CHAPTER 4

DATA COLLECTION AND DATA ANALYSIS

4.1 Data Collection

4.1.1 Baitul Maal Wat Tamwil Barrah (BMT Barrah)
Kelompok simpan pinjam Barrah was established in July 1993 with
capital of Rp 2.500.000. The motive is to participate on developing
small economic people to be free from interest based on Islam.

Then in 1996 kelompok simpan pinjam Barrah changed into BMT

Barrah under the coordination of PINBUK Jabar. BMT Barrah is
located in Jl. Kiara Sari Asri no.10.

Vision:
Increase empowerment of low class economic people in hope that
their welfare can increase to achieve business independency.

Mission:
• Develop people potential in order to be able providing benefits on
developing people’s economic.
• To become one of alternate solution in eliminating doubt against
Conventional Bank Interest.
• Participate in reducing poverty especially in Islamic community.
• Through empowerment and increasing people economic, society’s
life becomes prosperous.
• Create source of finance and capital availability to small and
micro business.
• Develop attitude of thrift through saving.

Reputation and Reward:

• The Pioneer of KSP Syariah in Bandung (2004).
• The Best KSP Syariah in Bandung (2004).
• Nominated by Cooperation as The Best KSP Nationally.

21
 BMT Barrah has cooperated with:
• Menegkop
• Bank Permata Syariah (Facilitate ATM, transfer, Payment of
electricity bills, pulsa, etc)

Operation Scope:
Region around Bandung with focus market to traditional market
because the cash flow is fast and big. Also in traditional market there
are a lot of people with low economic that need help. BMT Barrah
has branch office in Cijerah and Rancaekek.

4.1.2 PT. BPR Syariah Berkah Amal Salman (BPRS Salman)

Main Office: Komplek Ruko Pondok Mas
Jalan Pondok Mas Raya No.34 Baros
Cimahi Selatan – Kota Cimahi
Telp/Fax : (022) 6632613
Cash Office: KK.Batujajar Jl.Raya Batujajar Barat no.369
Batujajar Kab. Bandung

BPRS Salman form is a limited liability company builds in July 17th

2002.

Vision:
To become an independent financial institution as a place to increase
the quality of economic society’s and strengthen friendship between
Muslim through business cooperation.

Mission:
1. Building lower level economic people with Islamic character
and culture financial service.
2. Creating Islamic business environment condition.
3. Developing Islamic entrepreneur society model that align with
environment condition.
4. Provide financial service based on Islamic principle.

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Scope of BPRS Salman operation is around Cimahi city with 3.937
Ha which consist of 3 kecamatan and 15 kelurahan. Focus target is in
south Cimahi (kecamatan Batujajar, Margaasih, and Soreang). Main
activity is in Batujajar traditional market.

4.1.3 Ganesha Microfinance

“Mitra Bisnis Keluarga” (MBK) – which stands for “Family Business
Partners” – is a non-bank financial company (MBFC) regulated by
the Ministry of Finance. MBK began operating in January 2006 to
provide working capital to low-income households in Indonesia in
order to raise their family incomes and living standards. MBK took
over the successful microfinance activities of Ganesha Microfinance
Foundation (Ganesha), which operated from 2003 to 2006, and which
reached a total of just under 30,000 clients in that period, served by a
network of some 15 branches in two rural districts close to Jakarta
(Kabupaten Tangerang and Kabupaten Bogor).

PT Mitra Bisnis Keluarga Ventura (MBK) is a non-bank financial

company (MBFC) which obtained its venture capital operating
license by from Ministry of Finance in November 2006. It is in
possession of the following legal documents:

As a non-bank finance company, MBK is not allowed to raise savings

from its clients. As a venture capital company, it operates on a profit-
sharing basis, taking risks in providing working capital to micro and
small businesses without collateral, and sharing in their profits using
a pre-agreed profit sharing formula with its clients.

Many of the clients are landless laborers, and are involved in petty
trade, preparing and selling food, livestock rearing and vegetable
growing. MBK plans to reach 30,000 additional clients in 20 new
branches in 2007.

MBK uses the Grameen Bank Approach to extend working capital of

US$ 40-200 to poor women. This approach is particularly well suited
to Indonesian conditions.

