1. Introduction
Economic activity in the countryside in general is
dominated by small-scale farms with the main actors of farmers, farm workers,
traders and agricultural inputs, agro-processing, and home industries. However,
businesses in general are still faced with the classic problem of the limited
availability of capital, capital constraints may limit the space for
agricultural activities in the rural sector (Hamid, 1986).
Weak capital owned by economic agents in rural
areas has been recognized by the government, with the state government launched
several programs for credit to farmers and small farmer entrepreneurs. Starting
with the credit Bimas on yeras 1972, then followed Credit Small Investment
(KIK) and the Permanent Working Capital Loans (KMKP), Income Generation Project
Farmer / Fisherman Small (P4K), Farmer Business Credit (KUT), and to date they
occurred People's Business Credit (KUR). Although the government has
implemented a variety of loan programs, but the performance results are deemed
still not in line with expectations. This is reflected in the performance of
financial institutions has not been satisfactory, especially on the financial
institution as the executor.
According Martowijoyo (2005) the weak performance
of financial institutions as financial intermidiasi institutions can be viewed
from three aspects: (1) low levels of loan repayment; (2) low morality of the
implementing agency, and (3) low level of mobilization of public funds. The
disadvantage of these has consequences for not continuing financial
institutions set up after the program is completed. As a result, program participants
generally will again experience a shortage of capital.
To answer the problem of limited capital and
banking institutions are difficult to access for small farmers, it is necessary
to further optimize the potential of financial institutions which can be an
alternative source of funding for farmers and rural communities. One of the
financial institutions that can be exploited and encouraged to finance micro
segment is Microfinance Institutions (LKMA), yet can not be used optimally.
LKMA built by the Government is able to exist and
contribute to serve the capital needs of low-income rural development although
in these institutions received government assistance. LKMA existence in the
countryside could play a role serving the needs of small farms, although it is
still limited in scope particular group. This shows their internal capital
mobilization in the communities of farmers / rural, so the issue of capital is
not always small farms can only be solved by relying on external capital
mobilization.
Subandi (2007) said the success of microfinance
institutions is influenced by several factors namely; (1) each institution
usually makes own concept of credit in accordance with the conditions in which
the institution is located, (2) the ability to foster a sense of family among
the member raises openness, and those who receive loans are truly in need, (3)
the belief, dogma and or a particular myth that states that the poor will have
difficulty in repaying the loan.
Fukuyama (2002) argues that social capital, focused
on the importance of the relationship in economic affairs. Furthermore it is
said that companies, industries, regional, and national economies can function
more efficiently if there is respect for one another and the relationship of
trust between citizens.
Putnam (1993), has also shown evidence that
economic growth is positively correlated with the presence of social capital.
Economic development in a community and economic development of rural would be
good if the following characteristics are owned by economic actors in a synergy
between the activities of the community, namely: (1) The presence of close
relationships in a village with other village between members people, (2) the
presence of leaders who are honest and egalitarian who treat themselves as part
of a community, not as rulers, and (3) the existence of mutual trust and
cooperation among the public.
Hayami and Kikuchi (1987) says that the norms and
principles of traditional facilitate the community to act collectively achieve
economic progress, and he also said that the villagers have been used to
regulate any economic activity by facilitating coordination in
the use of scarce resources through customs and institutions. Collective action
is a must for rural communities to provide for the needs / interests together
is both physical, such as, roads, irrigation systems, and others as well as
institutional, namely the rules and regulations.
In the study Nuwirman (1998) mentions the raising
of capital in the form of principal savings, mandatory, voluntary or sadaqoh
activity group bodies Kongsi and Barn Pitih (money) Nagari (LPN) in West
Sumatra.
People who have high social capital will open up
the possibility of resolving the complexity of the problems more easily. Mutual
trust, tolerance, and they can build networks of cooperation both within
community groups as well as with other community groups. Traditional
communities, are known to have informal associations were generally strong and
has the values, norms, and ethics collectively as a community interconnected.
Studies of Chaves and Gonzalez-Vega also revealed
that the Village Credit Institutions (LPD) Bali involving agents of the village
in their credit granting system is commonly called the techniques of credit
based on the characters. Further Chaves and Gozales-Vega said that lending
based on character and local control is efficient to avoid the possibility of a
loan was not returned.
Other institutions have been
successful in utilizing local institutional as financial intermediaries with
rural communities is a non-bank credit institutions such as LPD and Lumbung
Bali Pitih Nagari (LPN) in West Sumatra. The purpose of the institution is a
financial intermediary for the rural poor (Robinson, 2001).
LKMA models that exist in rural areas can be
differentiated into the individual financial intermediary (Individual Financial
Broker) and financial self-help groups (Financial Self-help Groups) (Korpp,
1989). IFIs in the form of individual financial intermediaries is very dominant
in the countryside (Wharton Jr., 1973; Gammel, 1994; Hayami and Ruttan, 1971)
and generally exploitative (Mubyarto, 1990; Ahmad, 1991). While IFIs in the
form of self-help groups (SHGs), although relatively less dominant (in the
restricted group), but are able to exist in serving the credit needs of small
medium businesses and not berifat exploitative, as Julo-Julo (Zakri, 2001) and
a group of joint venture (Nuwirman, 1988 ). The agency is able to meet the
credit needs of people who are not able to access credit sources Formal
Financial Institutions (LKF).
