Microfinance key to eradicating poverty
Rita A.Widiadana, The Jakarta Post/Nusa Dua
The promotion of microfinance programs is crucial to accelerating poverty alleviation, as it would help small businesses long neglected by commercial banks, a three-day international seminar here has concluded.
"We need a new paradigm of poverty alleviation. We have good news that more countries have given more attention and efforts to develop micro- and small business as one of the alternatives of poverty alleviation," experts said in a joint communique issued at the end of the seminar.
Some 300 experts participated in the seminar organized by Bank Rakyat Indonesia (BRI) in connection with the United Nations' Year of International Microcredit 2005, and put forth a number of recommendations.
The concept of microcredit, developed in 1976 by rural economics professor Muhammad Yunus of Bangladesh, concerns the provision of loans to small entrepreneurs likely to be ineligible for bank loans under traditional means of evaluating credit- worthiness.
The experts concluded that the present financial system, which exclusively favors the rich and large businesses, had created a disparity of wealth.
"Microfinance development should put priority on expanding accessibility to financial services for the poor. An inclusive financial system will create distribution of wealth," the statement said.
They also suggested that all countries must develop microfinance immediately, regardless of an unavailability of infrastructure, including legal framework and human resources.
"We cannot wait until all the infrastructure is in place, since one billion out of 6.5 billion (people of) world populations are waiting for action," the statement said.
Rudjito, president of BRI, an institution considered the world's best microbanking model, had previously urged the government and legislature to develop legal instruments for accelerating the operation of microfinancing institutions in the country.
According to BRI managing director Krisna Wijaya, the state bank's microloans for small- and medium-sized businesses reached Rp 38.5 trillion (US$4.31 billion) as of September, and was expected to increase to Rp 50 trillion by the end of 2005.
Indonesia has been selected as one of the eight countries in the world to have developed innovative microfinancing successfully as part of a support program for small and medium businesses.
The current government has vowed to expand the microfinancing program further and is seeking necessary funds.
The latest government data shows that only 15 percent of some 30 million micro-entrepreneurs in the country receive financing from banks.