Leony Aurora, Jakarta – People in the market call her Bu Haji, because the salted fish seller has been on a pilgrimage to Mecca, Saudi Arabia or sometimes Bu Janda, the widow, as her husband passed away a year ago.
Her son left shortly afterward, taking everything from his parents' kiosks in Bendungan Hilir market in Central Jakarta, even the worn out wooden racks.
"He thought that because his father died, all this belonged to him," said Bu Haji on Tuesday as she packed crackers into plastic bags. "Poor, poor me." To stock her stall and keep her business afloat, Bu Haji borrowed Rp 20 million (US$2,212) from the market's cooperative unit.
Recognizing the importance of microcredits – defined by Bank Indonesia as loans under Rp 50 million – in the fight against poverty, the United Nations has set 2005 as the International Year of Microcredit.
Today, in the launching ceremony of the program, eight selected individuals from eight countries, including Indonesia, will receive microcredit awards in New York.
Although deemed successful, microfinance has not reached as many people as it should. The latest government data shows that only 15 percent of some 30 million micro-entrepreneurs in the country receive financing from banks.
Lack of collateral and complicated procedures often prompt people in need of fresh funds to go to loan sharks, despite the higher interest they charge.
Prihartini, who sells fruit in the same market as Bu Haji, arranged a Rp 60 million loan – a little higher than the microcredit criteria – with 40 percent interest for a friend in Klaten, Central Java, three months ago. In comparison, the bank lending rate is around 16-18 percent.
"I get 2 percent of the interest," she said. "He [the friend] couldn't approach banks because he doesn't have land certificates." To solve this, economist Pande Radja Silalahi said that the government should improve land ownership, or even provide land certificates free of charge.
Director of the Institute for the Development of Economics and Finance Imam Sugema urged banks to make more items eligible for collateral.
For some entrepreneurs, a business license – often also a requirement from the bank – poses another obstacle.
Roger, a florist, never arranges such a license. By law, he does not have to – his flower shop in Depok, West Java, operates with capital of less than Rp 200 million. "It costs millions of rupiah to get a business license," he said.
Pande urged the government to be proactive and to go to small-scale entrepreneurs instead of waiting for them to get the license.
The further development of microcredits should be headed by banks with the most experiences, which, in the case of Indonesia, is Bank Rakyat Indonesia (BRI), said Pande.
With more than 4,100 units across the country, BRI has been recognized as the initiator of microfinance in the world. "Other banks may have different segments (targeted)," he said.
Imam referred to another source that has not been optimally utilized: informal financial bodies.
"There are so many small businesses. Banks cannot afford to know as many customers closely," he said. "They are also usually less eager to take the high risks of non-performing loans." Many villages, for example, have collective rice barns, to which villagers add a certain amount of rice per week. The money gathered from these barns is later channeled back to the people. "The government should guide these informal bodies," he said.