikut-sertakan pemerintah dan DPR/MPR didalam diskusi2 konstruktif mengenai kegagalan2 paradigma lama serta prioritas2 untuk pencapaian manfaat2 dari paradigma baru.
Keuangan-Mikro Merupakan Satu Komponen dari Strategi Sistem Keuangan ∗ Pendekatan sistem2 keuangan terhadap keuangan-mikro akan memberikan hasil2
yang terbesar dan sangat berkesinambungan. ∗ Indonesia membutuhkan lembaga utama untuk mendorong keuangan-mikro; dan
karena pentingnya hubungan2 sistem keuangan serta adanya redefinisi peran Bank Indonesia, maka Departemen Keuangan merupakan pilihan yang logis.
Peran Pemerintah ∗ Departemen Keuangan dibutuhkan untuk memainkan peran kepemimpinan yang
lebih besar didalam pendefinisian suatu strategi keuangan-mikro, dengan bantuan Kementerian Koordinator Ekonomi
∗ Didalam memproses konsep undang2 mengenai keuangan-mikro, Departemen Keuangan perlu meninjau-ulang terutama butir2 awal mengenai registrasi dan batas maksimum tabungan yang diijinkan bagi institusi2 bukan-bank, serta larangan atas kepemilikan non-Indonesia. Tinjauan-ulang yang dapat dipercaya dan bermanfaat ini harus mencakup konsultasi luas dengan para “stakeholder”.
∗ Untuk penerapannya, usulan undang2 mengenai keuangan-mikro perlu disertai dengan definisi mengenai kerangka pengawasan. Isu2 yang perlu diputuskan termasuk cakupan (bank2 keuangan-mikro, lembaga2 non-bank, koperasi2
keuangan), kapasitas untuk desentralisasi implementasi, dan hubungan dengan LOJK (Lembaga Otoritas Jasa Keuangan).
∗ Pemerintah harus memindahkan sumber-daya2 dari kredit program bersubsidi ke pengembangan kapasitas, untuk perluasan jangkauan dan kesinambungan oleh penyedia2 keuangan-mikro, termasuk bank2.
∗ Akses ke Pemerintah Pusat bagi organisasi2 non-pemerintah yang menyediakan keuangan-mikro masih sulit. Pemerintah akan mendapatkan manfaat dari kebijakan yang lebih terbuka dengan cara bermitra dengan organisasi2 non-pemerintah ini, serta berintegrasi dengan pengalaman luas dan keberadaan mereka di tingkat lokal didalam pengembangan strategi dan kapasitas keuangan-mikro.
Peran Dari Praktisi2 Keuangan-Mikro ∗ Baik bank2 maupun lembaga2 non-bank mempunyai peran penting dalam
keuangan-mikro di Indonesia. Bagi lembaga2 non-bank, pengembangan kapasitas profesional merupakan suatu prioritas, termasuk pemeriksaan dan pengendalian intern, sistem2 insentif, sistem2 informasi manajemen, dan manajemen risiko.
∗ Dibutuhkan jaringan2 dan asosiasi2 nasional yang lebih kuat untuk menyuarakan serta mendukung pandangan2 otonom mengenai kepentingan2 “industri” sehubungan dengan standar2, kapasitas2, dan rezim2 kebijakan. Bagi lembaga2 non-bank, suatu jaringan yang lebih kuat akan merupakan sarana untuk pengembangan kapasitas penyerapan bagi para pemberi jasa serta para mitra dalam bantuan teknis penyediaan modal. Bagi bank2, asosiasi2 profesional yang lebih kuat akan memberi kontribusi dalam pembentukan landasan yang mendukung kapasitas2 sistem keuangan, sebagai contoh, lembaga2 penjamin deposito dan biro2 kredit.
Peran Dari Pelaku2 Eksternal ∗ Tipe2 yang berbeda dari pelaku2 eksternal membawa berbagai “strengths”
(kekuatan) kedalam kemitraan dalam pengembangan kapasitas keuangan-mikro Indonesia, termasuk institusi2 keuangan internasional (ADB, WB, IDB, dll.) program2 bantuan bilateral, organisasi2 non-pemerintah internasional, serta penyedia jasa langsung sektor keuangan-mikro (CGAP, M-CRIL, dll.).
∗ Pelaku eksternal harus bertindak hati-hati untuk “tidak merusak” dengan mentaati prinsip2 praktek keuangan-mikro yang baik, dimana terdapat konsensus internasional yang baik.
∗ Kepemimpinan Departemen Keuangan dalam keuangan-mikro akan membutuhkan perhatian untuk pengembangan kapasitas didalam organisasi tersebut, dan dukungan donor dalam usaha ini akan sangat berharga.
∗ Kemitraan antara penyedia2 keuangan-mikro Indonesia dan pelaku2 eksternal – terutama lembaga2 bilateral dan organisasi2 non-pemerintah internasional – dapat berfungsi sebagai saluran praktek2 internasional terbaik serta pembiayaan.
∗ Suatu “industri” jasa2 pendukung profesional dalam keuangan-mikro sedang muncul secara internasional, dan dapat bekerja sama dengan penyedia2 keuangan-mikro Indonesia.
∗ Pembiayaan dari pelaku2 eksternal harus fokus pada : (i) pengembangan kapasitas di seluruh sistem keuangan-mikro (penyedia, jasa, pembuat peraturan, pembentuk kebijakan); (ii) program2 pengembangan kapasitas yang mendorong jangkauan
institusi2 keuangan-mikro komersial, dan bukan tingkat suku bunga kepada nasabah2; (iii) pembiayaan langsung kepada penyalur2 keuangan-mikro dalam bentuk modal, pinjaman, atau hibah.
Sustainable Microfinance: Developing a Sector Strategy and Building Institutional Capacity
Workshop Program
Venue: World Bank Office in Jakarta
February 11: Global Best Practices in Developing a Microfinance Sector Strategy Morning
8:30 – 8:45 Registration
8:45 – 9:15 Welcome remarks and introduction to the Workshop: Mr. Mark Baird, Vice President and Country Director for Indonesia, The
World Bank His Excellency, DR. Boediono, Minister of Finance, Indonesia
9:15 – 9:25 Mr. Stephen Mink, Rural Sector Unit Coordinator, The World Bank Office Jakarta, Overview and Running Order for the Workshop
Moderator: Ms. Bikki Randhawa, Senior Financial Specialist, The World Bank, Washington, DC
9:25 – 9:55 Presenter: Ms. Marguerite S. Robinson, Institute Fellow Emeritus, Harvard Institute for International Development
Topic: The importance of a clear vision and strategy in developing sustainable microfinance along the financial systems approach
9:55 – 10:25 Presenter: Mr. Ricardo P. Lirio, Managing Director – Supervision and Examination II, Bangko Sentral ng Pilipinas
Topic: The Philippine experience in developing a vision/ strategy for financial services to the poor and adjusting the regulatory framework
10:25 – 10:40 Questions & Answers
10:40 – 10:55 Coffee and Tea Break
Moderator: Mr. Stephen Mink, Rural Sector Unit Coordinator, The World Bank Office Jakarta
10:55 – 11:25 Presenter: Mr. Abdul Salam, Director, BPR Directorate, Bank Indonesia Topic: Status of efforts to establish a regulatory framework for non-bank
microfinance institutions as an integral component of the strategy for microfinance in Indonesia
11:25 – 11:55 Presenter: Mr. Darmin Nasution, Director General, Financial Institutions,
Ministry of Finance, Indonesia Topic: Status of efforts to formulate a national strategy for microfinance
in Indonesia
11:55 – 12:10 Questions & Answers
12:10 – 1:30 Lunch
Afternoon
1:30 – 3:00 Facilitated small-group discussions on the lessons that Indonesia can draw from the presentations and panel discussions in the morning session. Each of the 4 group will prepare a summary of the points and issues with respect to the next steps for Indonesia to take in formulating a strategy and vision for microfinance, on which the group has reached consensus. The group summary will then be presented to the workshop at the plenary session.
3:00 – 3:15 Coffee and Tea Break
3:15 – 4:45 Moderator: Ms. Jennifer Isern, Senior Private Sector Development Specialist, CGAP, Washington, DC Plenary session Presentation of the 4 working group summaries – 10 minutes for each group presentation + 10 minutes each for questions from the floor and discussions.
4:45 – 5:00 Summary and closing for Day 1 , to be given by Ms. Bikki Randhawa, Senior Financial Specialist, The World Bank, Washington, DC.
February 12: Building Institutional Capacity of Microfinance Providers in Indonesia
Morning
Moderator: Mr. Joselito Gallardo, Consultant – Banking and Microfinance, The World Bank, Washington, DC
9:00 – 9:30 Presenter: Ms. Marguerite S. Robinson, Institute Fellow Emeritus, Harvard Institute for International Development
Overview: Why is continuing development of institutional capacity indispensable for sustainable microfinance?
