Paper Preapred by: Bambang Ismawan (President and Director, Bina Swadaya) Paper summerised by: INASIA (A case study of a village where the Self Reliance Development Foundation(Bina Swadaya) works in Indonesia ) Sidamulya village is located in the District of Subang, in the Province of West Java, 25 km away from the main city. Its population is 5431 with 547/km2 of population density. The climate of the village is relatively dry and the rainfall is between 1800 - 2200 mm/year. The land is not very fertile. Out of 325,781 hectares of wet rice fields, only 91,275 hectares are irrigated and the rest depend on rain. Land not under irrigation is 246,084 hectares and 178,800 hectares of state plantation. The volume of rice harvest is 508,331 hectares with production amounting to three tons per hectare (paddy where the hulls have not been removed but separated from the stalks). Total rice production is only 839 tons. The workforce is 3381 and most of them have not completed even elementary school. A majority of them (91,5%) work as peasants. Theowners of irrigated fields are 425; there are also 261owners of land not irrigated and the rest work for them. Most of the so-called owners of fields possess less than 0.5 hectare. There are several agriculturalimplements such as 5 hullers, 26 hand tractors, and 26 traditional ploughs in the village. They do not haveshops or markets. Line telephone is only one with the bad signal. The nearest bank is 22 km away.
The economy of the Sida Mulya village is dependent on rice harvesting. The village economy is active in the event of a good harvest but when the harvest fails the economy is flaccid. The economy is also dependent on the seasons. In the dry season most of the wet rice fields become unproductive. This compels many villagers to travel to the town in search of new jobs. As a result the village economy turns out to be inactive. In contrast, the onset of the wet season brings back the villagers to their homes to commence agriculture work.
Those who return from the towns bring with them the money earned in the towns, which is used to buy seed, fertilizer, etc. The lack of financial institutions in the village, had forced the villagers to depend on the services of moneylenders for years.
Bina Swadaya's first economic intervention in the village was in 1985 when the pump irrigation project was started. The project was designed to increase the productivity of uncultivated wet rice fields. For this purpose water was pumped from the Cilamatan River to the fields. Pumping water was necessary since the water level of the river is below that of the fields. The project was successful as the productivity of the fields increased dramatically from three tons to eight tons per hectare.
During this Bina Swadaya was facilitating the development of Self-Help Groups (SHGs) in the area through the project. The main purpose for developing SHGs was to offer the services of alternative financial institutions for the villagers since for many years the people have been dependent on moneylenders. The effort resulted in the fruition of 12 SHGs in 12 neighbourhoods.
SHGs are the basis of the micro finance approach. If micro finance is to be used as a tool to help the poor the process should be initiated by the development of SHGs. This endeavor is important because of the fact that the poor find it difficult to achieve self-reliance as individuals, while on the other hand it is easy in groups. The poor can thus become self-reliant only through mutual cooperation. As a consequence of the approach, community facilitators encourage people to establish SHGs. Through SHGs, the poverty alleviationprojects and especially the effort to help people to be self-reliant have been initiated.
Field experiences show that SHGs can be very effective in reaching the goal, i.e. to develop society's welfare and self-reliance of their members, if they refer to the following guidelines:
1. Oriented towards income generating In this frame of reference efforts should be directed towards imparting knowledge and improvement of household budgeting to SHG's members, especially the formation of savings, self-reliance, capital formation, and the development of production enterprises and marketing.
2. Open-minded Openness of mind and attitudes performed by members of SHGs in taking up new initiatives and progress is the underlying essence of success. In addition, members are also expected to open their minds for new forms of co-operation to scale up their businesses.
3. Democracy and participation The principle of democracy and participation is practiced in the regular and on-going meetings, democratic election of the board, regular training programs, good and transparent administration, and participatory program planning, implementation and evaluation.