The ability of agencies played in the countryside
because he grew out of the community and has a joint capital (Acharya et al,
1992; Quinones Jr., 1992) based on the social values developed in the
community. Even in the group Kongsi in West Sumatra are social values, customs
and religion in financial management (Nuwirman, 1998). This is in accordance
with the lifestyle of the people Minagkabau "Indigenous Basandi Syarak
(ABS), Syarak Basandi Kitabullah (SBK). Based on the above phenomenon can be
formulated research problem as follows: a. Why Microfinance Institutions (LKMA)
can survive in the long term and play an effective role in serving the needs of
capital Small Farm (UTK) in rural areas?.. How Microfinance Institutions
implementing social capital in enhancing the role of microfinance institutions
to serve the needs of capital UTK. According to research problem as formulated
above, the purpose of this research is: Identify the factors that affect LKMA
can survive long-term presence and play an effective role in serving the needs
of capital UTK in the countryside and Explain how Microfinance Institutions can
utilize Social Capital element in improving the service to the UTK.
2. Review of
Literature
2.1 Financial Institutions
To understand the definition of financial
institutions clearly need to put forward some definitions by several experts,
including a financial institution as an institution that launched the exchange
of goods and services with the use of money or credit, help channel the savings
of people with excess funds to mesyarakat in need of funds. Then Seibel (1996)
more clearly defines financial institutions as an agency which collects funds,
give credit to the public or equity participation, as well as doing more than
one of the above activities as well.
In the money market commonly known as the two-term
formal and informal financial institutions, although between these two
institutions are the term semi-formal financial institutions (Seibel 1996;
Kropp, 1989). Formal and informal use of the term in the rural credit market is
widely used by researchers in various studies, but still a bit of literature
that suggests about formal and informal sense of the term.
In this regard, they emphasized the importance of a
simple legal aspects or their official government permission in the use of
formal and informal term for rural financial institutions. According to
Financial Institutions
Microfinance institutions
are program loans for small amounts to the poorest to finance the project he's
working on his own in order to generate income, allowing them to care for
themselves and their families, "Programmes extend small loans to very poor for cell-employment
projects that generate income , alowing them to care for Themselves and their
family ". Microfinance Institutions (MFIs) in Indonesia according to the
Asian Development Bank and the World Bank (Gunawan, 2007) The main
characteristic, namely; (1) provides a variety of financial services that are
relevant or appropriate to the real needs of the community, (2) serve
low-income communities and (3) using the procedures and mechanisms are
contextual and flexible to make it more easily accessible to poor people need.
Microfinance institutions have advantages that most
real, the procedure is simple, without collateral, to do that liquid (personal
relationship), and flexible loan repayment period (negotiable repayment).
Characteristics accords with the characteristics of the economic actors in
rural areas (especially in agriculture) which have limited assets, low levels
of education and income irregular cycles (depending on the harvest). Perdesaaan
characters like that are captured well by actors microfinance institutions, so
easily accepted by the existence of small communities. The main drawback of
microfinance institutions, yaknii still limited capital, making it less smooth
institutions meet the capital needs of members.
The presence of MFIs is needed for at least two
things (Pantoro, 2008). First, as one of the instruments in order to overcome
poverty. The poor generally have micro enterprises. Terminology World Bank,
they are referred to as economically active poor or micro entrepreneurs. In the
configuration of the Indonesian economy, over 90% of the business unit is a
micro-scale enterprises.
Developing micro enterprises is a strategic move
because it would realize the broad bases development or development through
equity. They need capital to develop its capacity. With business increases
(becomes small scale enterprises), will effectively address the poverty
suffered by themselves and expected to help people in the poor category.
2.2 Social Capital
Fukuyama (1995) illustrates the social capital in
the trust, believe and vertrauen means that the importance of trust is rooted
in cultural factors, such as ethics and morals. Trust appears the community to
share a set of moral values, as a way to create a common hope and honesty. He
also stated that the associations and the local network really has a positive
impact on economic welfare and local development and plays an important role in
environmental management. James S, Coleman (1999) asserts that, social capital
as a tool for understanding social action that combines theoretical
perspectives of sociology and economics. This notion was reinforced by
Serageldin (1999) that social capital always involves the community and make
the community arises not only from the interaction of market and economic
value. Serageldin provides a classification of social capital among others:
First, Social capital in the form of social interaction but durable
unidirectional relationship, such as teaching and social interaction trading
relationship was reciprocal (mutual) such as social networks and associations.
Second, social capital in the form of social interaction effects are more
durable in such unidirectional relationship of trust, respect and imitation are
in the form of a reciprocal relationship like gossip, reputation, pooling,
social roles and coordination, all of these contain high economic value.
Simple and general conclusion
that can be raised about the main elements of social capital include norms,
reciprocity, trust, and network, Fukuyama (1995). The fourth element is a
significant influence on the behavior of co-operation to achieve the desired
result, which could accommodate the interests of individuals and groups who
cooperate collectively. In real terms in everyday life, when examined in depth,
all the behavior of socio-economic activities of local community members
embedded in social relationships network.
Social capital and trust (trust) can create and
enable economic transactions become more efficient by providing the possibility
for the parties concerned to be able (1) to access more information, (2) allowing
them to mutually coordinate activities in the common interest, and ( 3) can
reduce or even eliminate opportunistic behavior through transactions that occur
repeatedly in the long span of time. Social capital is inherently contain a
social sense. Almost all forms of social capital are formed and grow through a
mix or combination of actions of a few people.