9:30 – 9:45 Questions & Answers
9:45 – 10:15 Ms. Jennifer Isern, Senior Private Sector Development Specialist, CGAP, Washington, DC
The use and application of standardized tools for measuring and assessing levels of institutional capacity
10:15 – 10:30 Questions & Answers
10:30 – 10:45 Coffee and Tea Break
Moderator: Ms. Bikki Randhawa, Senior Financial Specialist, The World Bank, Washington, DC
10:45 – 11:15 Presenter: Mr. Sanjay Sinha, Managing Director, M-CRIL, India Key issues in developing institutional capacity of microfinance institutions, based on the regional experience of applying quantitative techniques (including credit rating systems) to assess the strengths, weaknesses and priority ranking of needs for capacity building for microfinance institutions in South and East Asia.
11:15 – 11:30 Questions & Answers
11:30 – 12:00 Presenter: Mr. Dominique Gallmann, Deputy Team Leader, GTZ Overview of the Indonesian landscape for microfinance: typology of formal, semi-formal and informal institutions providing microfinance services to the poor, and the GTZ experience in capacity building of microfinance institutions in Indonesia.
12:00 – 12:15 Questions & Answers
12:15 – 1:30 Lunch Afternoon
1:30 – 2:45 Facilitated small-group discussions on the lessons that Indonesia can draw from the presentations and panel discussions in the morning session. Each of the 4 groups will prepare a summary of the points and issues with respect to the next steps for Indonesia to take in formulating an action program for capacity assessment and capacity building of microfinance institutions. The group summary will then be presented to the workshop at the plenary session in the afternoon.
2:45 – 3:00 Coffee and Tea Break
3:00 – 4:30 Moderator: Mr. Dominique Gallmann, Deputy Team Leader, GTZ, Bali Plenary session Presentation of the 4 working group Summaries – 10 minutes for each group presentation + 10 minutes each for questions from the floor and discussions.
4:30 – 5:00 Closing Session Mr. Stephen Mink, Rural Sector Unit Coordinator, The World Bank Office Jakarta Summing up: Discussion of next steps forward.
Microfinance Workshop Jakarta, February 11, 2002
Opening Remarks by Mark Baird
Country Director, World Bank
The primary objective of the Bank's work in Indonesia is to reduce poverty. Despite the progress that has been made since the height of the crisis, more than half of the population still lives on less than $2 per day. Many of these people are poor or vulnerable to becoming poor if they lose their job, are affected by natural disasters, or have to pay more for basic commodities. One component of the overall work on poverty is increasing access to financial services to those segments of the population who are underserved. Expanding access of the poor to financial services is a central problem and priority for the government.
Microfinance is one of the instruments available for alleviating poverty. Global best practice has shown that microfinance institutions can be built to be financially viable and capable of reaching a large number of clients with repeat loans. However, microfinance cannot be the cure for all segments of the poor. Different segments have varying needs for assistance -- from safety net interventions to financial services. In addition, successful microfinance is built around institutions rather than programs which come to an end after the funding runs out.
Indonesia has a rich experience in building a successful microfinance model through the BRI Unit Desa network. Institutional development has been a key to the success of this model which started as a pilot and has become an impressive provider of savings products and credit. What is required is to build on such lessons of success and add to the models which work, such that outreach to the poor can be expanded and additional institutions which are sustainable can be added to the landscape of microfinance. There is an urgency to seek results such that the vast majority of the poor have the opportunity to access financial services.
In the context of the financial sector work that the Bank has been heading in Indonesia, the Bank has been providing assistance to the government on microfinance issues since 2000. The request to undertake this area of work as part of the overall financial sector strategy work was made by the government to ensure that the provision of financial services to the poor is an integral part of the overall sector strategy.
The three components of this work are: (1) assisting the government in developing a vision and strategy for providing sustainable financial services to the poor; (2) clarifying and unifying the legal and regulatory framework for rural finance/microfinance institutions; and (3) assessing the capacity of existing institutions which provide financial services to the poor.
The objective of this workshop is to provide and disseminate information about global best practices on developing a national strategy on microfinance and building institutional capacity of those institutions which provide financial services to the poor such that they develop along a path to become sustainable. The workshop will provide a forum for a discussion of lessons learnt on how other countries have formulated a vision and strategy for developing sustainable financial services to the poor and the process by which a lead ministry takes on this role. In addition, the workshop will highlight the application of standardized tools for measuring and assessing levels of institutional capacity.
Workshop participants come from various ministries and agencies of the national and regional government, organizations in the private sector and international experts eager to share their global experience. The cross-section of stakeholders present here for the Workshop is a fertile ground for lively discussions and exchange of ideas on how access to financial services for Indonesia's poor can be improved and expanded. This Workshop thus constitutes a good opportunity to establish priorities and build consensus, which are indispensable in the task of formulating national policy.
I wish you all a productive and successful meeting. This can provide valuable
input on how to incorporate microfinance into the government’s poverty reduction strategy – and the appropriate role for creditors and donors, such as the World Bank.
Dr. Boediono Opening Speeches (See Executve Summary in Engligh)
Presentations
(See separate files)
WORKSHOP ON
SUSTAINABLE MICRO-FINANCE: Developing a Sector Strategy and Building Institutional Capacity
Bromo Meeting Room, February 11 - 12, 2002
LIST OF PARTICIPANTS
No Name Department/ Institutions
Address Contact Telephone/Fax
I. Government of Indonesia
1 H.E. Boediono Minister of Finance Jl. Lapangan Banteng Timur
381-4324/380-8388
2 Mr. Darmin Nasution
MOF, Director General, Financial Institution
Gedung A, Lantai 3 Jl. Dr. Wahidin No. 1
384 5676, fax 3847434
3 Mr. Sirman Purba
(to substitue Mr. Kaman Nainggolan)
Head, Bureau of Planning and Finance and Director Bureau of Finance, Ministry of Agriculture
Jl. Harsono RM No. 3 Bld A, F4 o. 438, Jakarta
780 4981/780 4156 [email protected]
4 Ms. Ratna Djuwita
Wahab
Deputy III Menko Perekonomian, Bidang Koordinasi Pemanfaatan Sumber Daya Alam dan Peningkatan Produktifitas Petani Nelayan, Menko Perekonomian
Bappenas, 3rd Floor Jl. Taman Suropati 2 Jakarta
335 589
5 Mr. Edy Putra
Irawady Menko Perekonomian 392 6588/0811 811963
6 Mr. Bayu Krisnamurthi
Deputy Assistant for Agribusines Development Menko Perekonomian
Gedung Madiun, 3rd Floor Jl. Madiun
345 724, 0251 344113
7 Ms. Suharmiyati (to substitute Mr. Dipo Alam)
Deputy Minister for Industry Trade and Small Medium Enterprise Empowerment, Coordinating Ministry
Gedung Utama, 5th Floor Jl. Lapangan Banteng Timur 2-4 Jakarta Pusat
352 11861 352 1978, fax: 352 1855
8 Mr. Sri Bagus
