Cikeusal Financial Management Unit: Helping Women Succeed

Cikeusal Kecamatan, Banten Province, Indonesia, November 2007 - During the 2007 Idul Fitri holiday season, the price of sugar rose 40 percent at the local market in Cikeusal, a rural sub-district (kecamatan). For Ibu Fikri, a participant in the Kecamatan Development Program’s micro-credit program, these increases in the price of staple goods cuts sharply into her income of Rp.25,000 a day (US$2.73) from her vegetable selling business.

Ibu Fikri feels she must spend money at the holiday. “I would be embarrassed in front of my extended family—they would come and ask me where the sweets are. But they eat a lot—one person comes, eats most of one container, two people come, another two containers are gone,” she says mournfully.

Standing Proud: Cikeusal’s new staff. After four years of hard work, the kecamatan’s program has become a model.

This year the Cikeusal office of the Kecamatan Development Program (KDP) is helping Ibu Fikri with her holiday expenses. In their innovative, locally devised incentive scheme, women who have repaid loans receive crucial basic goods in advance of the financially draining holiday season. Women who repay loans faster receive larger amounts of staple goods; a longer repayment period means smaller quantities.

KDP is a key component of the Indonesian government’s flagship poverty reduction plan, the National Program for Community Empowerment, known most commonly by its Indonesian acronym, PNPM.

One of KDP’s main arms is a micro-credit program for village women. In Cikeusal, 3,150 women are presently borrowing Rp.1,041,278,803 (US$113,499) from KDP. Another 162 women are waiting to borrow Rp.198,800,000 (US$21,669).

More than motivating women to repay, the Cikeusal KDP Financial Management Unit (FMU) thinks about how to truly support the women. This means addressing issues ranging from small practicalities, like transportation costs to make payments, to more complicated work of building women’s confidence and basic management skills. “We want to find ways to help them to succeed,” says Pak Jamaludin, Head of the Cikeusal FMU.

Motivation

The Package Incentive scheme is a good example of how the Cikeusal FMU creates incentives that are meaningful to the women. The staff presents the award packages at a strategic moment: when the next round of funds is distributed. This not only minimizes transportation costs for members but also provides inspiration to women as they begin their new round of borrowing.

The packages have been highly successful, especially for motivating new groups or members. “When the packages are presented, older members are reminded of what they can get and new members ask how they can get them as well,” explains Sri Haryati, treasurer of the FMU. The reward system is funded by 2.5 percent of the women’s repayment of loans that would usually go to office operational expenses.

Incentive Program for Cikeusal Savings and Loan Groups

Group A: Special. A group that has never missed a payment and is paid in full before the due date.
Group B: Standard. A group that has repaid on time and never missed a payment.
Group C: A group that has repaid in full but payments were occasionally late.

Practicalities

Less dramatic but practical innovations have occurred in response to project demands. Initially, members had 2 separate cards, one for savings and another for payments. The Cikeusal office created a new card including all financial activity of the member so they could easily understand their whole status at a glance.

The FMU staff has also found ways to address two factors constraining savings and loan members repayment: transportation costs and the reticence of many group members to go to a formal bank to make payments.

Cikeusal’s transportation is limited to mini-buses that run along the main road. Aside from this, people use motorcycles or motorcycle taxis to get around. For many borrowers, a Rp.10,000 (US$1.11) motorcycle taxi ride to go to the KDP office is a significant burden—for one woman, Rp. 10,000 would be 1/3 of her monthly loan payment. In addition, they would have to leave their businesses unattended and, for women in more distant villages, the roundtrip could be up to an hour.

To solve the issue, members can elect to make their payments to their group head, who then deposits the group’s money to the KDP office. The office staff in turn takes the funds to Bank BNI, where each group has an account. Every three months the head of the savings and loan group is given a small amount to cover her transportation costs. As a precaution against fraud, there are two payment history records: the member’s card—a green form filled in by members at home and stamped at the KDP office and a yellow official office record that is updated at the same time.

Management Skills

Many of the women in the program have little experience in trade, they mostly worked in the fields until they were given an opportunity to borrow from KDP. “When I first arrived in Cikeusal, I saw so many people, especially women, living below the poverty line,” says Pak Jamaludin. “Most of the women only worked in the fields during the harvest season and the rest of the year were out of work. I thought this was striking, I wanted to help them find something to do. Even if they only have another Rp.20,000–30,000 (US$2.18–3.27) a day that’s still something.”

Once a month the FMU visits every borrowing group in Cikeusal. “We ask them about their business, what they sell. We ask them what difficulties they are encountering and work with them to find a better way for their business,” explains Sri Haryati. This proactive measure is a key reason their return rate remains around 91 percent.

New savings and loan members receive their first round of funds. They also receive their green Savings and Loan Membership Card that will record all loans, payments and savings.

The FMU also teaches basic financial management skills. Keeping business and home expenses separate and basic saving skills are the main messages the FMU teaches, and these must be repeated at every meeting. “Some women start using their loan to pay for their child’s schooling, then they use a little for daily expenses. They don’t save and then their credit is stuck,” says Sri. “We teach them they have to save. And its better to save more than just their payment—what if there’s an emergency? We tell them this again and again.”

“We teach them to save daily, they have to save a little each day so at the end of the month they can make their payment,” says Pak Jamaludin.

Again the numbers bear our their success. Package recipient Ibu Fikri saves daily. Another participant, Ibu Rohayti, likewise saves a bit every day to pay her loan of Rp. 700,000. “Everyday I use Rp.12,000 at the market, I save Rp. 20,000 a day for the family to eat, to pay other things, and for paying the FMU. I save everyday.”

The staff in Cikeusal still face challenges with borrowing groups. “We still have to work on changing the mentality of some members of the community who think this is a handout from the government,” says Pak Jamaludin. “We go to the field, we keep talking with them. Slowly, there is change.”