To reach such a profile, serious training and facilitation have to be rendered to SHGs. Furthermore, facilitation may also promote SHGs to become: Media of teaching-learning process among members Media of sharpening the analysis of problems encountered by members Media of decision making in relation to the strategy in problem solving Media of mobilization of internal and external resources Media of interaction with urban communities So, micro finance is only a tool to empower the SHGs. There are many other tools that should be used together with micro finance in order to help the poor people. All the tools have to be managed in certain ways to work in mutual cooperation. It is unfortunate that the pump irrigation project was not sustained. Two main reasons are the high operational costs, which the people were unable to meet even though the production was increasing. On the other hand the people had better opportunities in the city. Since the project was not continued, most of the SHGs were unable to survive. The need to borrow money from the SHGs was much higher than the ability of the SHGs to provide funds. The other reason that led to the failure to sustain SHGs was the facilitating factor. Since the government funded the facilitators and supported the SHGs in the pump irrigation project, once the project was over (1989) the facilitator andfacilitating effort cannot be isolated. The SHGs were left to continue on their own. In 1994 introspective of the experience of the last economic intervention in the area, Bina Swadaya changed its approach. The most urgent need of the people was facilitation and micro finance Bina Swadaya established the rural bank, BPR Abdiarta Swadaya in the area. The bank has two main missions: (i) provide micro financeservices to the SHGs and (ii) to develop and facilitate SHGs in the area. The rural bamks started operations in 1994 itself and today records a paid up capital of Rp. 175,000,000, total assets of Rp. 1,790,129,063, savings and time deposits of Rp. 480,940,804 with dues to third parties at Rp. 897,886,77, to the Central Bank at 1,058,980,360 and outstanding loans at Rp. 1,422,622,129. The bank operation attempted to contact and activate the SHGs in the area. Out of the 12 SHGs, only three survive. There is only one was capable of improving and developing its activities. This SHG was established in 1985 with an initial membership of 34. After the pump irrigation project was completed, the group continued its regular activities such as meeting, rotating credit and savings among its members. Today, the members of the group have risen to 206, consisting of initial and temporary members. There are 188 male and16 female members. Even though the women are a minority, they are more active than the males in group activities. The group members belong to different professions. Many of them (124) are micro entrepreneurs, some of them (81) are peasants, and the rest (1) is in the service sector. Their savings in the bank amounts to Rp. 1,260,000 and Rp. 60,000,000 worth credit has been given. The credit that has to be paid is 36,000,816. Assets of the group are worth Rp. 86,671,000. They already have their own office and two mini shops. The differentiation of member' status has an implication on rights. An initial member has the right to participate in the annual meeting to decide the policy of the group. They also have an opportunity to borrow money up to Rp. 400.000 without any form of physical guarantee. While temporary members can use the financial services that the group provides, but they cannot attend the annual meeting and have to have physical guarantees if they want to borrow money. The basic principle that Bina Swadaya operates on in its relationship with SHGs is what is described as the win-win principle. It is the belief of Bina Swadaya that both parties in the activity must benefit from the activity if it is to be a success. From the bank's point of view, the linkage helps them to handle troubled credit and savings mobilization. The bank also enhances its ability to serve the poor and widening its scope. This is evident in monitoring the members, and attracting other villagers to become members by the SHGs. This generates efficiency in the operations of the bank.
From the point of view of the SHG, the linkage helps them to develop their membership. It is interesting to note that the group membership has expanded significantly during the last five years. This expansion has occurred since the people from both the host village and other villages learnt about the financial servicesprovided by the group. The interest rate charged by the group is 4%. This rate is much lower than the interest rate stipulated by moneylenders in the area. They charge 50% for money borrowed for three months.
Even though the villagers realize the importance of the SHG, they do not want to form a new one. The main obstacles are (i) to find a good honest person willing to lead the group, (ii) the villagers are skeptical about SHG business since many SHGs established during government projects did not survive. As a result Arta Mekar Mulya became an alternative financial institution in the area.
From the profit earned out of the linkage, the SHG has shops that provide the daily needs of villagers. The shops according to the local people are really useful since there are no other shops in the area. The nearest shops are 10 km away. There was a positive response from the people since the group not only focused on its members but also gave attention to social problems and social activities in the area. The SHG took the initiative in building bridges, roads, and other community buildings.
Those villagers who have to go to the towns leaving behind their families to earn more money can leave the family in the responsibility of the group. The group will be responsible to see to the family needs of food, education, health, etc. Once they return to the villages, the group will charge him the amount expended on behalf of the family.
The routine meeting of the group enhances the knowledge and skills of the SHG members. The educated members in turn will make the SHG create other economic activities. The existence of a SHG has many advantages to the village. At the same time it also creates certain problems. One of the main problems is that the local authority perceives the SHG as a challenger to its existence. As such they do not want to support and participate in the group's activities. They are not willing to give a recommendation that the group may sometimes need. They feel that the people no longer depend on them. They perceive that they are no longer the only institution in the village that the villagers can count on.
The problem is turning out to be more complex since the existing formal leader of the village is also one of the biggest moneylenders in the village. The existence of the group is a direct threat to his business.
The impact of economic intervention on the functions of social capital, can be analysed by examining its impact on three main aspects of social capital. They are information sharing, coordination of activities, and collective decision-making. It is clear that economic intervention has strengthened some forms of social capital, destroyed some others, while creating new ones. With the presence of traditional social capital in the village, economicintervention has made the SHG take over the role of money lenders. The SHG has also become a place where thevillagers meet and discuss their problems. When there are broken roads or damaged bridges or destroyedirrigation systems, the villagers can discuss the best solution to the problems. In other words, the SHG canmobilize collective action.
Another impact of the economic intervention is the change brought onto the social structure of the village. The traditional leader no longer wields widespread influence, for instance, people will look up to a religious leader to answer their spiritual problems but they will not turn to him if they have financial problems, and There appear to be new leaders in the village such as the the board of the SHG.
Economic intervention has also developed another kind of social capital described as self-reliance. People realize that they cannot depend on the local government forever. They perceive that if they work together they can solve their problems. They contend that they can find other sources to improve their lives. The ability to solve their problems enhances their self-confidence. It is a new worth achieved by the villagers.
The impact of economic intervention on social capital varies. While the process of economic intervention strengthens social capital, it also increases the degree of information sharing, coordination of activities, and collective decision-making. The routine meetings and the facilitating activities have developed these three aspects of social capital.
Social capital that was destroyed by economic intervention, did not offer alternatives to the poor. There is an attempt to take undue advantages of the villagers. Contrarily the new form of economic intervention offers an option to the villagers and attempts to develop their lives. In other words, economic intervention will destroy any type of social capital that are not suitable for the development of the villagers.
Social capital that still does not exist but is needed to ensure the success of economic intervention, which with time will emerge as a new value of the villagers.
Source: http://dhaka.inasia.lk/ressourcesdocuments.html
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