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 MBK has adopted the Grameen Bank Approach (GBA) pioneered
and developed by Professor Muhammad Yunus (Grameen Bank),
Shafiqual Haque Choudhury (Association for Social Advancement or
ASA) and Abaid (Bangladesh Rural Advancement Committee or
BRAC) in Bangladesh, and Professor David Gibbons (CASHPOR) in
Malaysia and India, to provide financial services to low-income
households.

In the process of adapting this approach to Indonesia, MBK has

studied several existing Grameen replication programmes in
Indonesia, including Mitra Karya East Java (MKEJ), Yayasan Usaha
Mandiri in West Java (YUM) in East Java, Yayasan Dharma Bhakti
Parasahabat (YDBP) in West and Central Java, Karya Usaha Mandiri
in Bogor (KUM), Yayasan Siti Khadija (YSK) in and around Jakarta,
and POKMAS in North Sumatra.

MBK focuses exclusively on the bottom 25 percent of the

households. The programmed is implemented using a specialized
delivery mechanism and with specialized people. It system consists of
seven principles:

1. Provide small working capital for additional income-generating

activities (up to Rp 500.000 or $60 in the first cycle) to be repaid
in small installments over a period of up to one year.
2. There is no collateral and no guarantor, but group pressure and
support.
3. Clients are members of a self-selected group and of a village
center.
4. Clients must repay their working capital in full on a timely basis.
5. Clients attend weekly village center meetings, during which they
repay their working capital in weekly installments.
6. The working capital must be used only for agreed income-
generating activities.
7. Field staff visit their clients in their villages, the clients do not
visit the bank.

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MBK’s vision is to provide access to working capital to significant
numbers of low-income households in Indonesia, particularly in rural
areas and small towns, in an honest, timely and efficient manner.

MBK’s mission is to raise the income and living standards of

significant numbers of the poorest households in Indonesia. MBK’s
medium-term goal is to reach one million clients by 2010-11

In view of its highly transparent procedures and reporting,

MIXMarket, the global information exchange for the microfinance
industry – organized by the Consultative Group to Assist the Poor
(CGAP), of the World Bank –, granted five diamonds to Ganesha in
September 2005. Ganesha was also selected as five-diamond MFI
profile of the month by MIXMarket in October 2006.

4.1.4 Baitul Maal Wat Tamwil Wahana Mandiri

BMT Wahana Mandiri was form on 21 April 1999 (Cooperation).The
address is on Jl. Komodor Udara Supadio No.6A/72 RT 01/05 Jatayu
Bandung (022) 6035142.

Vision:
To create quality society around BMT that are safe, peace and
prosperous with the development of BMT business institution
through growth, trusty, safe, comfortable, transparent, and
cautiousness.

Mission:
Develop BMT that is growth, trusty, safe, comfortable, transparent,
and cautiousness in order to create a safe, peace and prosperous
quality society around BMT.

Objective:
Create families and society’s life that is safe, peace and prosperous
around BMT.

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 4.1.5 Baitul Maal Wat Tamwil Daarut Tauhid (BMT DT)
Baitul Maal Wat Tamwil Daarut Tauhid was establish on July 14th
1994 and was apart of division under supervision of Pondok
Pesantren DT Cooperation.

Vision:
To be Lembaga Keuangan Mikro Syariah independent model and
becoming pillar for national economic with international standard.

Mission:
Providing Lembaga keuangan syariah service like:
• Development of West Java BMT model degree standard.
• Have healthy finance standard.
• Becoming Lembaga Keuangan Syariah model which gives
contribute to society welfare.

BMT DT Objective:
To be society’s economic solution based on syariah.

4.1.6 Microfinance Syariah Berbasis Masyarakat (Misykat)

Misykat is a non formal (social) institution that stands for
“Microfinance Syariah berbasis Masyarakat”. Misykat was
established by Daarut Tauhiid in April 22nd 2003, the founder of
Misykat is Mr. Iwan Rudi Saktiawan. Mr. Iwan has many
experienced in microfinance program before and develops a new
form of microfinance in DT. For his effort he was given Ashoka
Reward from Ashoka Foundation.

