Community Empowerment Through the Revolving Fund

By Bambang Ismawan

Download: Buletin Bina Swadya, No. 59/Tahun XIV/Maret – April 09

The idea of community using the revolving fund when it began to show awareness that the poor are not the have not but  the have little. That they are economically active, the poor need more accessibility on the service provider (in this case financial institutions) rather than pity. And that community development efforts to be complete when have economic benefits for their members.

Years since 70 Bina Swadaya have used the revolving fund mechanism as a means to enhance community self-reliance through self-helps groups (KSM), which assisted. Bina Swadaya efforts in empowering the community for at least  have 3 experiences with the management of revolving fund program, the First Savings Setia Kawan (Tsk) and Credit Setia Kawan (KSK), among self-reliance groups. Second, Development Group to be Akseptor KB UPPKS Group, and Third, Inpres Desa Tertinggal (IDT)

TSK and KSK program

In each of the KSM assisted, Bina Swadaya have always emphasized the importance of fertilization capital of its members. Fertilization capital that can be a result of production, labor and now a lot of money.   Fertilization the form of money capital is understood as utilized  the savings to strengthen member businesses through loans.   But the members of the KSM is poor, have a limited capacity to provide the funds, needed to develop businesses that increasingly advanced.

Base on the idea to mobilize the available funds, and then designed and promoted savings and credit scheme between KSM which aims to support solidarity.   If member savings managed by KSM in the program TKS, savings in KSM managed Bina Swadaya.

Bina Swadaya further with the support of donor agencies, such as a revolving fund (revolving fund) that serves as a matching fund to provide loans to KSM up to 4 times tsk, addressed to members in need. This program is successful, in addition to increasing a sense of solidarity between KSM, KSM members also have the opportunity to increase their business is expected to increase their income and welfare.

Activities tsk-KSK is a success (100% credit back for 5 years) presented in a workshop in Nanjing (1986) held APRACA (Asia Pacific rural and Agricultural Credit Association) and the embryo is the project for Bank Relations with KSM (PHBK) Bina Swadaya promoted at the year 1987.   PHBK is an idea that aims to bring together 2 of ecosystems, namely: the modern ecosystem (which is represented by the bank) and the ecosystem poor / traditional (represented by KSM) and NGOs as the assistant and the principle of win-win solution.   In PHBK, the Bank’s services to improve the coverage, KSM get Accessibilty and NGOs that have a professional fee to build financial independence.

BKKBN in 1983 in cooperation with the UNFPA (United Nations Fund for Population Affair) conducted a program called Income Generation, Women Participation in Development.  This program will be implemented through groups Akseptor participants with the objectives of the KB to be a “sustainable” because the incentives to increase the income of a revolving fund that was called seed capital.   Bina Swadaya requested to assist the implementation of this program.  First, Group Akseptor concept changed to a group, then  later called UPPKS the way it works with the KSM.   Then the train PLKB (Field Officer KB) to support a group that base on Generating income.

This program successed, remarked by the large number of groups UPPKS that collected, around 650,000 groups with 13.5 million members (families).   Through Presidential Instruction billion of funds have been generated from the company’s profits (5%) as a revolving fund.   This program has been amazing, so many developing countries to study conducting in KB, especially on aspects of the management group with insentive (revolving fund) to become Group KB Lestari.

IDT Program
New Order government (1993) finally recognize that poverty is a serious problem, although many reject from  the Governor and the Regent.  They feel not proper reputation in the region reported that many poor people on there area.   Attitudes like this make difficult  the field identification .  But circumstances have changed after that news that the poor will be assisted with the revolving fund (called IDT funds ), which will be distributed through community groups (Community Groups), which was formed by the communities themselves in the villages left behind.  Approximately 4,000 assistants recruited between Bachelor assistants are trained for a better knowledge of the physical and community groups (the same as the KSM) and technical skills.   In addition to preparing a draft, Bina Swadaya also involved in training to prepare for the assistants.   IDT program has established community with 120,000 groups, 3.6 million families.

From the results of the research done by the P3PR against the development of community groups-community groups IDT results obtained: 36% Pokmas enter the criteria in Group A or group that has been ready to deal with the Bank, 31% Pokmas enter the criteria in B, the activities have a savings and loans, if accompanied 6 months is estimated to be increased to A, and 33% are community groups with the criteria C, the community groups that fail and do not continue. IDT program unfortunately only lasted 3 years.  The IDT assistant and then dismissed the government has withdraw the funds and the IDT program then managed as UEDSP under the Ministry of Home Affairs.

The success and sustainability of community development efforts using the instrument revolving fund is determined by the First, the effectiveness of organizing a group (KSM). Second, the effectiveness of support groups, and Third, the readiness of the institution (in this case the Bank) for the partnership.

About KSM effectiveness. KSM is a community development model that emphasizes the process of independence in togetherness. With KSM as the vehicle: mutual learning, joint problem identification, resource mobilization, and expand the network of communication with others. Meanwhile, as members of KSM are poor people , so the activities of the KSM should aim to increase income and welfare of members.   Activities that need to be in togetherness as in the institutional like cooperative.   Experience shows the execution group with the following diagram guarantee of success.

Overall effectiveness of KSM can be depicted in the picture below

While the matter of assistance. Assisting highly influential role in the performance of a KSM in order to achieve self-reliance and improve. Assistant role as (a) a motivator should be the motivation of members to support the implementation of the group, (b) facilitators who are able to facilitate group members in order to have the skills to develop the group and (c) comunicator that is capable of searching for information in connection with a variety of businesses that have good prospects.

To be able to perform its role properly, the assistant must have a first understanding of the concept of development on people’s participation through small groups of self-help approach. Second, the behavior is acceptable to the local community and understand the aspirations of the community. In addition, he must also be able to develop aspirations to become the motivation for the joint participation of members in each group. Third, the field worker as close partners of the group, attend every meeting members of KSM. Fourth, field worker as a facilitator to assist in problem solving, as well as specific guidance to the organization, administration bookkeeping, capital, business and so forth. Fifth, field worker must meet the requirements of a commitment in the development of community self-help, are willing to live in a location (usually done with the training / retraining in advance)

The readiness of the partner institutions, namely Bank. Indeed, the Bank is not designed to serve the poor.   But with a policy that many Bank office can serve the poor.   In this case, government policy needs to encourage banking institutions to partner with community development programs. There mechanism is a fee for professional support and assistance institutions, as done in PHBK, sustainability of community development is possible with the assistance of independent, that is their efforts that cost the price charged on the assistance that own, not donor from outside. (*)