Cikeusal: Saving for My Daughter’s Goals

Ibu Rohayati herself is 35 years old and only completed grammar school. She is able to give her daughter the money each day because of a loan from the Kecamatan Development Project (KDP) that has allowed her to expand her business and slowly acquire some assets for her family.

“Once, before there was KDP, I borrowed Rp.300,000. That’s Rp.12,000 a day over 30 days… When Pak Jamal (the head of the local KDP FMU) told us about KDP, I stopped borrowing from the moneylender and went to KDP" - Ibu Rohayati

KDP is a key component of the Indonesian government’s poverty reduction plan, the National Program for Community Empowerment, known most commonly by its Indonesian acronym, PNPM. One of KDP’s main arms is micro-credit for village women. In Ibu Rohayati’s subdistrict or kecamatan, 3,150 women are presently borrowing Rp.1,041,278,803 (US$113,499). Another 162 women are waiting to borrow Rp.198,800,000 (US$21,669). All loans repay at a market interest rate in line with local banks of 20 percent.

Ibu Rohayati runs a small stand selling homemade snacks like fried tempe and tofu, vegetable fritters, noodles, and soup to schoolchildren. Her stand is across the street from a school and she makes the majority of her day’s take in the morning when the children arrive. Her 5-year old daughter is also her best business advisor, telling her what kind of food to prepare so that little children will buy it. Ibu Rohayati’s husband works as a motorcycle taxi driver and, while he makes money, income from her efforts is the most reliable.

Originally, Ibu Rohayati borrowed from an informal moneylender. For most small or micro business owners these short-term lenders are the only option. Banks are not interested in loans of only Rp300,000 nor do they want to lend to those without collateral.  Her experience with the moneylender was stressful because she had to pay the loan back within one month.

“Once, before there was KDP, I borrowed Rp.300,000. That’s Rp.12,000 a day over 30 days… When Pak Jamal (the head of the local KDP Financial Management Unit) told us about KDP, I stopped borrowing from the moneylender and went to KDP. I’ve borrowed three times and, thanks be to God, my business, small though it is, is going well.”

In contrast with her experience with the short-term moneylender, when Ibu Rohayati borrowed Rp.300,000 from KDP, she paid Rp.30,000 per month for one year. The long term nature of the loan created a burden she describes as “light.” She was easily able to save Rp.1,000 a day for repayment.

Her first KDP borrowing experience gave her confidence to take out another loan, this time for twice the amount. Now she has a loan for Rp.700,000. This amount makes her a little nervous, but for the past 3 months she has repaid on time.

“In the morning I can make Rp.100,000, sometimes even Rp.200,000, when the kids are in school,” she explains. But during the fasting month, Ramadhan, it’s hard to make ends meet.

“The little children don’t fast, but they are embarrassed (in front of the older kids). It’s difficult to make Rp.50,000.” To make up some of the short fall, she sells sweet drinks for breaking the fast. While not as lucrative, she can still make some money.

“Right now there isn’t a point of buying a lot at the market, so I just save money (in the group account) right now (instead of reinvesting). But since (the loan payment) is only Rp.70,000, plus the interest Rp.10,000, so Rp.80,000 total, I can manage.”

With her business on more steady footing, Ibu Rohayati and her husband have used some of their increased income to buy a motorcycle to start a taxi business. They make monthly payments and in 7 months they will own it. The motorcycle is also useful as the market is far; before she had to pay a motorcycle taxi to take her to and from the market.

Eventually, she would like to start selling gasoline. Gas stations are rare throughout much of rural Indonesia, people fill glass liter sized bottles with gasoline and sell them to cars and motorcyclists. Motorcycle taxis are the main form of public transportation in this area. Mini buses run on one main road but you need a motorcyle to get out to most villages.

Ibu Rohayati’s next plan is to expand the family assets by purchasing some land next to her house. “They want 8 million. I’ve started saving, little by little. For the remainder I’ll borrow from KDP again, that would really help. If I borrow 1 million, I can increase my savings. KDP is really helping, not only by building my business. For people like me, KDP is really helping.”