Guritno Head of Section Investment for Banking Sector, Ministry of Finance
Jl. Dr. Wahidin No.1, Building A, 5th Floor, Jakarta 10710
3456854 fax 3847437 [email protected]
9 Mr. Agung Mulyana DG of Community
Empowerment, Ministry of Home Affairs (MOHA)
Jl. Raya Pasar Minggu Km. 19, Jakarta 12072
7919 4951, 7919 7108 [email protected] 7941938
10 11
Mr. Pung Parmadi Sulaksono Mr. Awan S. to substitute Tatag Wiranto
Bappenas
Jl. Taman Suropati No. 2, Jakarta
334 195, 334 195, 336 207 ext. 401
12 Mr. Antonius Tarigan
Bappenas Jl. Taman Suropati No. 2, Jakarta
334 195, [email protected]
13
Mr. Agus Prabowo
for Mr. Ikhwanudin
Mawardi
Director, Directorate Regional Staff of Directorate BAPPENAS
Gedung Madiun, 4th floor Jl. Madiun No. 4, Jakarta
334 251, fax 391 6338 [email protected]
14 Mr. Yandri Ali Head of Financial Institution
& Cooperation, Directorate of Financi, Min. of Agriculture
Jl. Harsono RM No. 3, Ragunan, Jakarta 12550
781 6085, fax: 781 8654, [email protected]
15 Mr. Deswandy
Agusman Staff Ahli Menteri Bidang Pemanfaat Teknologi State Ministry of Cooperatives
Gedung Koperasi, 5th floor Jl. H.R. Rasuna Said No. 3-5 Jakarta Selatan
5299 2879
16 Mr. Eriyatno Deputy for Business
Financing, State Ministry of Cooperatives and SME
Gedung Koperasi, 3rd floor Jl. H.R. Rasuna Said No. 3-5 Jakarta Selatan
526 8189, fax: 520 4385, 5299 2831, [email protected]
17
Mr. Abdul Salam
Director Pengawasan BPR Bank Indonesia
Kebon Sirih Bulding, 2nd Floor Jl. Kebon Sirih 82-84
381 8733
18 Mr. Ridwan
Situmorang DG of Financial Institution Gedung A, Lantai 3
Jl. Dr. Wahidin No. 1 384 5676, fax 3847434
19
Mr. Djoharis Lubis
Deputy for Poverty, Coordinating Ministry for People’s Welfare
Jl. Merdeka Barat No. 3, Jakarta 10110
345 9077, fax: 345 9077
20 21
Ms. Moon Cahyani Mr. Nyoman Meweh
Coordinating Ministry for People’s Welfare
Jl. Merdeka Barat No. 3, Jakarta 10110
3459 077
22 Ms. Sri Adiningsih DR, Economic Department, Gadjah Mada University
Jl. Bulaksumur, Yogyakarta
0274 551208, fax 0274 551 207, [email protected]
23 Mr. Yusuf Nawawi IVP Director, PT. BRI Head
Office Jl. Jend. Sudirman Kav. 44-46, Jakarta Pusat
5751029, fax: 251 1644, [email protected]
24 Mr. Wayan Alit Antara,
PT BRI, Managing Director for Micro Business and Retail
BRI I Building, 17th floor Jl. Jendral Sudirman kav. 44-46 Jakarta Pusat
575 1717, fax 570 6679, [email protected]
25 Mr. Philip Pinsent IVP BRI Consultant, Project
Operation Specialist Consultant
c/o BRI 1 Jl. Jend. Sudirman Kav. 44-46, Jakarta Pusat
5751026, fax: 2511 644, [email protected]
26 Mr. Eko
Heripoerwanto
Kimpraswil, Head of Sub-directorate of Finance Policy Development
Jl. Pattimura 20, Kebayoran Baru, Jakarta Selatan
7279.7024, 7279 9255
27 Ir. Sri Hartoyo KimPraswil Jl. Pattimura 20, Kebayoran Baru, Jakarta Selatan
727 98451
28 29
Mr. A. Heri Susanto Mr. Bitra Suyatno (to substitute Mr. Adhi Paryono)
MOF, Directorate of Financial Institution, for Banking and Financing Services
Jl. Dr. Wahidin No. 1, Jakarta Pusat
384 6474, 3507162
30 Mr. Ibnu Purna Head, Bureau of HAM,
Office of Vice President Jl. Kebon Sirih, Jakarta Pusat
384 7142, hp 0812 9410958
II Non Governmental Organizations
31 Mr. Bambang
Ismawan General Secretary Gema PKM Indonesia
Gedung Halim 1, Lt. 3, BKKBN Pusat, Jl. Permata 1, Jakarta Timur
420 4402/420 9412 800 4929, [email protected]
32 Mr. Riza
Primahendra General Secretary Gema PKM Indonesia
Gedung Halim 1, Lt. 3, BKKBN Pusat, Jl. Permata 1, Jakarta Timur
420 4402/420 9412, 800 4929, [email protected]
33 Mr. Titus K. Kurniadi Gema PKM Indonesia, Deputy Chairman
Gedung Halim 1, Lt. 3, BKKBN Pusat, Jl. Permata 1, Jakarta Timur
426 9571, [email protected]
34 Mr. Yosef Arihadi BINA SWADAYA, Director
of Development for Microfinance Facilitating Institutions,
Jl. Gunung Sahari III/7, Jakarta 10610
420 4402, 420 8412, [email protected]
35 Mr. Em. Haryadi ALTRABAKU
Asosiasi LPSM Mitra Lembaga Keuangan dan Pengembangan Usaha Mikro
c/o Jl. Gunung Sahari III/7, Jakarta 10610
4204402, 4208412,
36 Mr. Soni Harsono (to
substitute Mr. Awet Abadi)
PERBARINDO c/o Sekretariat DPP Perbarindo
Gedung IBI, Suite 109, Secretariat DPP Perbarindo, Jl. Kemang Raya No. 35, Jakarta Selatan
719 2221, 8833 7513 fax ::8833 7515, [email protected]
37 Mr. Abat Elias represented by Mr. Hubertus Wuryanto
General Manager, INKOPDIT
Gedung Janakarya, Lantai 3 Jl. Gunung Sahari III/7 Jakarta
426 9263, fax: 424 6527
38 Mr. Petrus Cannius
Suroso Parahyangan Catholic University, Bandung
Jl. Ciumbuleuit No. 94, Bandung 40141
022 2032576 ext. 141 022 203 1110, [email protected]
39 40
Ibu Adee Tiwow Bp. Osa Hartoyo
PT. UKABIMA General Managers
Jl. Panglima Polim X no. 6 Kebayoran Baru,, Jakarta Selatan
725 4177, fax: 722 2765 [email protected]
41 Mr. Slamet Riyadi FREND Foundation 7918 0346
42 Mr. Ibnoe Soedjono Chairman
LSP2I (Institute for Indonesian Cooperative Dev. Studies)
Jl. Gunung Sahari III/7 Jakarta, 10610
428 73019, fax : 424 6527
43 Mr. Hartanto Yayasan Dian Mandiri Jl. Imam Bonjol Ruko
Liga Mas, Blok A2 No. 11, Karawaci, Tangerang
558 9323
44 Mr. Frans Purnama Yayasan Dian Mandiri 0816 484 9743 558 9323
45
Mrs. Lydia Phillips (to substitute Mr. Roger Russell)
Canadian Co-Operative Association, Indonesia Co-operative Development Assistance Program
c/o Jl. Petogogan I/16A, Blok A, Jakarta 12140
726 8564, fax: 726 8565 [email protected]
46 Mr. Robby Tulus
Int. Cooperative Alliance Regional Office for Asia Pacific
E-4, Defence Colony, New Delhi 11024, India
(91-11) 469 4906, fax 469 4975, [email protected]
47 Mr. Amin Aziz Coordinator, Working Team,
Perhimpunan Lembaga Keuangan Mikro Indonesia - PINBUK
Jl. Tebet Timur Raya No. 56-57 Jakarta Selatan
8311 566, 830 5856, fax: 829 1096/829 9347, [email protected]@rad.net.id
48 Mr. Soeksmono Martokoesoemo
Individual, retired of Bank Indonesia Director
c/o Bogor Baru Block D VIII No. 9, Bogor
0251 331 085
49
Ms. Nurul Widyaningrum
AKATIGA Foundation Jl. Cilamaya No. 7, Bandung
022 4235526, fax: 426 0875, [email protected]
50 Mr. Sumantoro
Martowijoyo PUSAKO, Pusat Studi Keuangan Kecil dan Mikro
Jatibening Estate G 7/13 Bekasi 17412
6281 888 0104 [email protected]
51 Mr. Andi Ihsan Arkam
PERAMU Foundation Program Director
Jl. Gunung Batu no. 58, Kompleks Pusdiklat Dephutbun, Bogor 16118
0251-319869
52 53
Mr. Rozali Mr. Wem Nunuhitu
YTLM (Yayasan Tanaoba Lais Manekat), Executive Director
Jl. Soekarno No. 14, Kupang 85112
0380-823813, Fax. : 0380-827433, [email protected]
54 55
Mr. I. G. M. Oka Mr. Suryatmaja Indra
Bank Dagang Bali President Director and Director
Jl. Gajah Mada No. 2 P.O. Box 3388, Denpasar, Bali
0361-263736 Fax. : 0361-264292, 231226, [email protected]
56 Mr. Sukiswo
Dirdjosuparto Institut Bankir Indonesia, Director
Jl. Kemang Raya 35, Kebayoran Baru, Jakarta Selatan
7179 0819, fax: 719 5573, [email protected]
57 Ms. Frida Rustiani Chairperson, Jaringan
Nasional Pendukung UKM - Jl. Tebet Timur Dalam X/2, Jakarta Selatan
8370 3253, [email protected]
58 Ms. Fifi Rashando Opportunity Int. c/o YTLM Kupang
III. Donors
59
Mr. Kieran Donaghue
AUSAID, Australian Embassy
Jl. H.R. Rasuna Said Kav. J 15-16 Jakarta Selatan
2550 5570 [email protected]@ausaid.gov.au
60 61
Mr. Mike Ryan Ms. Sununtar Setboonsarng
ADB Jakarta ADB Manila
Gedung BRI II/ 7th Floor Jl. Jend. Sudirman Jakarta
251 2721-9, [email protected] (632) 632-6958, fax: 636
2410, [email protected]
62
Mr. Roderick Brazier
ASIA Foundation, Director, Economic Programming
Jl. Darmawangsa Raya No. 50, Jakarta Selatan
726 1860, fax: 726 2834 [email protected]
63 Mr. Tom Timberg
USAID Consultant Kebon Sirih Building, 5th Floor Bank Indonesia Jl. Kebon Sirih 82-84
381 8478 0812 9986196
64 65
Mr. Firman Aji Ms. Tuti Soepardjo
USAID, Program Manager and Program Mgt Specialist
American Embassy Jl. Merdeka Selatan 3-5, Jakarta
3435 9359, 3435 9408 fax: 380 6694, [email protected] [email protected]
66 Mr. Dominique
Gallmann GTZ-ProFI Bank Indonesia, Jl. W.R.