Social
capital will be growing and growing when used together and instead will decline
or even a decrease in extinction and death if not used or institutionalized
together. Social capital can not be transferred fully automatically from
generation to generation like a genetic inheritance in terms of biology.
Referring to Fukuyana (1995) there are three parameters ie social capital:
a. Confidence (trust): As explained Fukuyama
(1995), trust is a growing expectation in a society demonstrated their honest
behavior, organized and co-operation based on the norms that are shared. Social
trust is an application to this understanding. Cox (1995) later noted that in
communities that have a high confidence level, the social rules tend to be
positive, relationships are also collaborative. Social trust is basically a
product of good social capital, the social capital that is well characterized
by the existence of social institutions are solid, social capital gave birth to
a harmonious society (Putnam, 1995). Damage social capital will lead to
anti-social behavior (Cox, 1995), the absence of social capital in financial
institutions will lead to customer relationship with the manager of the
institution will not trust each other.
b Norma. The norms consist of understandings,
values, expectations and goals which are believed and run together of
religious, moral guidelines, and standards seem secular ethical code
propfesional. The norms are built and thrive based on the history of
cooperation in the past and applied to support the climate of cooperation
(Putnam, 1993, Fukuyama 1995). The norms can be a precondition nor a product of
social trust.
c. Network. Lenggono (2004)
explain the meaning of the network refers to the social relationships that
regular, consistent and long lasting, this relationship not only involves two
individuals, but many individuals. Relations between vindividu will form a
social network as well as reflecting the social groupings in community life.
Dynamic infrastructure of social
capital networks tangible cooperation among humans (Putnam, 1993). These
networks facilitate communication and interaction, allowing the growth of trust
and strengthen cooperation. Healthy communities tend to have social networks
that are sturdy, they then build a strong interrelationship both formal and
informal (Onyc, 1996). Putnam (1995) argues that social networks will strongly
reinforce the feeling of cooperation among its members as well as the benefits
from that participation.
2.3 Role of Social Capital
In the view of economics, capital
is everything that can benefit or yield, capital itself can be divided into (1)
capital berbetuk material like money, buildings or goods; (2) the cultural
capital in the form of educational quality; cultural wisdom; and (3) social
capital in the form of togetherness, social obligations that were
institutionalized in the form of common life, role, authority, responsibility,
reward systems and other attachments that generate collective action.
Coleman (1988), social capital is inherent in the
structure of relationships between individuals. The structure of social
relations form a network that creates a wide range of social qualities such as
trust, open, unified norms, and define the various types of sanctions for its
members. Putnam (1995) defines social capital as "features of social
organization such as networks, norms, and social trust that Facilitate
coordination and cooperation for mutual benefit".
Social capital is the adhesive for each individual,
in the form of norms, trust and networks, resulting in mutually beneficial
cooperation to achieve common goals. Social capital is also understood as
knowledge and understanding shared by the community, as well as patterns of
relationship that allows a group of individuals perform a productive activity.
Sajalan also with what is proposed World Bank (1999), social capital is defined
to the institutional dimension, relationship created, norms that shape the
quality and quantity of social relations in society. Social capital did not
mean only a limited number of institutions and social groups that support them,
but also the adhesive (social glue) that maintain the unity of the group as a
whole.
Lesser (2000), social capital is
very important for the community because it (1) provide ease of access to
information for members of the community; (2) into a media power sharing or
division of power in the community; (3) to develop solidarity; (4) allows the
mobilization of community resources; (5) allows the achievement of joint; and
(6) establish and organize a community kebersamaam behavior. Social capital is
a commitment of each individual to open with each other, mutual trust,
authority for any person who chooses to act according to its responsibilities.
This tool generates a sense of togetherness, solidarity and responsibility at
the same time will progress together.
Togetherness, solidarity,
tolerance, spirit of collaboration, the ability to empathize, the social
capital inherent in social life. The loss of social capital can be assured the
unity of the community, state and nation will be threatened, or at least the
collective problems will be difficult to resolve. Togetherness can ease the
burden, share thoughts, so you can bet the stronger the social capital, the
higher the resilience, fighting spirit, and quality of life of a community. In
the absence of social capital, people easily intervened even destroyed by
outsiders
Specifically World Bank (1998) provided a focus of
attention in the assessment of the role and implementation of social capital
and the possible contribution in the process of poverty reduction, especially
in developing countries. The role and position of social capital in the
community daily activities also have been studied more intensively by experts
from different scientific viewpoints among others, from the perspective of
agro-eco system, economics, sociology, politics, anthropology and psychology.
Experts have agreed that trust and social capital
of Understanding that social capital has the ability to contribute
significantly to the process of social and economic development of society has
become more prevalent. This is in line with the views Georgi (2003) which
basically concludes that social capital includes individual talents, the
accumulated knowledge of society, and society's forms of interaction,
organization and culture can make a significant contribution to economic growth
and development of society.
3. Results and Discussion
3.1. Role
of Financial Institutions on Financing Small Farmers
The results of the analysis of the role of LKMA
found that LKMA Panampuang have alignments and is capable of meeting the needs
of credit UTK. But still there are problems that the limited amount of funds
that can be given to members. This is due, among others, the poor ability of
members to raise capital collectively. In addition, the contribution of loans
to the increase in revenue (yield) members are still relatively low, because
there is still borrowed funds used for the benefit of family / consumer and the
limited number of credits earned.
