Savings lottery could help fund small businesses

Savings lottery could help fund small businesses

JAKARTA (JP): Traditional savings lotteries is one alternative
to fund small scale entrepreneurs, a speaker in a seminar on
small businesses said.

"I don't mean the lottery usually held by housewives, but the
same basic method can be used by market traders, for instance,"
Isono Sadoko said on Wednesday.

Isono, a speaker from Bandung-based Akatiga social research
institute, said the traditional savings lottery (arisan) has
received scant attention from those seeking ways to enhance
small-scale entrepreneurs, "due to the feeling that it has
limited space for expansion".

In an arisan group, members save an agreed-upon amount of
money regularly for a certain period. A lottery is held at agreed
intervals, either weekly or monthly, to determine which member
receives the sum collected.

However, on the request of any member with urgent needs a
group can decide on giving them the collective savings in turns.

Housewives are the main practitioners of this method, but
students and men also form arisan groups. Savings range from Rp
100 to millions of rupiah.

"Arisan is a credit group which actually has potential given
its informality and flexibility, particularly for very small
businesses..." Isono and another researcher, Erna E. Chotim,
wrote in their paper.

With support from a bank to circulate funds the potential of
this method can be increased, Isono said.

The seminar which ended yesterday was organized by Akatiga
with the Asia Foundation, the National Institute of Sciences and
Mitra Usaha Foundation. It focused on businesses with a maximum
capital of Rp 50 million.

The earlier session heard various experiences of banking and
financial institutions, such as Jakarta-based Mitra Usaha and
Paramita Foundation, the Purba Danarta in Semarang and PT Sarana
Jabar Ventura in Bandung, in dealing with small businesses.

In their paper Isono and Erna differentiated the needs of
capital owners of up to Rp 5 million, Rp 10 million and over Rp
20 million (US$8,400). They cited cases of well-intended
assistance to small businesses which ended up in dependence on
the helping party.

For instance organized scavengers in Jakarta could previously
sell their merchandise to the factory with the most attractive
offer.

But since an environmental group tried to provide them access
to credit, the junk men are only able to sell recycled material
to the factory which acts as their bank guarantor.

"A mutual beneficial dependence can only happen in a
competitive market with many alternatives, transparent
information on prices and relatively high demand of the product,"
Isono said.

Economist Thee Kian Wie from the National Institute of
Sciences stressed the need to be more selective on the provision
of credit for small and medium businesses.

He said the special loans introduced recently by the
government still stresses a "welfare approach" instead of an
"efficiency approach".

The latest effort of the municipality for small traders is the
establishment of a coordinating body for small businesses.

It has set up a few markets to accommodate street traders.
This month a new one is to be opened in Palmerah, West Jakarta.
(anr)