From the knowledge that to solve poverty problem it will need

holistic solutions, therefore it initiate Misykat. Misykat is a
development program which affects the increasing of member
economic welfare. The main activities of Misykat are:
1 Weakly Forum
2 Saving
3 Loans

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 4 Training
5 Market Excess
6 Organization

This is the different with other institution, Misykat develop amateur

entrepreneur to become excellent entrepreneur. While in other
institution the key is finding excellent entrepreneur. Misykat used
andragogi (education for grown up) method explain the topics. The
education takes place in a relaxed environment, simple and dialogue.
Also every member is visited by counterpart to help them one by one.

Misykat is an empowerment program which effect to the increase of

its member economic welfare.

4.2 Data Analysis

From the data that are gathered, we compare it to make it easy to see the
difference between each institution in some area. This are is very
essential for the development of Microfinance Institutions (MFI).

4.2.1 Vision
Vision is very essential to the institution performance because it is
the main directions that control all of the institution activity. A good
vision has the description of where is the future position of
institution, the object, scope of activities, how to achieve its goals
and uniqueness. These six microfinance institution (MFI) each has
different goals. The words that are underline is the key word that
become the basic activity of MFI.

27
 Table 4.1 MFI Vision Comparison

Institution Category Vision

BPRS Salman Formal Bank To become an independent financial institution as a place to increase the quality of economic society’s
and strengthen friendship between Muslim through business cooperation.
BMT Barrah Non Bank Increase empowerment of low class economic people in hope that their welfare can increase to achieve
business independency.
BMT Wahana Mandiri Non Bank To create quality society around BMT that are safe, peaceful and prosperous with the development of
BMT business institution through growth, trusty, safe, comfortable, transparent, and cautiousness.
BMT Daarut Tauhid Non Bank To be Lembaga Keuangan Mikro Syariah independent model and becoming pillar for national
economic with international standard.
Ganesha Microfinance Non Formal To provide access to working capital to significant numbers of low-income households in Indonesia,
particularly in rural areas and small towns, in an honest, timely and efficient manner.
Misykat Non Formal An empowerment program which effect to the increase of its member economic welfare

BPRS Salman vision as formal bank did not specifically mention about microfinance program. The goal is becoming independent financial
institution to increase the quality of economic societies and strengthen friendship between Muslim. This vision is more general and characterizes
the institution as a formal bank. Because formal bank can have many programs and one of them is microfinance, and have to follow the regulation
determine by Bank Indonesia. Therefore there isn’t much uniqueness of mirofinance in the vision statement.

28
Different from formal bank, BMT as a formal non bank institution
have microfinance goals in their vision. BMT Barrah, Wahana
Mandiri, and Daarut Tauhid focus their activity on helping the
community. However in building the community BMT also offered
other facilities such as savings and other financial service.

BMT Barrah focused on the empowerment of people so in the future

they can help the societies. BMT Wahana Mandiri tried to make
quality society that is safe, peaceful, and prosperous. This target can
be achieved if the community is being helped to make their life better
and easier. Through micro financial service and counseling the
people is being stimulated to increase their quality of life. BMT DT
as one of the pioneer of BMT have a higher goals, they targeted to
become model for other LKMS. LKMS is one form of institution that
focused their activity in microfinance. Giving example to other
LKMS means that BMT DT has to have good system all around and
produce excellent output.

Ganesha Microfinance and Misykat as a non formal institution have a

unique position because as non formal organization, their objective
are not profit like other institutions but fully helping the community.
Ganesha vision wants to reduce one of the main problems for poor
people, which are giving access to working capital for low income
household. Empowerment of women is also targeted by Ganesha to
increase the income of household. This vision clearly stated that
Ganesha only focus on giving access to working capital.

Misykat have almost the same vision as BMT Barrah. They position
them self as an empowerment programs. Therefore Misykat
programs are limited for poor people only. Their main focus is
empowering poor people so they can develop them self to become
better educated. The main focus for Misykat is how to make good
and effective empowerment programs for their member.

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 Conclusion:
As a microfinance institution, all of these institutions have the same
intention that is to help and develop their community in their own
ways. Their goals are to increase poor people income so they can
increase their quality of living.