The conclusion of this analysis of empirical
findings on facts on the ground by analyzing the five aspects above the LKMA
Panampuang).
a) Establishment of the Institute of Philosophy. LKMA
Panampuang (Panampuang= name of place) was founded in 1996 by the Government of
Agam as a response to the failure of IDT program and KUT in some jorong in
Kenagarian Panampuang, especially in villages Panampuang. Although initiated by
the government, but with determination, the spirit of togetherness and support
of all citizens, especially public figures such as village chiefs, traditional
leaders, religious leaders, and youth, however, the organization may be formed
in accordance with the government's desire. Purpose of establishing the
institutions to improve the local economy is relatively weak, by providing
credit.
LKMA Panampuang Prima established by the government
in 2008 by the Government of Agam. The establishment of the program is
motivated by the failure of previous Bangdes so the acclaim and the support of
community members such as village heads, religious leaders. and the youth. With
his determination and spirit for the common good ultimately these institutions
can be formed in accordance with the government's desire.
In accordance with the economic conditions at that
time were relatively weak and many people trapped practice of moneylenders, the
institution established to improve the local economy by providing credit for
venture capital, with the hopes of the people no longer borrow credit from
moneylenders.
In carrying out its activities as a source of
capital in the countryside, this institution is able to realize the objectives
of the institution to meet the capital requirements UTK. This is supported by
the application procedures and requirements easily and without collateral in
credit services. Although the agency established by the government, but were able
to show partiality to the UTK.
b)
Accessibility.
LKMA Panampuang is a financial institution that was introduced by the
government but managed by members of the community, so that in carrying out its
activities depends on the participation of members. As a savings and loan
institutions, these institutions are still implementing procedures and
administrative requirements as other financial institutions, but relatively
simple. To get a loan, members must be registered as an active member, has a
decent effort to be financed, and fill out a form of borrowing.
Procedure to be followed is fill out a form of
borrowing, then the board will check the business to be financed. When owned
businesses there and in accordance with the funds raised, the board approved
and the funds can be disbursed. Requirements and procedures easily provide ease
of access, especially small farmers.
The location is very close to the institution
housing residents. Panampuang LKMA office has its own building and located in
the middle of human settlements Panampuang villages, districts Ampek Angkek
Agam district. Thus a very strategic location because it lies between the
residential area, it is very easy to reach by foot or rural transport and
motorcycle taxis.
Credit application process until
the credit disbursed relatively short. In LKMA Panampuang only 2-3 days, this
is possible because the first location is ditengan residential institutions and
between institutions and the board members know each other.
Determination of collateral
requirements on LKMA Panampuang only required for the loan is not more than Rp
5 million, turn over the collateral, however Borrower must have a viable
business. This requirement is only a formality to see the seriousness member
uses credit, even less so the board just ask the establishment, regardless of
the physical.
Credit refund system set by installments. In LKMA
Panampuang originally defined according the harvest, but many members objected,
finally converted into monthly installments. Each member is required to attend
the meeting, either wishing to borrow and pay the installments. For the smooth
return of credit, members of delinquent fines then 0.25 per cent per day of the
installment amount for one-time arrears.
Determination of credit repayment system at this
institution does not affect the level aksessibilitas members, but will affect
the level of loan repayment terms of the number of arrears is still relatively
low. only 0.5 percent of total loans.
The low percentage of arrears of members illustrate
that members feel has the institution as a source of venture capital.
Specifically indicate that farmers more easily meet the refund system for
retrieval system in accordance with members' expectations. Besides, the general
low level of arrears credit institutions Panampuang LKMA also be caused by the
following factors:
1)
Their
perception of the notion of an individual, that credit is a local government
assistance, which can help undercapitalized.
2)
The high
awareness of members paying the installments. This is evident from the low
percentage of delinquent members to pay credit.
3)
The
existence of mutual trust between members and administrators in developing
lemabaga (LKMA) for officers / officials have a good relationship with a member
of either family or friendship
relationships fellow citizens.
Based on the procedures and
administrative requirements, collateral requirements, as well as relatively
easy to reach location, the process of borrowing relatively short, and the loan
repayment system, it can be concluded that the source of credit from a
financial institution that can be easily accessed by members. It proved most
members can take advantage of the available credit, including farmers.
At LKMA Panampuang accsessibility
level of farmers to credit sources is quite high in 2012. Of the number of
active farmers in 2012 the number of members who can access credit in the agricultural
sector amounted to 30 members (68%), whereas 14 (32%) in the trade sector. This
condition illustrates that LKMA more aligned to farming than trade.
The composition
of loan recipients
based on the
type of work
on both LKMA can
be seen in
Table 3.1.
Table 3.1. Number of Receivers of Credit, by Type of Work At LKMA
From Table 3.1. The above also can be seen equity
attributable lending. In general, the two agencies have been distributing most
of the credit to small farmers. In LKMA Panampuang, enough credit loans
properly distributed to farmers. From all loan recipients, there were 68
percent of the farmers who received credit, 32 percent of merchants. LKMA means
Panampuang distribution of loans to small farmers has been quite good, without
any discrimination between farmers and traders.
This description indicates that
LKMA Panampuang in distributing loans to UTK in the countryside has been quite
good, and feel can help meet the capital to farm.
Table 3.2. Contributions Loans to Members User
Credit Income on LKMA Panampuang
d Role of Credit for Small Farms
In general, the two institutions
could play a role LKMA Panampuang capital requirements UTK. Padatahun 2012 from
all members active farmers are 68 percent of loan recipients. able to utilize
sources of credit. Quite a high percentage of the allocation of the loan,
indicating the existence of LKMA has benefited UTK in meeting the needs of
business capital.
