Transformation of financial institutions grants from the government to inclusive financial institutions in Indonesia

Abstract

Low-income communities have limited capital and access to money or loans from formal financial institutions. To solve the problems, the government provides solutions, one of them is by forming a microfinance program, namely Rural Agribusiness Business Development (PUAP). PUAP program is one of the grant activities to farmer group association (Gapoktan) with a total capital assistance of IDR 100 million. The problem with the 52,186 Gapoktan units that participated in PUAP activities, only 7,703 units (15%) were transformed into Agribusiness Microfinance Institutions (LKMA). This paper differs from others as it briefly explains the PUAP/MFI’s institutional transformation and the factors that affect its sustainability, which is so far still limited discussed. The paper aims to see what transformations Gapoktan becomes an inclusive LKMA and the level of sustainability of the LKMA. The research was conducted in Kendal Regency, Central Java- Indonesia, in 2022 on 5 LKMA. The process of transforming LKMA into an inclusive financial institution is analyzed descriptively. LKMA sustainability levels were analyzed using a multidimensional scaling (MDS) approach with the Rapfish application. So far, MDS with the Rapfish application is still very limited for microfinance analysis. MDS analysis is employed because it is relatively simple and effective for looking at sensitive attributes in improving sustainability and generating leverage attributes that can be used for policy-making. The result study shows that the transformation of PUAP into LKMA is driven by the ability to improve legality, financial governance and diversify the customer’s business field. The five LKMAs have a sustainability status of ’sufficient’ in running their business, with an index value of more than 50%. The study recommends 1) the Indonesian government could assist LKMA in improving its legality and 2) LKMA’s management should get training by experts to improve its financial capability to manage the cost saving.

Technology Adopters versus Non-Technology Adopters on the Sustainability of Agricultural Cooperatives: The Case of the East Kutai Regency Scale

“…Substantively, agricultural cooperative financing depends on the Agribusiness Microfinance Institution (LKM-A) which is directly supervised by GAPOKTAN . Darwis et al (2023) emphasize that in the agricultural institutional format, GAPOKTAN is also a recipient of grant funds from the government assistance scheme through Direct Community Assistance-Rural Agribusiness Development (BLM-PUAP). Figure 1 displays the organizational diagram of agricultural cooperatives in Indonesia.…”

Bauran Kebijakan Apa Yang Dapat Diimplementasikan Untuk Meningkatkan Inklusi Keuangan Bagi Masyarakat Agraris?

“…Kondisi pada saat ini menunjukkan bahwa akses masyarakat agraris terhadap lembaga keuangan formal masih sangat terbatas (Darwis et al, 2023). Berdasarkan data dari Otoritas Jasa Keuangan, Indeks literasi dan inklusi keuangan petani dan nelayan merupakan kelompok masyarakat dengan tingkat inklusi keuangan dan literasi keuangan terendah dibandingkan dengan kelompok masyarakat lainnya, bahkan lebih rendah jika dibandingkan dengan kelompok masyarakat yang tidak bekerja (Otoritas Jasa Keuangan, 2021).…”

“…Pada saat ini, berbagai upaya telah dilakukan dalam rangka mendorong perluasan akses layanan keuangan bagi kelompok masyarakat agraris. Pemerintah Indonesia telah merilis Pengembangan Usaha Agribisnis Pedesaan (PUAP), program tersebut memfasilitasi bantuan pinjaman modal usaha kepada para petani (Darwis et al, 2023).…”