After seeing the difference in each institution basic policy concerning

their choices of target and model, now we look at the achievement of
each institution. Table below gives us description about the
performance of institutions.

Table 4.2 Microfinance Institution Comparison (comply from many

source)

Finance
Form Target Model
BPRS Salman Formal Bank Traditional market, merchant Individual
BMT Barrah Non Bank Traditional market, merchant Individual
BMT DT Non Bank Traditional market, merchant Individual
BMT Wahana Mandiri Non Bank Traditional market, merchant Individual
Ganesha Microfinance Non Formal Poor Women Group
Misykat Non Formal Poor people mainly women Group

4.2.2 Target
Targets are classified into 2 categories:
1. Social Status
There are microfinance institutions that divide their target
based on the social status. Ganesha Microfinance and
Misykat targeted poor women as their member. Ganesha
also targeted people that are in the lowest 20% class of
society.

The divided based on social status need more programs or

standard programs that can accommodate the people needs.
But the advantage is that their members have the same
character so it can make it easier because the members have

30
 the same characteristics and their employee can be trained
the same way. People who have the same social status tend
to stick together with their group because they comfortable
with the people that have the same condition.

2. Business Activity
Target based by business is more detail and simple. Some
microfinance institutions divide their client based on their
business. For example the target are traditional market,
merchant, small & medium business, farming, etc.

BPRS Salman and BMT have the same target market. They
give financing to individual people and select nearby
traditional market as their main market. Market is chosen
because their activity and consumers are certain with each
day people make many transactions in the market. There is a
different treatment when the clients have small independent
business (ex: warung) although the system is similar to with
traditional market system. The difference lies in the
screening process because traditional market and small
business has different consumer, competitors and location
that is important to business.

Conclusion:
Target and model need to be aligning each other and the
institutions goals. Each offer different approach and control. The
success of microfinance programs is determined by the proper
match among target, model, and institution’s goals.

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 Table 4.3 Financial Condition (comply from many source)

No Institution Funds Distributed Collateral NPF/NPL

1 BPRS Salman 1,146,138,569 Yes 49.09%
2 BMT Barrah 8,313,950,000 Yes 3-4%
3 BMT DT 9,297,574,615 No 2.97%
4 BMT W.Mandiri 2,108,963,200 No 0.01%
5 Ganesha Microfinance 9,105,260,000 No 0.11%
6 Misykat 379,130,000 No 9.93%

We then look at the scheme used by each institution in more detail. The
scheme will be view from financing model used then the detail target
market of institutions. We will look at the scheme from screening
activity, process activity and output.

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 4.2.3 Scheme
4.2.3.1 BPRS Salman

Individual Target Screening Process Output

Finance (Mudarobah,
musyarokah,
murabahah)

Traditional market Prerequirement:

Loans amount Rp 1

Figure 4.1 BPRS Salman Scheme

The non performing funds (NPF) of BPRS Salman are very high; in March 2007 it has 49.09%. The cause of high number of NPF is because
bad controlling. They did not routinely collect the funds and taken real action to conduct people that does not or could not repay the funds.
The controlling was not good to serve traditional market segment. The BPRS people are not discipline in collecting debts.
33
4.2.3.2 BMT Barrah

Individual Target Screening Process Output

Finance (Mudarobah,
musyarokah,
murabahah)
BMT Barrah Interview to see advisability.

Max loans Rp 10

Figure 4.2 BMT Barrah Scheme

34
Collateral is not needed for people who have good reputation in the eyes
of BMT Barrah. Maximum loans of Rp 10 million is for people that
already trusted by BMT and Rp 5 million is for new people. Action in
handling the NPL there are different teams and time limitation, which
are:
1. Surat Perintah 1 is 1 month and conducted by Account Officer
2. Surat Perintah 2 is 2 week -1 month, conducted by Remedia Team
3. Surat Perintah 3 is 2 week conducted by supervisor
4. Management Team fined the person until he/she is found.

Restructuring is needed when debtors are difficult returning the funds,

steps in restructuring are:
1. BMT will give time extension to the debtors.
2. Installments will be change to lighten debtors but balance is still the
same.
3. Final step is changing everything; the installments and balance.