Supratman No. 1, Denpasar
0361 265 877 fax : 0361 265833 [email protected]
IV. Bank
67 Mr. Stephen D. Mink Rural Development [email protected]
68 Ms. Maria Triyani Operations Officer [email protected]
69 Mr. Mark Baird Country Director Ext. 3069
70 Ms. Dara Lengkong WBOJ/PREM Ext. 3063, [email protected]
71 Ms. Bikki Randhawa WBOJ/FSD [email protected]
72 Mr. Joselito Gallardo WBOJ/FSD [email protected]
73 Ms. Marguerite S.
Robinson Institute Fellow Emeritus, Harvard Institute for International Dev.
74 Mr. Ricardo P. Lirio Managing Director –
Supervision and Examination II, Bangko Sentral ng Pilipinas
E-mail: [email protected]
75 Mr. Sanjay Sinha Managing Director, M-
CRIL, India E-mail:
76 Mr. Stephen Grenville Consultant – Ministry of Finance c/o Bikki Randhawa
77 Ms. Jennifer Isern Senior Private Sector
Development Specialist, CGAP/World Bank
E-mail: [email protected]
78 Mr. Leslie Barcus CGAP/World Bank [email protected]
The Financial Systems Approach to Microfinance
Marguerite S. Robinson Institute Fellow Emeritus Harvard Institute for International Development
Jakarta: 11 February 2002
WHAT IS COMMERCIAL MICROFINANCE?
• Small-scale financial services — primarily credit and voluntary savings —• Provided by competing regulated financially-self-sufficient institutions • To economically active poor people—men and women, rural and urban.
In its most advanced form, all microloans are fully financed by savings, commercial debt, for-profit investment, and retained earnings (in a variety of forms and combinations).
WHO ARE THE CLIENTS?
• BORROWERS: economically active poor and lower-middle income people –– who farm or fish or herd; – who operate microenterprises where goods
are produced, repaired, recycled or sold; – who provide services; or work for wages or
commissions. • SAVERS: people of all income levels
who live or work near a branch or unit of the financial institution.
WHO ARE THE ECONOMICALLY ACTIVE POOR?
• People who have some form of employment and are not severely food-deficit or destitute.
• People who save in small increments.• People who can repay a small loan at an
interest rate that enables the lending institution to be financially self sufficient.
The Poverty Alleviation Toolbox
Income Level Commercial Financial Services Subsidized Poverty Alleviation Programs
Lower middle income
Economically active poor
Extremely poor and displaced households
Official Poverty Line
Standard commercial bank loans; full range of
savings services Commercial
micro loans
Interest-bearing savings
accounts for small savers
Poverty programs for such purposes as food and water,
medicine and nutrition,
employment generation, skills
training, and relocation
THE OLD PARADIGM:SUBSIDIZED MICROCREDIT
Indicator Assumptions PrimaryTarget
Policies & Practices
Results
Credit Poor cannot afford commercial credit
Very poor, especially women
Subsidized credit programs
Non-sustainable. Globally unaffordable.
Savings Poor cannot / do not save; do not trust financial institutions.
Very poor, especially women
Compulsory savings. Voluntary savings not provided / not effective.
Demand for savings services not met. Savings cannot finance loans.
THE NEW PARADIGM:THE FINANCIAL SYSTEMS APPROACH
TO MICROFINANCECREDIT
Assumptions Primary Target
Policies & Practices
Results
• Commercial credit for economically active poor. • Other poverty programs for very poor.
Economically active poor & lower-middle income people of both genders.
Loans priced to enable institutional self-sufficiency.
• Institutions are financially sustainable.• Approach is globally affordable for mass demand.
THE NEW PARADIGM:THE FINANCIAL SYSTEMS APPROACH
TO MICROFINANCESAVINGS
Assumptions Primary Target
Policies & Practices
Results
• Economically poor do save• MFIs can mobilize savings with right products & services
All savers who live or work near the MFIs’outlets
• Voluntary savings products• No compulsory savings
• Demand for savings can be met• All loans can be financed with commercial funds
All MFIs and Financially Self-Sufficient (FSS) MFIs: Selected Indicators
from The MicroBanking Bulletin, November 2001
Indicators 1-3Indicator All MFI’s (n=148)1 FSS MFIs (n=57)2
(average) (average)
1. No. of offices 13 119
2. No. of employees 95 512
3. Assets (million US$) 5.5 21.2
[1] Averages are calculated on the basis of the values between the 2nd and 9th
deciles. [2] Averages are calculated by dropping the top and bottom observations.
All MFIs and Financially Self-Sufficient (FSS) MFIs: Selected Indicators
Indicators 4-6
Indicator All MFIs (n=148) FSS MFIs (n=57)
(average) (average)
4. Commercial funding liabilities ratio (borrowing at commercial rates over avg. loan portfolio (%)
49.5 96.2
5. Total gross loan portfolio outstanding (million US$)
3.7 15.1
6. No. of borrowers with outstanding loans
10,710 89,370
All MFIs and Financially Self-Sufficient (FSS) MFIs: Selected Indicators
Indicators 7-10Indicator All MFIs
(n=148)FSS MFIs
(n=57)(average) (average)
7. Avg. loan balance/GNP per capita (%)
46.0 76.3
8. Adjusted return on assets3 -3.7 5.1
9. Profit margin (%) -17.1 15.4
10. Portfolio at risk over 90 days (%)4 2.1 2.1
[3] Adjusted net operating income/average total assets. Adjustments are made for inflation, subsidies, and loan loss provision. [4] Outstanding balance of loans overdue over 90 days/total gross loan portfolio.
“The Philippine Experience in Developing A Vision/Strategy for Financial Services to the Poor and
Adjusting the Regulatory Framework”
Ricardo P. LirioManaging Director
Bangko Sentral ng Pilipinas
•High overhead costs•High incidence on non-payment of loans
Social Intermediation vs. Financial Intermediation
•Distorted the financial market
•Suppressed the development of private financing institutions
BanksShy away from granting loans
•High risk
•High operational cost
Informal Financing
Institutions
Weak institutional capacity
of the 75 million Filipinos are living below the poverty lineSource:World Development Poverty Indicators, 2001 (Survey Year 1997)
36.8%
are engaged in entrepreneurial activities but only one-fourth had access to loans.Source:Annual Poverty Indicators Survey, 1999
3 out of 5 Filipino families
Philippine population grows by 2.36% or by 1.7 million persons a year.
Philippine Commission to Fight Poverty
1. Promote and sustain economic growth to create employment and livelihood opportunities.
2. Sustain growth based on people-friendly strategies.
3. Expand social services to provide minimum basic needs.
4. Foster sustainable income-generating community projects
5. Build capabilities of the poor to help themselves
Financial and Market
Reforms
•Lifting of interest rate ceiling
•Liberalization of licensing and branching of banks
Intensified competition
More products and services
Mandated Credit Allocation of Loanable Funds
• PD 71725% for agri-agra loans(10% for agrarian and 15% for agricultural loans)
• R.A. 6977 as amended by R.A. 82296% for small enterprises
Agency under the
Department of Finance
Created under Administrative Order No. 86 in
1993
Rationalize and optimize government
credit programs
“To have a viable and sustainable private micro (Financial) market, with the government providing a supportive and appropriate policy environment and institutional framework to that market.”
Vision of National Strategy for Microfinance
Greater role of the private sector MFIs in the provision of financial
services.
Provide a financial and credit policy environment conducive to the effective and efficient functioning of the financial markets
Establish market-oriented financial and credit policy environment, which is conducive for the broadening and deepening of microfinancialservices. Broadening and deepening mean the development of new product lines and services, the design and implementation of new microfinance technologies and practices which will result to increased microfinance intermediation between the target clientele and MFIs.
