Dissemination and workshop on developing a linkage model for Community Empowerment Trust Fund (DAPM)
PNPM Mandiri – Central Java
Semarang, 13-14 August 2014
Empowering the community by developing a linkage
The establishment of PNPM linkage was derived from the needs of two parties: banks that need to expand their markets, and the Community Self-reliance Agency (BKM/LKM) that needs to increase its credit funds. Their partnership is based on a trust. The target for linkage in PNPM isn’t limited to banking services, but also includes insurance and payment services. PNPM Linkage is expected to promote the work of the Community Self-reliance Agency – Activity Management Unit (BKM UPK) so they can expand their network and partnerships.
An interesting story came from BKM Ngesti Rahayu, in Pati, Central Java. It began when they needed additional funding for their community activity group (KSM) that had been on the UPK’s waiting list for credit. While waiting, they saw an opportunity to obtain additional credit funds from the Cooperative Bureau (Dinas Koperasi) that could be accessed through PD BPR BKK Pati Kota. They then sent a proposal to acquire for revolving credit funds. It was approved for Rp15million with an annual interest rate of 6 percent. BKM Ngesti Rahayu became the executing agent, or executor, to manage the funds resulting from this linkage..
From this fund a food seller, Ms. Aring, was able to renovate her shop and increase her shop inventory. Her sales increased, growing from Rp250,000 to Rp600-750 thousands.
The risk on applying the linkage with executing model is assumed by two parties: The bank as the credit provider, and BKM/UPK as the credit manager/executor . BKM/UPK provides the collateral.
As mentioned before, BKM Ngesti Rahayu received a low interest rate of 6 percent for one year. They then distributed the funds to PNPM borrowers with an interest rate of 1.5 percent a month or 9 percent a year. The balance was used to help cover BKM’s operational cost.
“BKM Ngesti Rahayu showed they are trustworthy by making the payment early,” a representative of Bank Jateng said.
Another story came from UPK Kalijambe in Sragen. They decided to form a linkage, or partnership, with two insurance companies: Jiwa Bersama Bumiputera 1912 and Jiwa Kredit BOSOWA. It began when a beneficiary passed away while he still had the responsibility to repay the revolving funds. Neither his heir nor his community group could afford to pay off the debt. By having insurance, the loan could be covered and there wasn’t a burden for the community group.
LKM Arta Murti in Bantul, Yogyakarta shared tips on initating a linkage. The tips came from their experience on building partnerships with 13 companies, including Bank Mandiri as well as non-governmental organizations such as Hivos and Yayasan Griya Mandiri (YGM). What they did was to provide recommendations for members of their community activity group (KSM) who had good payment records so they could access credit from PKBL Bank Mandiri. As a result, 11 KSMs in Trimurti Village received loans to expand their businesses. The LKM has also partnered with DPU for a revolving cement loan. With YGM, they worked together to build an environmentally healthy houses. And with Hivos and Paluma, they were hand in hand to help cattle farmers to generate blue energy.
Prof. Gunawan from DEFINIT asked PNPM to support communities to develop their skills in financial management, not only providing loans but also encourage for saving. He suggested through linkages PNPM can encourage the government, the private sector, companies, universities, and NGO’s to provide assistanceship for the communities.
He also said that through this workshop it could facilitate for a national community empowerment movement. This movement should be supported by corruption-free leaders, from the village level up to the national level.
“This movement will begin in Central Java, continue all over Indonesia, and the world. Let’s work together,” he said.
My writings for PSF website.