The NPL that happen in BMT Barrah are usually caused by major forces,
market are desolate & remove, family divorce, business divorce, and bad
collector.

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4.2.3.3 BMT Daarut Tauhid

Individual Target Screening Process Output

Finance

Student/Santri For student maximum loan Using Mudharabah &

Figure 4.3 BMT Daarut Tauhid Scheme

Management Concept of BMT DT:

1. Khairunnas Anfauhum Linnas:
Give the best to investor
Give the best to invest users
2. Collective in muamalah:
Business that is based on syariah are not rival but partner
Together in developing religious proselytizing and the benefits of syariah economy which is “Rahmatan lil Alamin”

36
 4.2.3.4 BMT Wahana Mandiri

Individual Target Screening Process Output

Finance

Traditional market Debtor need to have active GB/CH (Giro Bilyet /Cheque).

Figure 4.4 BMT Wahana Mandiri Scheme

The different from other institution is that their customer pays with GB/CH (Giro bilyet and cheque). The sellers then change the GB/CH to
BMT Wahana Mandiri. The function of BMT is gather the debt and pays the liquid funds to the sellers but still concern to 5C. There will be
cross check about GB/CH to insure that this was not self made. If it true than BMT ask for collateral that is higher then the cash. Their focus
on service, efficiency, reorganize and very cautious to financing. The reasons for NPL are the member business not doing well.
37
4.2.3.5 Ganesha Microfinance

Group Target Screening Process Output

Finance

1 group = 5 women Poor Women: Screening requirement: Financing are given in 3-2

Figure 4.5 Ganesha Microfinance Scheme

38
 In Ganesha Microfinance discipline is the basic concept of the
whole system. If there are rule that not obey by member then there
is punishment whether it given to the group or indivdual. To
understand more about the finance limitation, the table below
describes the financing policy in Ganesha Microfinance:

Table 4.4 Ganesha Microfinance Financing Policy (Yayasan Ganesha

Keuangan Mikro, 2006, 8)

Working
Capital Maximum Number Total
Cycle Size (Rp) Weekly Repayments(Rp) of Repayment
Week
Profit Weekly
Principle Sharing Total
1 500,000 10,000 3,000 13,000 50 650,000
2 1,000,000 20,000 6,000 26,000 50 1,300,000
3 1,500,000 30,000 9,000 39,000 50 1,950,000
4 1,800,000 36,000 10,800 46,800 50 2,340,000

There are several mandatory savings for Ganesha member, which

are emergencies, reserve, and voluntary saving funds. These
savings have function to pay back the funds if NPL occured or help
member if they have problem with their business. The savings
mechanisms are describe in table below:

Table 4.5 Ganesha Microfinance Savings Policy (Yayasan Ganesha

Keuangan Mikro, 2006, 15)

Round Maximum Hold by Association (Rp) Hold by Total

Loans(Rp) Ganesha(Rp) (Rp)
Emergency Preserve Voluntary Responsibility
Fund Fund Saving Fund Fund
Deposit 1x
Group
Leader Association Group/Asso
Leader ciation Leader

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 Table 4.5 Ganesha Microfinance Savings Policy (Con’t)

Round Maximum Hold by Association(Rp) Hold by Total (Rp)

Loans
(Rp) Ganesha(Rp)

% of
Loan 1% 0.2% 2.6% 5% 8.8%

1 500,000 5,000 1,000 13,000 25,000 44,000

2 1,000,000 10,000 2,000 26,000 50,000 88,000
3 1,500,000 15,000 3,000 39,000 75,000 132,000
4 1,800,000 18,000 4,000 47,000 90,000 159,000
a = the first time is from weekly mandatory meeting, after that it
is from distributed funds
b = at the same time with funds distribution

The table below gives a simple view of the flow of loans using 3-2
method in Ganesha.