Implement capacity building program for MFIs
Social Reform and Poverty
Alleviation Act (1997)
Executive Order 138
(1999)
Agriculture and Fisheries Modernization Act (RA 8435)
•Role of the state in institutionalizing and enhancing a Social Reform Agenda that would pursue programs for the disadvantaged sectors
•Creation of People’s development Trust Fund
Government Non-Financial Intermediaries
Directed Credit to the poor
Subsidized Credit Programs
Complements Executive Order 138
Phase-out of agriculture
directed credit programs
Action Plan
“Provide an appropriate supervisory and regulatory framework for Microfinance Institutions which will enable them to
engage in the development of new and innovative product lines and services
appropriate for the demand for financial services/products by poor households
and microenterprises”
Requirements for Granting Unsecured Loans
At least one co-maker
Proof of financial capacity
(documents)
Sec. 40
Sec. 43
Sec. 43
Sec. 44
Cash flow based lending to the basic sector that should not be covered by traditional loan collateral requirements
Monetary Board may regulate the interest rates imposed on microfinance borrowers by the lending investors
Schedule of amortization of the credit accommodations to the microfinance sector should consider the cash flow of the borrower
Bangko Sentral ng Pilipinas
272
273
282
Guidelines for implementing the provisions in the General Banking Law 2000
Licensing of Microfinance Oriented Banks
Rediscounting facilities for Microfinance Loans
Bangko Sentral ng PilipinasMinimum Capital Requirement
Type of BankPesos
(Millions)US $
(Millions)Thrift Bank
(within Metro Manila)
325 6.373
Thrift Bank(outside Metro
Manila)52 1.020
Rural Bank(1st,2nd,3rd class) 6.5 .127
Rural Bank(other areas) 5 .098
Bangko Sentral ng PilipinasReserve Requirement
•Maintain % of deposits as cash, deposits in BSP and government securities
Type of Bank Demand Deposit
Savings Deposit
Thrift Bank 8% + 2%* 6% + 2%*
Rural Bank 7% 2%
*Liquidity reserve =2%
Bangko Sentral ng PilipinasReserve Requirement
•Serves as liquidity buffer in case of sudden inadequacy of operational funds
•Prompts bank to adopt an effective fund allocation system
Bangko Sentral ng PilipinasLoan Classification and Valuation Requirement
Classification Valuation Requirement
Especially Mentioned 5%
SubstandardUnsecured
Secured25%10%
Doubtful 50%
Loss 100%
Bangko Sentral ng Pilipinas
Risk – Based Supervision Approach
•Considers other types of risk (liquidity, interest rate, market, compliance, operations)
•Overall assessment of the system
•Mitigates examiners’ biases against unsecured loans
Bangko Sentral ng PilipinasOpportunity Microfinance Bank
(started its operations on August 17, 2001)
Figures as of December 31, 2001
Total Number of Clients Served 8,874
Total Loans Provided P60.262 million US$1.182 million
Deposits GeneratedP12.429 millionUS$.244 million
Dutch
International Micro Investment (Germany)
20%
Microenterprise Bank(started its operations on November 21, 2001)
International Finance Corporation (10%)
Netherlands Development Finance
Company (10%)
Bangko Sentral ng PilipinasCARD Rural Bank
•Pioneer of microfinance lending in the Philippines
•Started as a non-stock non-profit organization offering savings deposit and lending services under the Landless People’s Fund
•Authorized to operate as a bank in 1997
Bangko Sentral ng Pilipinas
Rural Banks under MABS
Figures as of October 31, 2001
Total Number of Borrowers 20,268
Loans Outstanding P116.717 million US$2.289 million
Bangko Sentral ng Pilipinas
Microenterprise Access to Banking Services
•USAID-financed effort operated by the Rural Bankers Association of the Philippines
•Aims to accelerate national economic transformation by encouraging rural banks to significantly expand microenterprise access to innovative microfinance services
•Under the mandate of the Cooperative Development Authority
•Allowed to mobilize deposits from their members
•Resources come from the capital contribution of members and their surplus from credit, marketing and economic activities
•Not under any regulatory body
•Developed and adopted their own standards
•Microfinance Council of the Philippines, Inc. and other microfinance networks provide self-regulatory measures to their members
Government Non-Governmental Organizations
Philippine Coalition for Microfinance
Standards
Other Civic
Groups
To develop and promote standards for NGO microfinance operations that seek to provide the poor with greater access to financial services on a viable and sustainable basis
Philippine Coalition for Microfinance Standards
3 Core GroupsPolicy Advisory
Group
Project Support Group
Secretariat
6 Core Principles of the Coalition
1. The poor needs access to appropriate financial services
2. The poor can repay loans, can pay the real cost of loans, and can save
3. Microfinance is one effective tool for the alleviation of poverty
4. Microfinance institutions must aim to provide financial services to great numbers of poor people
6 Core Principles of the Coalition
5. Microfinance can and should be undertaken on a viable and sustainable basis
6. Microfinance non-governmental organizations must develop performance standards that will help define and govern the microfinance industry toward greater reach and sustainability
Microfinance is the cornerstone of the current administration’s fight against poverty.
Lead Agency to Promote Microfinance
•Spearheads the standardization of the chart of accounts and the creation of performance standards for credit cooperatives
•Created a Technical Working Group (TWG) that will develop a uniform set of standards applicable to all types of microfinance institutions
•National Credit Council
•National Anti-Poverty Commission
•Bangko Sentral Ng Pilipinas
•People’s Credit and Finance Corporation
•Cooperative Development Authority
•Agricultural Credit Policy Council
•National Council for Filipino Women
•Bureau of Rural Workers
•Rural Bankers Association of the Philippines
•Microfinance Council of the Philippines
•Landbank of the Philippines
•Philippine Deposit Insurance Corporation
Differentiate Social from financial Intermediation Programs
Initiate reforms that will create a financial system conducive to operations of financing conduits
Enact laws upholding the fight against poverty through microfinance.
Take on strategies promoting microfinance as a primary tool to fight poverty
Synergize anti-poverty efforts with non-governmental organizations and other stakeholders
A REGULATORY FRAMEWORK FOR NON BANK MICROFINANCE INSTITUTIONS
AS A STRATEGY TO PROMOTE MICROFINANCE IN INDONESIA
ABDUL SALAM
DIRECTORATE OF RURAL BANK SUPERVISIONBANK INDONESIA
INTRODUCTION
1.The economic crisis is yet to subside2.The crisis contributes to high level of poverty and
unemployment3.The importance of Microfinance to uplift the unfortunate in
terms of a self employment approach4. Indonesian commitment to mitigate 10 million poor people
as stated in Washington microcredit summit by using the microfinance approach.
WHAT NEXT….Follow up the issues by real steps to empower and develop Microfinance Institutions in Indonesia.
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
BACKGROUND
1.Many types of Microfinance Institutions (MFIs) in Indonesia are operating without any legal basis
2.Village Credit Boards (BKDs) are classified as BPRsalthough they do not meet criteria as BPR.
3.There is no facilitating law that promote the growth of MFIs
4.A lack of capacity building limits the development of MFIs
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
LIMITATION OF THE CURRENT LEGAL FRAMEWORK
1.Banking Act No.7 of 1992 article 58LDKP shall be granted the status of BPR pursuant to this act after the requirements and procedures to be stipulated in a Government regulation are fulfilled
2.Government Decree No.71 of 92 Article 19Those institutions must submit a proposal to get a BPR licenses in 5 years or not more than October 30, 1997, otherwise will not be granted as BPRs
3.The Banking Act No. 10 of 1998 (Article 16.1)Any party conducting business in the form of collecting funds from the public in form of deposits shall be required to obtain an operating licenses as commercial bank or BPR from Bank Indonesia except the concerned business of mobilizing funds from the public is stipulated in a separate Act. • 2,272 LDKPs do not have legal basis• 5,345 BKDs do not meet requirements to have licenses as BPRs
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
WHAT BANK INDONESIA CONCERNS
- MFIs without licenses as banks nor cooperatives which mobilize fund from public violate the law (the banking act).
- MFIs are mostly needed by micro, small business and middle and lower level of income people
- MFIs are close to its clients
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
BANK INDONESIA EFFORTSConstraintBI does not have authority to pass the MFIs law since they are not banksTherefore….initiate to set up an Initiative Team with the objective to formulize the draft of MFIs act.•The team consist of officers from institutions related to MFIs:
Coordinating Ministry for economics, Ministry of Finance, State Ministry of Coop. and SME, Ministry of Home Affairs, Ministry ofAgriculture, National Development Planning Boards, PT BRI, GEMA PKM, and Bank Indonesia
•Supported by GTZ ProFI •Weekly team meeting from March to August 2001
The draft has been sent to MoF in September 2001A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia,
World Bank Workshop, Jakarta, February, 11-12, 2002
COVERAGE OF THE ACT
• Definition of MFI
• Principles, Function, and Objectives of MFIs
• Types of MFIs
• Operations of MFIs
• Licensing, and Ownership
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
DEFINITION
Microfinance institutions comprise of BKDs, LDKPs, and other non bank MFIs that provide financial services in terms of deposits and loans, especially for lower level income of community.