While in increasing the members'
income as a result of the use of credit has not given the expected results. In
LKMA Panampuang of total farmers loan recipients, only 10 percent who use
credit for the benefit of productive and felt an increase in revenue, compared
to traders who are able to achieve 14.92 percent. The low contribution of the
loan to increase farmers' income, caused by the use of credit that are not
entirely for the sake of earning. Farmers are forced to use some of the funds
for the purposes of the family while waiting for the harvest.
From this description it can be
concluded that from the aspect of expediency of credit for small farmers in the
countryside, the institution only at the stage LKMA Panampuang meet only a
fraction of capital requirements UTK. While a role in increasing revenue, not yet
felt by farmers. Conditions such as these reflect the ineffectiveness LKMA as a
driver of agricultural development in the study area.
e role of the Board in the Capital Mobilization
In LKMA Panampuang,
administrators / managers selected through community meetings attended by the
clerk's office of rural development (PMD) as well as the village head, the head
of KAN, religious leaders and youth. Board selected through consultation with
the spirit of togetherness based on guidance from the clerk PMD. Board which is
chosen from the several elements of the society, with consideration of the
effectiveness of management of the institution. Board at the beginning was
formed consisting of the supervisory board, companion extension, board
committees, the chairman, secretary and treasurer plus 5 managers.
In LKMA Panampuang, officials drawn from village
residents Panampuang which consists of various elements of society. Board
selected through consultation with the spirit of togetherness based on
instructions from the clerk's office PMD, attended by the village head, the
head of KAN, religious leaders and the young man. Some administrators are
active at this time include Supervisory Board Chairman of the Manager,
Secretary, and Treasurer. Generally administrators / managers in both the
background of the financial institution to the top high school education, and
in the absence of selection but select appointed by consensus at a meeting of
members. But still equipped with management skills through special training by
the district at the beginning of the establishment of the institution. In LKMA
Panampuang Prima is an institution established by the government, so that the
authorized capital of these institutions came from the district government
through the department of agriculture and PNPM, but the board does not just
rely on these funds, but do collective capital formation through the members'
contributions in the form of deposits. Help initial capital of Agam received
government LKMA Panampuang In LKMA Panampuang shape and size of deposits was
decided involving the participation of members in management and members of
deliberation. Principal paid each member at the time of loan borrowing,
amounting to Rp 25.000, -. While deposits shall be paid on each monthly meeting
of Rp 5.000.-.
Besides fertilizing done through a capital loan
service payments by 1 percent and loans received. In LKMA Panampuang collective
contribution to capital formation in 2012 largely from the source of funds in
the form of compulsory savings, voluntary principal and Rp 186 045 000, - The
high contribution of compulsory savings and voluntary savings due to both an
obligation that must be met when receiving a loan, while the low contribution
of principal due to the relatively small amount of capital available to
members. While the low contribution of voluntary savings due to the relatively
small contribution of credit to the increase in revenue that can be set aside.
Sources of funds in capital mobilization collective Panampuang LKMA can be seen
in Table 3.3. following:
Table3.3
Sources of Funds in Capital Mobilization Collective LKMA
From the above it can be concluded that in addition
to the mobilization of external capital from the government, also found
internal capital mobilization of members. In the internal capital mobilization
role of the board and the members are very important, not only able to meet the
credit needs, but also to develop the independence of institutions, however
both lmbaga not maximized in raising capital sourced from internal collective.
3. 2
Personality and Dinamics of Small Farm Credit Services as Object.
From the
analysis of the nature and dynamics of farming on LKMA Panampuang, show that.
LKMA existence in the study area tend to be aimed at serving the needs of
capital UTK, especially for UTK who are denied access to formal financial
institutions. This is consistent with the nature and dynamics of farming organizations,
namely the object of credit services both agencies are small businesses with
total area of between 0.25 to 0.5 hectares.
Most farmers cultivate land belonging to other
people (tenants) with food crops (rice) and pulses, as well as using a credit
not only for farmers, but also to cover the costs of the family that are urgent
as is the case for financial institutions semi-formal, conditions such as it
became one of the causes of bad loans.
Although the number of credits earned relatively
limited, but to obtain farmers are not subject to collateral requirements. Most
farmers are very dependent on loans, but the procedure - terms and credit
pengembalan system is felt not so burdensome. This conclusion is supported by
the empirical findings of the analysis of the nature and dynamics of the
farming area of land, land status, type of plant, the intended use of the
credit, collateral, the amount of credit, capital resources, procedures and
requirements, and loan repayment system.
a) Land. The land area is cultivated by farmers from
both LKMA Panampuang Prima generally range between 0.25 -0.5 hectares. Based on
data collected in the field turns on LKMA Panampuang 85 percent of farmers have
land area between .25 to 0.5 hectares and 15 percent pursue an area of between
0.51 to 1.0 hectares. The area of land cultivated by the farmers credit
recipient, it can be said the majority of farmers are small farmers who are the
target of credit services in rural areas.
b)
Land
Status. Land tenure on the loan recipient farmers LKMA Prima Panampuang more
(80 percent) in the form of arable land or to manage other people's land, while
the rest (20 percent) the status of their own land.
c)
Type of
Business / Plants. Farmers who are members of both the credit receiver LKMA
Panampuang generally cultivate the land with food crops (rice and pulses),
which is seasonal. In LKMA Panampuang 70 percent of farmers cultivate their
land with food crops (rice), while the other 30 percent of land planted with
crops.