Table 4.6 Ganesha Microfinance Distribution Pattern (Yayasan Ganesha

Keuangan Mikro, 2006, 24)

Meetings Reserve Funds Member in each Group

A+B+C D+E
Ratification Seriousness/ Submission
Emergency Fund
A+B+C+D+E
Week 1 Preserve Fund A + B + C + D + E Distributed Submission
Responsibility Fund A + B + C
Voluntary Saving Fund A + B + C
Week 2 Responsibility Fund D + E Deposit 1 Distributed
Voluntary Saving Fund D + E
Week 3 Deposit 2 Deposit 1

The first financing funds it is only given to three people from the
group. After all the requirement are met then the other two
people will get finance. If there is NPL in the first financing then
the last two people financing will be hold until the first financing
is NPL free. This is also happening in Misykat model. One of the
last two people is always the group leader.

40
 The main priority for Ganesha Microfinance in order to achieve
its goals is stated in “The Four Key Factors” below:

1.
Strong Discipline
100% poor women
100% weekly meeting
attendance
100% repayment
No short cuts in meeting
Loan utilization checks
2. 3.
Human Resource Develop Accounting & Efficiency
Fresh graduate (no bad habit) Computerized MIS &
On the job training (mentoring) accounting
Promotion from below Efficiency ratio analysis
Productivity incentive Cost control
Staff welfare Internal audit
Operational manual External audit

4.
Strong Supervision & Internal Control all the way to where Lending Activities Take Place

CEO

Head Office Reporting

Area Coordinator

Branch Managers

Field Officer
Surprise Visits
Clients

Center meetings
Client house

Figure 4.6 Four Key Factors in Successful Microcredit Program

(ganeshamicrofinance.org, 2007)

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4.2.3.6 Misykat

Group Target Screening Process Output

Finance

1 group = 5 member Poor Phase I: Education and empowerment is most

Permition from Local RT/RW

Figure 4.7 Misykat Scheme

Different from Ganesha, Misykat uses 2-2-1 method. This means that there are three times funds distributions. The first distribution is for
two people, and then the next two people and finally the last person which is the group leader. Each step can be done if the member fulfill
the requirement that member already receive rolling funds continue returning the funds

42
 Candidate Weekly Forum Issued & Release
Recruitment Rolling Funds
Stage1 Phase 1

Phase I: Standardize Consultation Agenda:

Permition from Local 1. Opening
2. Tilawah
3. Member Motivation
4. Consultation Topics
5. Discussion Issued & Release
6. Closing & Pray Rolling Funds
7. Administration Stage 1 Phase 2
Consultation Topics:
Week 1: Savings in Islam
Week 2: The Important of Savings
Week 3: Savings Barrier & Strategy
Week 4: Applied Savings Planning
Week 5: Evaluation Issued & Release
Week 6: Types of Financing in Islam Rolling Funds
Week 7: Qordul Hasan
Week 8: Mudhorobah + DB issued Stage 1 Phase 3
Week 9: Musyarokah + DB release stage 1 phase 1
Week 10: Murobahah
See education curriculum

Figure 4.8 Misykat Stream of Process

43
 Misykat used savings not for credit oriented or look at the saving
power but savings as part of household economic development
process. Savings as tools to prepare for future needs. In details
each person have to write the purpose for saving, how much the
nominal, and how long the saving last. The saving can only be
used for the purpose of saving.

Table 4.7 Different between Loan & Financing (Misykat, n.d)

Aspect Loan Financing

Aggrement Non commercial Commercial
Purpose Productive & Productive
Consumption
Plafon Max Rp 1 million Limited by
BMPK and
Misykat

Group function in Misykat:

• Medium to discuss each member problem.
• Medium to help each other.
• Medium to study together.
• Medium for member to work together.
• Medium to grow member critical thinking.
• Medium to gives advice each other.

Group benefits in Misykat:

• Multiple screening process from own group member to
Misykat.
• Risk anticipation.
• To create loyalty among member.
• Service can reach the poorest of the poor.

44
4.2.3.7 Financing Model
The schemes used by microfinance institutions consist of two
types which are group and individual model. This scheme is
determined based on the social status and also business activity.
Group model are being used to accommodate poor women. While
other low income people are being handle by individual model.
There are some benefits and disadvantage that this two model
offer.