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
• To give a legal basis for the existing MFIs • Enabling the establishment of new MFIs• Protecting small depositors • MFIs that mobilizes fund from public until specific
amount (e.g. 50 mio) are not necessary to be regulated nor to be licensed
• MFIs that mobilizes fund between Rp50 million and Rp1 billion are obliged to have license from Supervisory Entity. ---> the threshold could be adjusted by a regulation issued by the Supervisory Entity
PRINCIPLES OF REGULATORY FRAMEWORK
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
• MFIs that mobilizes public fund over Rp1 bio shall obtain license as BPRs or Cooperatives
• MFIs must follow prudential regulations set by a supervisory entity
• MFIs shall participate in a support scheme program that will be regulated further by the Supervisory Entity
• BPRs are under the Banking Act, whereas Cooperatives under the Cooperatives Act
PRINCIPLES OF REGULATORY FRAMEWORK…cont’d.
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
LICENSING, REGULATION & SUPERVISION
• The Supervisory Entity grants the license, issues regulation and conducts supervision for MFIs
• The Supervisory Entity could delegate the authority of licensing and supervision to the regional government or other institutions deemed to be fit
• The entity could delegate the supervision to other institution: Provincial Governor, the head of commercial bank, or other institution
• In case the supervisory entity is yet to establish, Ministry of Finance will issue the regulation
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
Resistance from some stakeholders, which will be regulated by the Act, such as informal MFIs.
The Level Playing Field …..BPRs, MFIs, Saving and Loan Coop.
POTENTIAL PROBLEMS IN THE MFIs ACT
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
•The draft of the Act has been submitted to the Ministry of Finance (MoF) in September 2001 to be further reviewed by the Review Team ofMicrofinance in MoF, prior to submission to the Parliament.
•The Review Team has to deal with relevant issues in rectify the draft.
There is a need to fasten the process of review
ENACTING PHASE OF MFIs ACT
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
THE SUPERVISORY ENTITY
According to the draft , MFIs is regulated and supervised by a Supervisory Entity
Q….who is the Supervisory Entity ?
Is it a Financial Service Supervisory Institution (or Financial Service Authority-OJK) ?as stipulated in Central Bank Act or ...Is it a special Supervisory Entity for MFIs, such asMicrofinance Supervisory Institution (MFSI) ?
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
SETTING UP THE SUPERVISORY ENTITY
Some alternatives for setting up the Supervisory Entity for MFIs, including BPR and KSP are:1.Setting up a separate division in Financial Service
Authority (OJK). There will be a division in OJK to be responsible to supervise MFIs, or
2.Setting up two institutions which, respectively,responsible for supervising comm. banks and MFIs under one Act, or
3.Setting up an institutions to supervise MFIs under a special Act.
BEST CHOICEDue to time constraints, alternative 2 is the finest choice.Nonetheless…..in short term MFSI needs subsidy from the Government to carry out its task
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
RECOMMENDATION
1. Support the Review Team in MoF to speed up the process in finalizing the draft prior to submission to the Parliament.
2. Common understanding between BI and MoF to set up the MFSI.
3. Level playing field for all MFIs Actors to lessen distortion in the implementation.
4. Socialize the concept to stakeholders 5. BPRs’ concept for capacity and institutional building
as one model to promote MFIs. 6. Significant roles from regional Government
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
CLOSING REMARKS
Setting up an MFI Act to promote MFIs is the most viable institutional approach
Other significant factors to optimize the role of MFIs are:1. To build the capacity of MFIs, … the
experience from BPRs could be a lesson.2. Market principles basis to ensure
sustainability.
A Regulatory Framework for Non Bank Microfinance Institutions as A Strategy to Promote Microfinance in Indonesia, World Bank Workshop, Jakarta, February, 11-12, 2002
THANK YOU
Synopsis of Mr. Darmin Nasution's presentation, Director General of Financial Institutions
Ministry of Finance Micro finance workshop
February 11, 2002
Ladies and Gentlemen: It is useful and challenging to hear the proposals from my colleague from Bank Indonesia on the draft microfinance law and options for microfinance regulation and supervision. So many stakeholders in this case are involved. Actually, concerning micro financing, the Ministry of Finance (MOF) must admit that we have inadequate expertise committed in this kind of endeavor. In terms of experience working with microfinance providers and information on these organizations and the sector, maybe Bank Indonesia knows much more than the MOF. And the State Ministry of Cooperatives and SMEs has been developing quite a bit of expertise in this domain, extending beyond the specifics of financial activities of cooperatives. But the MOF realizes that microfinance is not synonymous with banking and that effective financial institutions providing microfinance may not formally be banks, and that to strengthen the framework and operating rules in this area, MOF needs to have a role. Ladies and Gentlemen: I would like to give an overview of the agenda in the financial sector for the future on which MOF is working. First of all, we are preparing an authority, a financial sector supervisory institution (FSSI). Why do we move to try to change institutional arrangements here? Because, there is a consensus that past Bank Indonesia supervision was not effective, and that supervision without regulation power or right for regulation is not effective. After the FSSI is operative it will have the rights of full authority to conduct regulations concerning banking in the micro level. Every institution relevant to this is concerning with the regulation. The FSSI will regulate and supervise practically all sectors of financial services, banking, or insurance. The question from Bp. Abdul Salam was “Will micro financing be included in that regulation and FSSI responsibility?” Actually, every time we talk about the institution of micro financing – we return to the need to have a practical or simple approach. Is there any capacity to do this at the regional level? Well, the best developed organizational and human resources capacity right now is with the regional offices of Bank Indonesia. But
50
is it realistic to consider that the DPR will shift some portion of FFSI responsibility back to Bank Indonesia implementation? Within the Ministry of Finance, we do not have a regional structure and human resource capacity to undertake microfinance supervision. The FSSI, when it is formed, would be of course first establish its capacity in Jakarta. So, don't do try to do everything in a hurry because this will end up in with so many problems and sacrifices that we end up with an unsatisfactory outcome. Second, we are also trying to strengthen the institutional infrastructure to support financial cooperatives. There is so much debate on whether to try to increase or decrease the coverage of deposit guarantees. According to us, it is time now that it has to be decreased. How about the loans and deposits? Of course, it is the easiest to deal with because the funds are ready as are the regulation and legal framework. But, when will we try to decrease this amount to this kind of coverage? Progress in clarifying where we are going in developing systems of insurance and deposit guarantees is proving difficult to achieve. In housing, for example, there is a difficult problem because credit for housing is very long term credit but short term paying. In the primary market itself, it is still difficult for us. For example concerning standardization in the time frame or certification of land and also contracts among banks and debtors. This is in the primary market level. We have not talked about secondary level. The strategy preparation for a secondary market facility is still on going. Actually, this is not impossible this year for example, if in 2004 we do not achieve results concerning housing management, this is something very serious. Returning to the topic of micro finance, the objective should be to improve the access or opportunity to the poor people. We have all kinds of institutions. The State Ministry for Cooperatives and SMEs is preparing the groundwork for establishing a credit bureau to facilitate information concerning the debtors. Previously, resources for microcredit were provided as KLBI through the Bank of Indonesia. Following the revision of the BI Law, KLBI funding ceased and these credit programs restructured into three groups:
1. Credit program for food production (KKP); 2. Credit program for cooperatives and SME; 3. Credit program for low cost housing
Programs in all these groups are experiencing difficulties and can hardly said to be thriving. For example with the KKP, the potential need is very large but if you total everything it may only have achieved 502 billion through December last year. And in normal conditions it should not be less than 1.2 trillion. This is evidence that the policy of the government is not achieving its objectives. It shows that the policy is does not yet have the correct vehicle of be placed with the right institution. And with all these very
51
strict prudential regulations, it is proving impossible to run it through commercial banks with existing rules. This is the experience, at least. With all this historical background, we at this moment are trying to amend the regulations for Bank Indonesia and also with the DPR’s initiative we try to prepare the laws and regulations for bank credits. All of this is still in the MOF and is on my table along with a number of other pressing draft laws. We have to admit that as a nation we are facing so many difficult problems in finance. What will happen in the years of 2004 and 2005 when resources from BPPN’s asset sales near completion but fiscal obligations we have will still be large? Our eyes are open to these important questions and we are working on various scenarios. There are ways forward but the cost will be great. There is also the important question whether putting in place a regulatory structure in the current environment brings any assurances? Even though I am a government person, I think that it is really important for us to think about this. There is the risk that a regulatory approach would become too complex and burdensome. Once we try to regulate everything, it becomes very difficult. Where is the optimum point between to just let microfinance go by itself or that we need standardization and we also need supervision? Where is the optimum point and place to build appropriate implementation capacity? Getting the right balance is not easy. Even where data are good, they do not speak by themselves and perspectives are important. Finding an optimum balance will involve debates, and these will be time-consuming, but let us try to find a way. We should not try to rush ahead directly in a hurry. Let us come and sit together and talk about it. And then we try to get some experiences from other countries where is the optimum balance and implementation capacity so that do not make this just more complicated. The decentralization process complicates this discussion because this itself is not settled whether to go forward or not on the revision. It is impossible for microfinance supervision, whether done by the Bank of Indonesia or the FSSI, to proceed without cooperation with the regional areas/regional government. We have to go there; if not, who will have the capacity to do the supervision? Do the regional partners have this kind of capacity or not? Well, if not, we have to build something for this. Temporarily what we will do? We do not have the luxury of waiting for the environment to improve before moving. Regarding the need for an umbrella framework for financial regulation and supervision, we can establish the umbrella and also take advantage of existing structure of implementation capacity. We do not need to wait until everything becomes better, and must address these problems in an integrated way. We cannot just go on with the condition at this moment. Thank you very much.