The variation of plant species this institution is
more influenced by the characteristics of the livelihoods of local people who
cultivate land crops (rice and Palawija).
d) Purpose of Use of Credit. In general purpose member
farmers apply for loans with the purpose to finance the farm. This is in
accordance with the conditions set by the board LKMA Panampuang But in the
field, farmers tend to avail loans to finance not only farming, but is also
used to fund family life such as school fees, the cost of child marriage. This
is caused by the lack of selection of beneficiaries tight credit, weak
supervision of the board after the credit disbursed, and their family needs are
very urgent.
In LKMA Panampuang only 76.5 percent of the farmers
who use loans to finance farming. While 23.5 percent of other farmers loans
used to finance not only farming but also to finance the needs of family life,
such as consumption and children's school fees.
e)
Collateral.
Generally members do not have collateral. Thus, in applying for loans of credit
to LKMA Panampuang for a loan as a member is not required to submit collateral.
In this case the credit lending is based more on trust. However, to obtain a
loan must have a member of the land / business eligible to be financed by the
agency, which is a formality that the loaned funds are intended to finance the
farm.
f) Capital Resources. In LKMA institutions Panampuang
limited capital is a constraint faced by all members of the farmers, so that
the loan is a major source of capital. Farmers do not have their own capital to
finance the schemes, farmers are very dependent on loans from the institution.
Lack of institutional capital is not all the expectations of farmers / members
can be met, so as to obtain a loan teraksa members until one month.
g)
Procedures
and Requirements for Credit. In all farmers get loans to institutions (LKMA
Panampuang) meets. Procedures and credit requirements that must be met
relatively simple and easy to fulfill. Farmers only apply to the management of
credit by filling out the form requirements, have a viable business, and
registered as a member.
In LKMA Panampuang within 2 to 7 days of credit is
received by the farmer. From interviews with farmers, all farmers feel the
procedures and requirements set board is relatively simple and easy to fulfill,
but with the limited amount of funding exists on both institutions led to the
loan amount is very limited, it is causing the benefits of these loans have not
been up to the capital small farms.
h) Credit Refund System. In LKMA Panampuang credit
refund system is felt by all the farmers are relatively not burdensome. At the
beginning of the establishment of a credit Panampuang LKMA can be paid in
installments every harvest time or in installments over 4 times in the credit
period (10-12 months), but because some members objected credit eventually be
repaid each month. When farmers are delinquent fines amounting to 0.25% of the
loan. Although farmers do not get into trouble paying back the loans, but due
to failed harvests cause farmers in arrears up to 0.5 percent of borrowers but
still categorized institutions in healthy status (<5 percent). When farmers
are in arrears, the board only take action first to give warning verbally, if
not successful, the management brought the issue of arrears to the steering committee (committee) in which there are elements of
village government, ninik mamak, and the scholars so that arrears could
diselasaikan relative.
i)
Total
Loans. In Panampuang LKMA credit institutions is a source of major capital
obtained by farmers and the procedure is easy and straightforward. However, the
loan amount ranging from $ 500 thousand up to Rp 20 million and is highly
dependent in its ability to provide funding.
Number of farmers' needs in this institution
exceeds the capacity of financial institutions in providing funds, the
relatively limited amount of funds available in the two institutions because of
this limitation collective capital accumulation. The limited amount of capital
provided by the agency to make the customer of the institution is forced to
wait their turn until two months of the petition submitted to the board.
3.3 The
Role of Social Capital on the Effectiveness of Financial Institutions
From the analysis of the data shows that in LKMA
found only values the role of social capital in several aspects analyzed. In
LKMA religious values and traditional values are found in the implementation of
the activities of this institution. With the role of religious values and
customs on both LKMA shown that in recruiting prospective members / new borrowers, the board
always involves a longtime member (fixed) in deciding whether the loan will be
disbursed or not.
In terms of monitoring and evaluation functions
permanent members are also involved whether in terms of tackling while members
are in arrears to pay the loan (jointly and severally), then in terms of
religion has also been involved in motivating members of the clergy to be
obedient and responsible for obligations that should be paid. While traditional
values are also seen to involve the mamak ninik both in the lending process as
well as in the framework of evaluation and monitoring, including the settlement
of bad debts.
In LKMA Panampuang values of social capital in the
form of shared values, participation, trust, and financial contribution was
instrumental in the founding of the institution, the selection committee and
the management of institutions, capital formation, the credit lending process,
as well as monitoring and evaluation. This is reflected in the structure of the
board, where there is one part of the steering committee.
The steering committee is working to provide
direction to the board, especially in developing the institution, but it also
serves to resolve the arrears payments of members. Committees involved in
village government officials, department of agriculture, ninik mamak, and
scholars.
a)
Establishment
Process Institute. LKMA Panampuang founded in 1996 by the Government of Agam.
The Institute is one of the government programs as well as a response from the
district to the failure of IDT program and KUT in some jorong in Nagari
Panampuang. Although the formation was initiated by the government, but with
determination and a spirit of togetherness and support of all members of
society Panampuang especially public figures such as village chiefs,
traditional leaders, religious leaders, and youth, institutions can be formed
in accordance with the government's desire. Purpose of establishing the
institutions to improve the local economy is relatively weak, by providing
credit.
