Oleh: Frida Yanti Putri Nababan | Wakadiv Kajian Kanopi 2012 | Ilmu Ekonomi 2010
“Don’t give a man fish, he will eat for a day. But teach them to fish, you have fed them for a lifetime and he won’t starve for his entire life”
Poverty is a never ending problem in Indonesia. Indonesia consists of 235 million people that two third from the population suffered from poverty who live with IDR 7.075 per day (BPS). Government tried to address this problem with 3 social programs, namely Unconditional Cash Transfer, School Operational Assistance, and Community Driven Development. Unfortunately, although each program was helpful to assist the poor, we found drawbacks of these programs, such as lack of clear local government’s role in the program, problematic targeting methodology, and lack of transparent complaints mechanism that resulted in leakage and under-coverage. People who are literally poor can not obtain the assistance. The same thing went down on others programs, even though students who are poor got free school tuition, but they still can not finance another expenses like expenses for books and stationary stuffs and transportation costs, it cause increased rate of dropout students. Therefore, sadly said, it can not effectively help the poor to gain their better life.
Instead of focusing on increasing cash income for the poor, we need to focus on a greater consideration for improving the livelihood of the poor. Give them wider options and also tools to increase their own standard of life by providing greater opportunities for the poor to access financial services to finance their micro business. ‘Unfriendly credit rate’ and credit procedures set by commercial bank made access to financial services for the poor become difficult. It makes the poor decide to use traditional way to access credit, for instance, accessing credit to ‘loan shark’ that makes the poor become poorer because of the high credit rate. Once again, it makes the poor live in a ‘vicious circle’ that makes them can never improve their quality life because it is resulted in they have to focusing on paying the principle plus the high amount of interest instead of effectively using it for they develop their economic life.
Microfinance gives the alternative solution of this problematic issue. Microfinance help to finance people whose daily income is less than 1 USD and average of credit is 100 USD (Microcredit Summit). Because it concerns on helping the poor, microfinance can identify and reach the most marginalized poor population even in the remote area by making a comprehensive and detailed surveys. Microfinance gives them microcredit, typically used for working capital, secure saving products, insurance products, and the best thing is that they provide training program to micro entrepreneur.
How microfinance works differently from other commercial banks and other financial institutions to alleviate the poverty? First, poor people struggle to find money for fulfilling their basic needs from week to week and they need microfinance that can give them loans without complex procedures to even start thinking about building a micro-business that will be a new sustainable source of fund to finance their basic needs. Second, some microfinance institutions require their member to save in a very small amount before they take loans to teach their clients how to save and manage their expenditures. Many poor families can not manage their expenditures by spent their income for unnecessary needs, like cigarettes, snacks, and their children’s toy and make ‘don’t have enough money’ as a reason not to sent their children to the school. By requiring their clients to put small amount of saving in the first place before they take loans teach them to be responsible for deciding what to do with the loan. Third, the facts that many microfinance institutions also provide the training program to micro-entrepreneur really help the poor not only dream about making their life better because many poor people want to make some micro-business and take loans from “loan shark” with the expectation they will be able to pay back the loan after they gain revenue from their micro business, but it was failed because of inability to manage the micro business effectively and efficiently. In the long run, we expect poor people will be able to survive with their very own strength and if the micro business work well and need to be expanded they need other to work with them therefore it will create job. The more they gain profits, the more they will be able to finally be investor in the microfinance institution and help them to finance others. It will effectively create wealth for the poor.
Hence, microfinance has big potential to address poverty and the best thing is that microfinance can teach the poor “to fish” for their own needs and it will effectively reduce the poverty.