Group model have the characteristic can be for long-term

financing. This long-term financing benefits for people because
longer times means that people repay lower each repayment time.
It will make them feel easy to repay the funds and do not feel
burden. It helps in the condition when there are doubts from MFI
about giving long-term financing to poor people because they
scared people will run away with their obligations. The biggest
advantage of group model is that it transferred the risk of NPL
from MFI to the group. The people in group are being carefully
guarded by their own group. If one person could not repay the
funds then other people in the group could not get their financing
also. Therefore they will actively encourage the person to return
the money. Problem with loan requirement are being handle by
the group and if the group could not handle the NPL then MFI
will help them to do it. Group can be effective when the member
is women because women are more responsible and reliable then
men. Group model also can unite the relationship between each
person in the community by making them care and help for each
other in the group. Therefore the community can be build together
and the main executors are the people in the community it self.
The disadvantage of group model is that it consume more time
because before financing start there are explanation about the
program that takes several weeks, and the people or MFI need to
find appropriate number of people to start the group program.
Finally before the start of the program MFI needed to train and

45
 give preliminary counseling for several weeks. It troubles if the
candidate does not have the patient to wait.

Individual model have the characteristics of fast service.

Individual doesn’t need to wait for other people to get financing.
It is suitable with type of merchant in traditional market because
they don’t have much time to spare and want to have quick
service. If MFI uses this model that means MFI is the main
executors. They have to accommodate all member and collect the
repayment them self while they have limited number of account
officer to do so. This is more risky than group model. The effect
is they need a lot of time to collect each repayment while it
causes the time to counseling is limited. Because MFI that uses
this model give option for the member whether they repay them
self or pick up by the MFI. Most of them prefer that MFI pick up
the repayment in their place in daily basis. Most of the member
for this model is traditional market merchant. Because MFI think
that traditional market has certain customers which reduce risk of
business failure. Traditional market segment do not suit with
group model that need strong discipline and have to attend
weekly meetings.

4.2.3.8 Savings
There are the same characteristics both group and individual
model. Both have savings mechanism although in different
function. In individual model savings is the prerequirement to be
able to get financing service. This savings can give view to MFI
about the visibility and loyalty of the member, while group model
position savings as the first step of the program before financing
started. Group model uses the savings that member made as a
collateral to cover any delay or default in the repayment. But in
individual model if the person still could not return the funds
based on the agreement and already have certain treatment then
savings will be used to cover up the loss.

46
Savings is an important part of the microfinance scheme. In both
model savings has an important role to give view on the discipline
of the people and to back up the system if anything goes wrong.
In conventional bank collateral is a must to protect the funds that
are borrowed because they think that every people are negative. In
return the candidate will feel they are not trusted, different from
conventional bank microfinance scheme uses savings facilities to
help the people. Therefore the member will feel they have been
trusted and helped by MFI. The member will not feel that savings
is the collateral and this collateral they don’t need to have from
very beginning but can be established in the process.

4.2.3.9 Counseling
Counseling is one other important tool in microfinancing. A lot of
small people that have business could not grow their business
because either they don’t have the desire or lack of knowledge on
how to do so. This is where microfinance institution role is very
important. Not just in providing capital but also develop the
people. This is very useful to the people because they got
empowerment to expand their business and increase the quality of
their life.

In Individual model counseling are being done in the same time

as picking-up repayment. Therefore the time is limited because 1
account officer from MFI could handle 400 people to collect
every day. Mostly the counseling topics highly related to their
business, on how to increase their business, what can be reduced,
etc.

Group model can have more space and time to conduct

counseling. Group model always have weekly meeting and the
repayment also takes place in that meeting. They can explore each
other business through discussion and everybody can also help
other member to increase the business not just MFI. The topics
can be also none relate to the business, for example personal

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 development, religion, etc. Therefore the empowerment program
can be more holistic then in the individual model.

Conclusion:
Group model is better than individual model because it is less
risky than individual model. In group model there is one back-up
system to minimize NPL risk that is the group it self compare to
individual who doesn’t have any. Overall scheme from building
communities and counseling, group model gives the best support
to accomplish microfinance objective.

4.2.4 Non Performing Loans (NPL)

NPL can give us a good evaluation about the microfinance system
that is being applied. The high number of NPL tells us that there is
problem because the system could not make the people aware of
returning the funds. BPRS Salman and BMT Barrah have relatively
high number of NPL when compare to the other microfinance, and
other MFI proven that they can achieve low NPL without collateral.