When linked to the values of social capital, in the
establishment of this institute initiated by the government in order to improve
the livelihoods of farmers as a form of spur agricultural development in rural
areas. When viewed from the establishment of this institution not include local
agencies, as established by the government, but in its operation handed over to
the local community. Although copper is formed with the concepts and
institutional system was introduced the government, but the process of
realizing the institution also depends on the support and determination of
citizens not only farmers, but also by the community leaders / religious,
village, density of indigenous villages (KAN).
Strong determination underlying spirit of unity,
cooperation and collective agreements establish the economic organization of
society for the common interest. The spirit of togetherness is reflected in the
form of a real participation of citizens attending meetings in mosques, offices
and agencies village hall. The role of public participation is manifested in
his involvement in any decision-making.
Management of savings and loan institutions
operationally is the duty and responsibility of the board and supervised by an
advisor, protector and overseer. Similarly, in determining policy and making
decisions regarding the rights and obligations of members conducted by the
officials and members were excluded.
The rights and obligations of members include (1)
shall form farmer groups of at least the 10 (ten) people, (2) shall attend the
meeting of the members of each month, (3) shall participate in capital
formation in the form of compulsory savings, principal savings, voluntary
savings and loan services, (4) is obliged to return the loan in installments
every month, (5) entitled to apply for and obtain a loan for considered
feasible by the board.
b) Finalization of the Board and Management of the
Institute. In LKMA Panampuang Prima, in accordance with the wishes of the
government, officials from among their Panampuang Nagari which consists of
various elements of society. Selection committee held at the head of the
village through community meetings attended by officials from the office PNPM
and the head of the ellipse, KAN chairman, religious leaders and youth, through
consultation with the spirit of togetherness.
Board which is chosen from the elements of society
and provided training in the management of savings and loans by the government
through the Agam district PNPM program. Board consists of 2 Advisory Board,
Trustee Protector Jorong and 3 Supervisors and Administrators who gterdiri
Chairman, Wail Chairman, Secretary, Deputy Secretary, and Treasurer.
When linked to the values of social capital, the
role of shared values and the participation of members only in the board
election process. Board selected through village meetings in the spirit of
togetherness, cooperation and mutual agreement. Board elected a form of trust
board member with the hope can bring members to a better life.
While in the management of the institution both
operationally and in determining any decision is the duty and responsibility of
the board without involving the participation of members. The role of member
participation only reflected in his involvement in the consultation meetings
both attendance and participation in decision-making regarding the selection
board.
c)
Capital
Formation. Capital formation, the role of social capital values are common to
both Semi-formal financial institutions. In LKMA Panampuang values of social
capital in the form of shared values, member participation, trust, and
financial contribution. While on KSPP Lundang only in the form of shared
values, beliefs, and financial contributions.
LKMA Panampuang is an institution established by
the government in which each of the funding must go through LKMA Puad, so that
the authorized capital of these institutions comes from government assistance
aimed at helping meet the needs of capital farmer groups with a membership of
266 people with the amount of wealth at the end of 2012 amounted to USD 551 394
293 , - capital this institution comes from government aid coupled with
principal savings, mandatory simapanan and time deposits, as well as the
efforts of capital formation through the members' contributions in the form of
deposits.
The shape and size of deposits was decided to
involve the participation of members in the board deliberations and members of
the RAT. Besides fertilizing done through a capital loan service payments
amounting to 1 percent of the loans received.
When linked to the value of social capital in
capital formation, it appears that the formation of collective capital
resources on LKMA Panampuang guided by shared values, participation and trust
and every member. This is reflected by their determination, spirit, and
cooperation to establish a joint capital resources.
Determination and spirit is applied in the form of
real action that is the willingness of each member placing funds in savings and
time deposits and a portion of net income (25 percent) retained as additional
capital based on trust and a sense of community among members and pegurus. In
addition, the board involve the participation of members in deciding the amount
of savings and loan services.
In the implementation of collective capital
formation have demonstrated their shared values in the form of a spirit of
togetherness, trust in management, and financial contributions of members of
the institution. The spirit of togetherness reflected by mutual agreement and
cooperation of members to provide a source of capital together. The willingness
of these members also indicate the existence of a trust value to board members
as well as financial contributions, in the form of principal savings, simwapin
and loan services.
d)
Loan Loan
Process. In the process of credit lending, the values of social capital is
relatively bigger role in LKMA Panampuang encountered. In LKMA, the values of
the social capital in the form of shared values, member participation, trust,
and financial contributions.
The process of credit lending in LKMA Panampuang a
collective agreement and board members. Although it is a credit service
operations carried out by the board, but the rules of procedure and the
requirements a joint decision involving members through member meetings and
board meetings. Thus the members had no difficulty because the process is very
simple and easy. Members who want to borrow loans just fill out the form and
submitted to the board / officer. Members are not required to provide
collateral and if the business owned by a decent, credit can be availed.
When linked to the values of social capital, then
there is a role shared values, member participation and confidence in the
process of credit lending. The role of common values reflected in the spirit of
togetherness and cooperation in determining the procedure and terms of
borrowing. The provision is a joint decision is discussed in the meeting of
members. Participation of members materialized in the form of the willingness
of members present at the meeting and was directly involved in formulating and
issue a decision. While the role of trust is reflected in the absence of
collateral requirements for members who borrow loans This is to educate members
in trying to be honest.
e) Monitoring and Evaluation. In the monitoring and
evaluation activities, the role of social capital values found in the
institution (LKMA Panampuang) in the form of shared values and member
participation. In LKMA Panampuang, monitoring and evaluation carried out by the
regulatory body are appointed jointly by the board and members.