52
09/21/2006
MicrofinanceTransparency and
Capacity
Jennifer IsernSenior Microfinance Specialist
February 2002
Jakarta
09/21/2006
Key Elements of a Microfinance Institution
Clients & Products
Strategic Objectives
Organization & Systems
People
Financial Performance
09/21/2006
Financial Information FlowsSupervision
Information
System
Assessment
Audit
Performance Measurem
ent
Benchmarking
Rating
Performance Standards
Internal Control
09/21/2006
Information
Supervision
Information
Assessment
AuditPerformance Measurement
Benchmarking
RatingPerformance Standards
Internal Control
•Information Systems Service
•Consumer reports•Guidance on selecting systems•Frequently asked questions
•Financial Disclosure Guidelines
09/21/2006
Internal Control
Supervision
Information
Assessment
AuditPerformance Measurement
Benchmarking
RatingPerformance Standards
Internal Control
•Operational Risk Management Course
•Internal control and audit•Fraud prevention
•Microfinance Network manual on Internal Controls
•GTZ Liqudity Management manual
09/21/2006
Audit
Supervision
Information
Assessment
AuditPerformance Measurement
Benchmarking
RatingPerformance Standards
Internal Control
•External Audit Program
•External Audits for Microfinance Institutions: a Handbook•Audit Information Center•Local auditor training
09/21/2006
Assessment and Performance Measurement
Supervision
Information
Assessment
AuditPerformance Measurement
Benchmarking
RatingPerformance Standards
Internal Control
•Format for Appraisal of Microfinance Institutions•Appraisal and Monitoring Service
•Microfinance Portfolio Due-diligence Tool
•Industry Standardization of Financial Ratios
09/21/2006
Benchmarking and Financial Standards
Supervision
Information
Assessment
AuditPerformance Measurement
Benchmarking
RatingPerformance Standards
Internal Control
•MicroBanking Bulletin
•SEEP Network Development Project
•Microfinance Market Databank
•Philippines Coalition for Standards
09/21/2006
Rating
Supervision
Information
Assessment
AuditPerformance Measurement
Benchmarking
RatingPerformance Standards
Internal Control
•Rating Fund
•Evaluation and Ratings from Certified Partners
•Eventual multi-donor participation
09/21/2006
Supervision
Supervision
Information
Assessment
AuditPerformance Measurement
Benchmarking
RatingPerformance Standards
Internal Control
•Consensus Guidelines on Regulation andSupervision
•Consultation on Regulatory Issues
•Training for Regulators and Supervisors
Sustainable Microfinance
Key Issues in developing institutional capacity of Microfinance Institutions
Micro-Credit Ratings International Ltd104 Qutab Plaza, DLF City-1, Gurgaon 122002 [email protected] Tel: +91 124 635 0835, 635 6692 Fax: +91 124 635 2489
12 February 2002
The context
• Widespread, endemic poverty in South Asia
• A growing microfinance sector in India and Nepal
• Large, well known microfinance programmes in Bangladesh
The context…
Ad hoc appraisal systems using a mix of financial and development assessment tools to appraise the performance of microfinance institutions
Largely undertaken by individual consultants, academic institutions or, occasionally, western consultancy companies with mainly Latin American or African experience
Such evaluators have limited Asian experience, mainly in Indonesia/Bangladesh
The context…
It became clear that a standardised tool was required in order to enable investors – mainly lenders and donors – to
• understand the risk profile and credit-worthiness of MFIsto estimate the appropriate volume of investments
• identify their strengths and weaknesses in order to determine their needs for institutional capacity building
Developing the tool
EDA set out to develop a standardised tool for this purpose since it had
• a substantial research orientation• considerable experience of monitoring studies• been engaged in research on development appraisal
methodologies • substantive knowledge of microfinance• a well-established reputation for quality, integrity and a
knowledge of microfinance
Developing the tool…
This was undertaken through
An investment of 1.5 years at the most senior levelCombining EDA’s experience and knowledge with international best practice methodologies and feedback Consultations with microfinance specialists in the regionRigorous field testing of instruments across different microfinance models and geographical regions within India Continuous and iterative process of testing and improvement
Why rating…?
The methodology that emerged entailed the rating of MFIs
Rating is about disclosure and accountability
Rating provides a standard assessment comparable across organisations and over time
It is undertaken by a team of professionals who specialise in the activity and work together to achieve a high degree of standardisation
It is an internationally recognised service for investors –who were the primary target of the initiative
The Rating Instrument
The working hypothesis is that
The risk profile and creditworthiness of an MFI depends critically on its financial performance, but is also affected by its managerial capabilities and governance
The rating instrument…
Governance issues professional experience/involvement
of board membersdominance of the leadershipstrategy and organisational structuredegree of focus on microfinancedegree of concentration of operations
The rating instrument…
Management/ resource indicators
quality of managerial and field staff quality of accounts, MIS, tracking systemsfinancial control systemsstrength and capability of clientsadequacy and use of infrastructure
The rating instrument…
Financial performance
level and growth of savings of membersrepayment rate (MFI-borrower and MFI-lender)age statement of overdues and portfolio at risk operating expense ratio, capital adequacy, financial sustainability
The rating instrument…
Financial statements adjusted for
income recognition on loans on a cash basisadequate loan loss provisioningloan loss reservecost allocation - especially important in the case of multi-service NGOs/MFIs sustainability calculations make the usual adjust-ments for inflation, cost of funds, all subsidies
Progress
A total of 106 ratings done so far – includes 88 MFIs inAsia and 18 rating updates
Seven ratings have been in Bangladesh, four in Nepal and one each in Cambodia and Kazakhstan; a capitalisation review of three MFIs in Myanmar was undertaken last year
Over the next few months M-CRIL will be rating MFIs in Indonesia, Pakistan, Sri Lanka and the Philippines
Grade distribution
0
5
10
15
20
25
Gamma Gammaplus
Betaminus
Beta Betaplus
Alphaminus
Alpha Alphaplus
Risk category
Number
86 MFI ratings
Promoting transparency
Achievement 1 – helping to overcome information asymmetry
Makes lenders/donors aware of issues affecting creditworthiness– emphasises for the sceptics amongst investors, MFIs enable
• provision of financial services to those the banks don’t reach –a substantive poverty focus
• a prudent approach to client savings • responsibility in ensuring the repayment of loans from banks
most importantly, • many are at or near sustainability, therefore, good investments
for either loans or equity
Promoting transparency…
Key weaknesses found amongst many MFIs in India
• lack of a business orientation which limits sustainability – most MFIs in the region emerge from NGOs with a social agenda
• perceive microfinance as extension of social development not financial intermediation – affects orientation/systems
• many are leader dominated institutions with centraliseddecision making, which
• affects receptivity to ideas, limits response to market opportunities
Promoting transparency…
Typical systemic weaknesses found in Indian MFIs
• incomplete understanding of client needs/product design• poor loan tracking and follow up• lack of incentives for staff • accounting deficiencies • failure to take account of income accruals • rescheduling and refinancing of client loans• (minor) cases of fraud undetected on account of poor
MIS/internal audit processes
Promoting transparency…
o Rating has enabled such issues to be highlighted and discussed between lenders/donors and MFIs
o Some public transparency is also starting to happen as some MFIs now make their rating reports public – this puts pressure on others to do so
o CGAP Fund imposes public disclosure of the rating report as a condition for its support
Establishing internal accountability
Achievement 2: identifying strengths and weaknesses– prioritises capacity building needs – specific recommendations facilitate capacity building support
• financial/yield analysis and delinquency management • loan tracking systems and MIS • financial control – budgeting, cash planning & internal audit• staff skill improvements through better recruitment and
training • better governance + focus on microfinance as specialised
financial intermediation not social development
Strengthening links with investors
Achievement 3: Detailing information on the risk profile of MFIs has facilitated substantive links with investors
• Lending of the order of $7 million by SIDBI to some 50MFIs in India, others such as ICICI Bank and HDFC have also used M-CRIL ratings for this purpose
• Capitalisation of MFIs in India, Bangladesh, Myanmar by Hivos, DFID, SDC, UNDP – used in Bangladesh to facilitatea credit guarantee mechanism
Strengthening links with investors…
• Lending of the Dexia Micro-Fund in India, Cambodia of funds managed by Blue Orchard Finance – interested in further inputs vis-à-vis the Philippines and Indonesia
• Women’s World Banking also using the service to support its affiliates in Asia – Bank Dagang Bali to be rated soon
Enabling development of standards
Achievement 4: In India – due to the resulting database – this has facilitated the process of developing industry standards related to performance and systems
• efficiency OER<25%• portfolio quality PAR60<10%• sustainability OSS>90-100%• accounting practices cash basis• information systems effective loan tracking• staff recruitment and incentives professionalisation
Conclusion
M-CRIL’s experience is that institutional assessments based on accepted standards can be a very powerful tool in promoting institutional capacity building of MFIs – but to be effective, the service must be provided by a professional team
dedicated to microfinance, having the specialist knowledge and experience that goes with that dedication
committed to the long term development and growth of the microfinance sector.