The high number of NPL is caused by bad controlling or monitoring.

MFI should have strict policy about the mechanism of all the process
from input through output. MFI should have selected the right people.
There should be a good screening process that tells what the real
condition of people is. For example some MFI survey the
neighborhood of candidate recipient to know how this person in the
society. If MFI have selected the right people then its controlling
mechanism need to be good. It will need the commitment of MFI
staff/employee to control the financing properly. Either they use
group or individual model the MFI need to consistently do what they
planning to do. MFI should not tolerate other things that not align
with their rule and it should be strict policy, because if strict rule
really apply then the people tend to really try to fulfill their
obligation. For example Ganesha Microfinance does not easily
tolerate the member if they have bad debt. Different from Ganesha
Microfinance, BPRS Salman did not continually collect the

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repayment which causes the member to be able to do what they want
because the MFI gives those people chances to do so. From the data
Misykat NPL also in not in a good shape, although they have good
system however they tolerate some NPL. It will opinion in the
members mind that if they can not return the funds then they can get
away with it.

Conclusion:
1. Microfinance institution should have strict policy by not easily
tolerate any NPL from the member. All process in the scheme
especially monitoring and could not easily be bend by their
member. The problem of not having strict policy is that member
will not have incentive to follow the rules.
2. Collateral are not very significant in guaranteeing low rate of Non
Performing Loans. This can be seen by the better performance of
other non collateral microfinancing institutions.

4.2.5 Microfinance, Conventional Bank and Money Lenders

Money lenders usually give interest between 20%-50% per month
and conventional bank gives interest below than 20% per year. While
Ganesha Microfinance gives 30% interest/month although they did
not mention this return as an interest. If we see this numbers we may
assume that microfinance (not all Microfinance) is more burden than
conventional bank and the same as money lenders. But if we look
from different perspective there is significant difference of this
concept.

The different between conventional banks and Ganesha Microfinance

in term of interest is that conventional bank interest is lower then
Ganesha Microfinance. However Conventional bank only providing
loan to the debtors. In the process after the loan has been given out,
conventional bank do not want to know what happen to the business.
They only interested on the return of their funds and the continuity
interest payment on time. If there is problem with the business and
interest payments then Bank quickly recover the money by taking

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 over collateral. Bank usually charged compound interest which can
be increased if the debtors failed to pay interest at the agreed time.
Conventional bank also do not see what happens to the debtors family
when the loan are giving out. Conventional bank only cares for the
return of their funds. While in Ganesha Microfinance (and other
Microfinance Institution) is the opposite of conventional bank
condition. In the process of financing, MFI makes great effort in
seeing what happens to the business, debtors, and debtors family.
They also give counseling not only about how to run the business but
also in developing debtor’s personality, skill and knowledge. MFI
also make great effort helping debtors if they could not pay the funds
on time, also MFI do not used compound interest, they used simple
interest.

The similarity between Money lenders and Ganesha Microfinance is

almost that they almost charged the same interest rate. Money lenders
operate in the same scope as microfinance, which is microbusiness.
However the type of operation conduct by money lenders are the
same as Conventional Bank like I have explained in the previous
paragraph. The difference is that because the debtors don’t have any
collateral then if debtors could not return the funds plus interest then
money lenders will use physical intimidation to make debtors pay the
money. They also used compound interest to the debtors so we can
see a lot of small people are being trapped by money lenders.
However for microfinance institution the high number of interest are
for the beneficial of people. Not only providing the funds, they
organize the group, train the people before the program start, and give
counseling in the program. They pro actively assist the person to
become great people and businessman while money lenders do not do
so.

MFI activity certainly needs money and there for it is rational if the
return are greater then conventional bank and almost the same as
money lenders. The high interest is given back to the people by MFI
through counseling and other empowerment programs.

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Conclusion:
The high interest rates of MFI have a good purpose and are given
back to the people through counseling and other empowerment
programs. Different from money lenders and conventional bank that
are only want good result from business and their funds are returned
with interest.

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