The regulatory body is basically
just tasked with monitoring and evaluating the implementation of the activities
particularly the management of funds by the board. Besides, monitoring and
evaluation in general is also done by the members through a RAT. Monitoring is
done is about the course of events over the past year and plan activities for
the next year, while the evaluation is about financial accountability by the
board. While monitoring and evaluation of the administrative accounting and
reporting by the supervisor.
When linked to the values of
social capital, in LKMA Panampuang there are shared values and the
participation of members that play a role in monitoring and evaluation. Shared
values that play a role is in the form of a spirit of togetherness and
cooperation for the mutual benefit to oversight. Although the monitoring is
done by the regulatory body, but every problem can not be separated from
monitoring or supervision and contribution of some members.
The role of member participation is evident from
the willingness of members attending each meeting. Each member is required to
attend the meeting to discuss and find solutions to the problems facing the
institution. The role of social capital in LKMA shown in Table 3.4.
Table 3.4. Role of Social Capital in the
Institution
| ||
3.4 The Role of Government Policy on Financial Institutions and Capital Strengthening Small Farms
a) Regulatory Aspects. Although LKMA development
program is part of the county government, but the agency has no legal basis and
operational in carrying out its activities. The only operational base is AD /
ART created by governments and society.
b)
Aspect
Capital Assistance. To support the operations of the institution LKMA never
received capital assistance from the district administration at the time of
establishment of the institution. In an effort to boost the economy of poor
rural communities through the provision of capital by the government. LKMA
obtain financial aid from the government amounting to Rp 100 million as initial
capital Agam operational agencies in 2008. The initial capital is first used as
loans to members.
Help initial capital received by
LKMA a positive impact on the provision of loans to its members. However, recently
the number of members feel the credit is inadequate because of the limited
availability of capital. The provision of capital amounting to Rp. 100.000.000,
- financially can not mengmbangkan effort by farmers. This assistance is more
prominent than the political elements of the economic element.
c)
Aspects
of Development. From the aspect of coaching support, obtain guidance from the
government in the form of training. The board LKMA provided training in the
management of financial institutions held by the government of Agam district at
the time of establishment of the institution. The training aims to provide the knowledge
and skills regarding the management of the institution, especially regarding
credit services to members. Therefore, a program of the government agency, then
this training is very useful for administrators in managing the institution.
4.
Conclusion
Based on the results of research and analysis, we
can conclude that there are three important factors that cause LKMA can survive and play an effective role in a
rural airport FOR namely:
1). Elements of Faith. The nature of trust between
members with members and between members of the board resulted in the formation
of a network that enables the formation of mutually beneficial cooperation
between members in achieving common goals. These conditions affect the
suitability of the characteristics of the institution with the characteristics
of the nature and dynamics of UTK, this condition causes LKMA easily accessible
by UTK. Characteristics of institutions characterized by UTK as the main target
of credit services, procedures and administrative requirements are relatively
simple, does not require collateral, repayment system is relatively lightweight
and flexible, and easy to reach location. While the nature and dynamics of UTK
is characterized by a limited area, there are still peasants, and the business
is seasonal. While the dynamics of UTK include reliance on credit loans, no
collateral, and just being able to access credit that do not bloom / low
interest rate and easy to obtain.
Ease of access of farmers to financial institutions
causing farmers to succeed in the implementation of agricultural activities.
Such a condition indicates that the character of financial institutions in
accordance with the characteristics of farmers, led to the development of
agriculture and increase farmers kesejahreraan better. Mutual trust between the
manager and members by making mutually beneficial working system between
managers and members. Mutual benefit will arise if the results of the
activities carried out benefit the two sides. This situation will lead to
mutual trust, sympathy, mutual participation and sense of belonging to the
institution. This was evident at LKMAPanampuang Prima, effectively serving the
needs of capital.
2)
Network
Elements. Empirical facts stated that credits earned UTK mainly benefit the
credit needs to sustain its agricultural business capital. This situation as a
result of involvement of financial institutions to serve the needs of capital
for UTK are our customers. The success in the management of the institution has
LKMA main source of capital (initial capital payment and savings), so as to
empower UTK in fulfilling the capital although still DSLAM limited quantities
without relying on external capital mobilization, especially from the
government.
3). Elements Norma. From the aspect of the rules /
policy of the government, the upfront analysis showed that LKMA after being
given initial capital, as it does not have a dependency on the government, so
it is able to exist and contribute to UTK. This condition is seen on the level
of compliance with the provisions, the rules they created together. This
indication is reflected in the low tingakat loans (2%).
5.
Suggestions
Sisitem Operating Procedure (SOP) is formulated
based on an element of trust that has been shown to create an independent local
agencies and beneficial in meeting the capital of the farmers. To mengarangi
operating costs, the establishment of a network system also proved to make the
system more effective cooperation and norms / rules are made jointly make the
members abide by the rules according to the agreement, it also makes a
collective capital formation was effective.
Therefore, it is suggested that microfinance can be
entrusted management / delivered to local bodies under the supervision of their
pemerintrah brackish areas. Specific regulations on microfinance / informal
financial institutions such as LKMA can be set by local governments either
provincial or local government or city government, as has been done in the Barn
Pitih Nagari (LPN) West Sumatra Governor governed by district head of West
Sumatra province in 1976.
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