Djumilah Zain together with her colleagues from the Economics Faculty of Brawijaya University, work as volunteers for Mitra Karya East Java (MKEJ), in the second largest province of Indonesia. MKEJ is working in this region to empower poor women by improving family income as well as their position in society.

Since the financial crisis in Indonesia, MKEJ has witnessed very rapid expansion and currently its membership is approaching 10,000.

Their daughter, Rini, 22 also has learned this skill. Every day, they spend their spare time weaving capil made from pieces of bamboo. If everything runs smoothly, they can produce 12 capil to sell for Rp 75.000 (US$ 7.5) with raw material cost of Rp 25.000 (US$ 2.5). The profit they make is very significant for these inhabitants of Dukuh Dawung and Umbuldamar, villages in Sub-district of Binangun, Regency of Blitar, East Java.

The branch manager of MKEJ for Ngajum, Blitar, stated that 104 of capil producers all have good business. " None of them are defaulting in their payments," he said. It is not surprising, therefore, that the women who become MKEJ members are called "heroes" of the families. Most of them are petty village traders or home industry workers, like Marsini.

In an area which is relatively unfertile and poor, it is not profitable for families to engage in farming activities. Moreover, most of them are near-landless farmers. So, there are a lot of men who benefit because their wives and daughter are handicrafts makers.

The handicrafts business conducted by Marsini and her friends has run smoothly since 1998, after she got capital from MKEJ. Their association consists of 20 families that are subdivided into four groups under one center. This type of organization is based on the Grameen Bank model. The members are required to be women, poor, of productive age, having or about to begin business activity. "This group of people do not have access to credit because they do not have any assets which can be used as collateral", Djumilah Zain added.

Assessing Capability

The loan provided for the group members is selectively provided. At the initial stage, the selection is conducted by MKEJ field staff together with members, representatives. In the next stage, the supervision is done by members themselves under coordination of group head, center chief, and MKEJ staff. "We are applying a bottom up system," said Djumilah Zain. Moreover, there is jointly liability for loans.

Under this system, each member within the group will provide guidance and mutually supervise activities. The capacity to use the loan capital is also measured by each member according to the size of their business. There is also weekly discussion among members to find solutions to existing problems faced by them individually.

Never in Default

The loan provided by MKEJ requires neither collateral nor guarantor, but carries an administration fee of 2.5 % each per month. The loan is paid back in 50 weeks, which could be extended up to 55 weeks in special cases due to holidays, accidents or calamities. MKEJ is proud to inform that these poor women who conduct petty business are "bona-fide" and always repay on time. The repayment rate of all borrowers whose business activities are running, is 100 %.

The administration fee of 2.5 % each month (30 percent annually) is low compared to interest rate charged by others. In the Blitar area, some private banks charge interest at 3 percent each month and also require collateral. One bank even applies compounded interest taking advantage of the ignorance of the village people. Some "official" banks charge interest up to 47.6 % per annum. Money lenders in the area charge even higher interest, sometimes 60% for just 12 weeks.

MKEJ, received the Paul Harris Fellow 2002 Award from Rotary International for services rendered in human development.

Yayasan Dharma Bhakti Parasahabat Foundation (YDBP), was established in 1999 by three prominent personalities associated with Astra International, an important business group in Indonesia. It began with initial funding from its founders as a pilot project providing small loans ranging from US$ 40 to US$ 225 to farmers and petty traders in villages of West Java. From the outset, YDBP followed closely the Grameen approach, providing one year loans without collateral, with weekly repayments. All their clients since inception are women.

In 2001, Grameen Trust approved US$ 100,000 as scaling up funds to Sukatani and Pedes branches of YDBP. GT has since built a strong partnership with YDBP, recently co-hosting a Grameen Basics Training for replicators in Indonesia.

YDBP has already established 14 branches in West Java province and has 15,993 members, making it the largest Grameen replicator in Indonesia. The project has disbursed US$ 987,244 and has US$ 409,920 as outstanding loans. The repayment rate is 100%.

In order to expand its outreach and mobilize members' savings, YDBP will transform itself into a BPR or a rural bank. YDBP, with the strong backing of its founders and its highly professional management, is poised to become an important player in the field of microcredit for the poor in Indonesia.