Fighting Poverty Takes Time and Commitment
Thu April 22,2010
Jakarta, 22nd April 2010 – Now celebrating its first anniversary, Bank Andara has shown its strong commitment and partnership to Indonesian Microfinance Institutions (MFIs), providing them with vital assistance and tools to deliver needs-focused services and products to their low income clients, in order to support local economic development and poverty reduction. Meanwhile, the Bank has worked hard this year to establish the strong foundation it needs for future social and business success in providing long term sustainable support to MFIs and their end clients.
“We have had many positive results in this first year. One success can be seen through the number and value of loans distributed to date,” said Paulus Wiranata, President Director of Bank Andara. “We have increased our loan value from a starting point of 2.5 billion IDR to a small number of borrowers a year ago, to our current position of 72,2 billion IDR to 117 MFIs borrowers now, 40% of whom are pro poor, and we are currently processing 101 more micro loans.”
However, by 2012 Bank Andara aims to help more than 1 million more of the millions of low income unserved Indonesians gain access to financial services, so that they can step out of poverty for good, and improve the quality of life of their families and local communities. “To fulfill this mission will take time, commitment and action from all the stakeholders in our partnership working together in a transparent and focused way” said Paulus Wiranata.
In recent years many institutions have shown a willingness to try to help the 40 million underserved low income Indonesians gain access to finance. However, many have been driven more by profit than by the genuine needs of their clients, and have subsequently failed to provide those most in need with the right services and products that they can afford. Infact, some companies driven by profit often failed to carry out effective due diligence in selecting participants, which has led to a high NPL rate in the microfinance industry and a high number of people who are still live in poverty.
Realizing this situation, Bank Andara has launched a vital program focused on helping those most in need to access effective and accessible financial assistance. The program is called the “Social Deposit program” and is a unique set of deposit products offering the bank’s customers both financial and high impact effective social gains for their deposits. This program offers customers the choice of which group of low income Indonesian people their deposit will assist: farmers, women or the poor, while also providing regular reports on what their deposit has achieved, with specifics to help them understand the MFI’s and customer’s needs. Indeed, if a depositor wishes they can have the opportunity to visit the MFI and end clients their deposit has supported and see the impact first hand.
“By carrying out an extensive and well prepared social deposit mechanism to select the right recipient for our social deposit loans, we believe we can deliver an effective high performing program with low NPL rates and a high welfare improvement rate amongst those who receive and replay loans,” said Paulus Wiranata as President Director of Bank Andara.
Bank Andara’s client BPR Karangampel introduced us to Pak Tofik, one of their farming customers who came to them looking for business support to make a sufficient and consistent living. Before Pak Tofik became a client of BPR Karangampel, he earned a living by collecting recycled waste and re-selling it, but like many others, his business was devastated when the price of recycled waste dropped dramatically. After this he decided to look for a safer profession and chose to become a beekeeper. “The idea came when I visited my friends in Jatibarang and saw my friend’s neighbours harvesting honey. I realized it could be a reliable and sustainable business for me too,” Pak Tofik explained. Subsequently Pak Tofik approached BPR Karangampel with the idea for his new business, and they supported him with a Rp 5.000.000,-seasonal group loan.
BPR Karangampel’s group loan facility provided Pak Tofik with the funds to support the start up and operational costs of his business. In the beginning he started with 3 bee boxes and collected and sold the honey door to door himself. Over the first 6 months he increased his business to 18 bee boxes and employed three additional workers to help work with the bees and sell the honey. With 18 boxes and three workers, Pak Tofik can make Rp 240.000 a day profit selling his honey door to door and to Karawang hospitals during the dry season. “The biggest challenge with beekeeping is that it’s a seasonal business. During the dry season there are many food sources for the bees and they produce a lot of honey. However, in the rainy season there are limited food sources, and it is hard to collect honey. For this reason, a seasonal loan with a flexible repayment facility, like Bank Andara provided through BPR Karangampel, is essential for me and my fellow beekeepers,” added Pak Tofik.
Ultimately, each single deposit that customers invest in Bank Andara helps everyone to win because the deposit will go directly to building MFI customers like Pak Tofik, reducing their financial risk and in helping to fight poverty.
“Our MFI customers win by obtaining funding and additional capacity building activities, while their customers and their communities win through improved economic well-being and financial risk reduction. Bank Andara wins because it receives ongoing support to continue its mission to reach those most in need,” says Pak Paulus. “No other deposit in Indonesia can have as positive an impact on so many groups at one time.”
Fighting poverty takes time and commitment. The challenge Bank Andara has taken on is not small or easy, but it is important for the benefit of Indonesian MFIs and their end clients. Setting and achieving small goals along the way is the best strategy for future success and Andara have already set the next goal in their path to reach, “In this year, we expect to provide total loan value of approximately IDR 400-500 billion to our current existing MFIs and to new BPR clients, many of whom will have a pro poor focus.” said Paulus again. (LR)