Microcredits for Small Business Start-Ups in Indonesia

Religion No Bar to Financial Support

The Indonesian Dian Mandiri Foundation is a Christian organisation that specialises in the allocation of microcredits, the majority of them to Muslim savings clubs. The funds are intended to provide the means to set up small businesses. Christina Schott reports

​​"What is important for your business?" Around 20 women in multi-coloured dresses and headscarves are sitting around, attentive, and eagerly responsive to their trainer's questions. "Getting up early in the morning and always opening for business at the same time," one woman calls out from the back row. "That my husband and I trust one another," volunteers another.

"Discipline", "punctuality", and "trust" are among the mantric concepts scribbled in Indonesian on a blackboard for the instruction of the group who are squatting around it on phloem mats on a wooden porch.

For four years now, the women of the "Sari Ayu" microcredit group have been meeting once a week in the village of Kiyarapayung in the district of Tangerang, one and a half hours west of the capital Jakarta, the members taking it in turn to offer their house as venue for the meetings.

Comprehensive approach the way to success

Training sessions, however, do not take place every week. The Dian Mandiri Foundation, which organises the training, has been making microcredits available to savings clubs in the poorer areas of Jakarta and its surrounding area, including Kiyarapayung, since 1998.

The foundation's aim is empowerment of the poor, women in particular, by making it possible for them to establish their own businesses, not only by making microlending facilities available, but also by ensuring that they receive adequate training and support.

New members receive a first credit, equivalent to a little over 40 euros, after they have completed a minimum of eight training sessions, with the loan and interest (at 3.5%) to be paid back in weekly instalments. "Of course, it's more than a normal bank would take, but they wouldn't give us any credit in the first place. We, on the other hand, get training included," says Soleha, who has been a member of "Sari Ayu" from the beginning.

No Christian bias

Although Dian Mandiri is a Christian organisation, 95% of its clients are Muslim, the majority female. "We are a professional organisation, not missionaries: our religion has nothing to do with our work," explains operational director Dino V. Hadjarati. "When we are asked what our aims and purposes are, we refer people to our terms and conditions of business. That's what we adhere to, and so far it has worked out well. In order to more fully meet the needs of our customers we are currently developing our knowledge and expertise in syariah banking."

There is no problem with religion as far as the women of the "Sari Ayu" group are concerned either. "We have been working with these people from the beginning and they have always been true to their word. We have even turned down offers from other microcredit organisations, because we trust Dian Mandiri completely – whether they are Christian or not," Soleha insists. Now on her seventh cycle of credit, the 33-year-old has transformed what began as a bamboo kiosk in front of her house in Kiyarapayung into a fully-fledged corner shop.

The additional money is used to pay the school fees for her three children, something her fisherman husband's income alone would not suffice for. "Without the credit group and the training I would never have managed to do it," Soleha says.

Solidarity as principle

Soleha with her youngest doughter (photo: Christina Schott)
Even Muslims have great trust in the Christian organisation Dian Mandiri, says Soleha, a Muslim working for the microcredit group "Sari Ayu"

​​Savings clubs have a long-standing tradition in Indonesia. Everyone in Indonesia knows the Arisan system – informal social gatherings where people get together to pray and eat and contribute money to a common savings fund.

People in the villages also make small financial contributions towards the cost of communal necessities, which are then collected by a night watchman from old tins or jars left at the house door. It provides a way for the village community to help out when, for example, someone dies.

Dian Mandiri also applies this principle of neighbourhood help. If, say, for reasons of ill health, a member is forced to default on loan repayments, then it is the rest of the group which must take on the responsibility. In the case of Rohayati, this is currently being put into practice, and working out well. With a critically ill husband to be looked after, the 40-year-old is no longer in a position to work enough to pay back what she owes. The other women of "Sari Ayu", therefore, have clubbed together to come up with the money.

Additional insurance safeguard

To provide a safeguard against an unnecessary burden falling on surviving dependents in the case of a death of a borrower, Dian Mandiri last year introduced a compulsory insurance coverage.

In collaboration with Allianz Indonesia and Germany's agency for Technical Cooperation (GTZ), the organisation is now offering a combined credit and life insurance for an additional twelve cents. In the case of a client's death, not only is the debt liquidated, but the beneficiary also receives a sum of double the originally borrowed amount.

"It's the first time in my life that I have had insurance," Soleha says. "But I really do feel better knowing that my family will not be faced with any debts should anything happen to me." To close the meeting they pray together to Allah – the headscarved women and their Christian trainers.

Christina Schott

© Qantara.de 2007

Translated from the German by Ron Walker

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