Overview on MFIs in Indonesia and GTZ strategy in capacity building
Workshop on“Sustainable Microfinance: Developing a Sector Strategy and Building Institutional Capacity”World Bank Office Jakarta, 11 – 12 February 2002Dominique Gallmann, Deputy Team Leader
“The Alchemy of Microfinance”“…it is as if Indonesia has been the world’s largest laboratory on rural financial market experiments…Many different institutional forms have been tested by trial and error… Valuable lessons have been embedded in the variegated experience of Indonesia’s rural financial markets, along a rich continuum of shades and shapes.”(Gonzalez-Vega / Chaves, 1992: 38)
Typology of MFIsInstitution and ownership (formal /informal, Bank/non-bank, NGO/Govt. program)Financial services (credit and/or savings, asset size, viability)Clientele and outreach (gender, income level, targeted)Sustainability and viability (dependence on subsidies, cost coverage)
MFIs in Indonesia: formal sectorserves some 40 - 50 million clients
Commercial BanksBRI Unit (∼3,700)BDB and others
BPR (∼ 8,500)2,240 Peoples Credit Banks (BPR)4,566 active Village Credit Boards (BKD)∼1,600 Rural Fund and Credit Institutions (LDKP)
Cooperatives (∼ 4,000)1,105 Credit Unions (Kopdit)1,582 Saving & Credit Service Posts (TPSP)1,160 Saving and Credit Coops (KSP)
Pawnshops (633)
MFIs in Indonesia: semi-formal sector serves ? million clients
400(?) NGOs with microcredit projects various ministries with their ownmicrofinanceprojects (P4K, PHBK, UED-SP, UPPKS, IDT)
MFIs in Indonesia: informal sector serves ? million clients
Roscas (Arisan)MoneylendersFamily members
BRI UnitMust do something rightExcellent savings mobilization, LDR only around 37% (no other microbank could afford this)Excellent scale of outreach (savings: 20 –25% of all households; credit: 6% )Unit system is highly profitable, however BRI as a commercial bank faces other risks
The three BPR families (1)BPR Unit Bank
LDKPLPD
LKDPBKK
BKD
Ownership mostly private
village (adat)
local govt village (govt)
Established after 1988 1984 1970 1902
BPR license
all none partly Collective license
Financial Services
Loans, savings, deposits
Loans, savings, deposits
Loans, savings, deposits
Mostly credit
Coverage Nationwide (Jawa/Bali)Sub-district
BaliVillage
Central JavaSub-district
Java /Maduravillage
Supervision BI BPD BPD/BI BRI for BI
The three BPR families (2)BPR Unit Bank
LDKPLPD
LKDPBKK
BKD
Active Units 2,240 1001 160 4,566
Total Assets
5,6 t 500 bn 68 bn 222 bn
No Clients 4,8 m 500,000 180,000 800,000
Avg OutstLoan
1,300,000 535,000 424,000 142,000
AvgSavings
141,000 130,000 134,000 14,000
AvgDeposits
8,165,000 2,204,000 4,026,000 27,000
BPR Unit Banks
2,240 BPR, most are privately ownedregulated under the banking act as secondary banksGood financial intermediaries (LDR 75%)Reasonable outreach: 4,8 million savers and 1,7 million borrowers but mostly in Jawa and BaliOnly some 60% sound/fairly soundIndustry is profitable again since 1999
BPR - BKD4,566 BKD, owned by the village, controlled by village governmentProblematic legal basis: Staatsblad No 357 of 1929, Decree of MoF, Banking Act No 7, 1992 and Govt. regulation No. 71, 1992Considered as banks, supervised by BRI on behalf of Bank Indonesia although having no legal body and not fulfilling criteria to become BPROperating only in Java and MaduraFocusing on Credit financed by retained earnings + forced savings, voluntary savings marginal, overliquidIndustry is stagnant, viability questionable, if loans properly written off, industry probably insolvent
LDKP
1,600 LDKP established by Provincial Govts, mostly Govt. owned (PD), except for LPD and LPN that are village ownedRegional Development Banks act as supervisors, financial intermediary and technical assitance provider 625 LDKP transformed into BPR (mandated by Govt. regulation No. 71, 1992)LPD in Bali and BKK in Central Java most successful type of LDKPOutreach: LPD serve 50% of all households in Bali; BKK serve about 5-10% of the households in their working areaViability: most LPD and about 50% of BKK are profitable, loan portfolios are sound and performing
Finding about BPR
Long-term performance of the BPR is closely linked to their capacity of savings mobilization. The higher the share of savings of total assets the faster the growth, the higher the profitability and the better the loan performance fo the respective BPR system.(Steinwand, 2001:324)
MFI OverviewM F IM F I Fin. Fin.
IntermInterm..OwnerOwner ViabilityViability OutreachOutreach
Depth/ScaleDepth/Scale
BRI LDR:35% Govt. +++ + / +++
BPR LDR:75% Private + + / +
BKD Credit Village -/+ ++ / -
LPD LDR:94% Village +++ +++ / +++
Integrated systematic conceptMacro,- Meso- und Micro Level
Macro LevelPolicy advice
ProFIProFI Meso LevelPromotion of associations
Training system
Micro LevelNon-bank MFI
Micro LevelBPR, LPD
Strategy in MFI Capacity Building
Polic
y A
dvic
e
1 2 3 4Supp
ort f
or
Ass
ocia
tions
Trai
ning
Sys
tem
Non
-ban
k M
FI in
N
TB, N
TT
TheTheThe ProFI ProgrammeProFI ProgrammeProFI Programme
Programme ComponentsProgramme ComponentsRoof/Programme
Complex Programme structure - Stakeholders
BPR
PerbarindoGTZ BI
DPSNSEPerbar.Found.
Apex-Institutions
Non-bank MFI Non-bank MFI
BPD NTT,NTB,SulselProv. Governmts
NTT, NTB
LPD
BPDBali
Prov. Govern-
ment Bali
LPD-Association
MFI Customers
LDP Customers
BPR Customer
ProFI
MFI Customers
MFI Customer
BPR Customer
BPR Customers
LDP Customers
LDP Customers
Pilot Project Areas ofPilot Project Areas of ProFIProFI
NTB & NTTBaliEast-Java
1. Policy Advice
Objective: MFI use the improved framework conditions to improve their soundness
1. Establishment of policy dialogue with all stake-holders and decision making institutions2. Deposit protection scheme for BPR3. Improved regulation and supervision of BPR4. Improved regulation and supervision of LPD5. Legal framework for non-bank MFI is available
2. Support for BPR and LPD association
Objective: BPR and LPD improve their performance by using improved services offered by their associations
1. Support concept and strategy for Perbarindo/LPD association developed2. Technical and organisational requirements created, management works efficiently3. Financing of association secured and sustainable
3. Training System
1. Stakeholders are sensitized for the need of a systematic training system2.“Standard Board” and “Regional Examination Boards“ are established3. Regional training institutions and trainers are identified an accredited4. Financing of the training system securedMFI employ their
trained personnel in a more efficient way
Objective:
4. Establishment of non-bank MFI in NTB, NTT
Objective:
Various options to support non-bank MFI in NTB and NTT are identified, developed and tested as far as possible
1. Selection of suitable project areas and support strategies and organisations2. Support strategies are tested