This blog was originally written for Lendahand, a crowdfunding platform for impact.
There are about 58 million micro, small and medium-sized enterprises (MSEMEs) in Indonesia, responsible for around 99.9% of the employment in the country. These businesses are run by farmers, fisherman, craftsmen and local traders. Most of them lack access to conventional loans and even more than 50 million MSMEs are defined as unbankable. Nusa Makmur, the local partner of Lendahand in Indonesia, has made it their mission to change this. Nusa Makmur finances local cooperatives that are spread throughout the country and in in this way supports the entrepreneurs that make the difference in their local economies.
The role of Non-Bank Financial Institution (NBFI) like Nusa Makmur
Nusa Makmur is a regulated rural Non-Bank Financial Institution (NBFI) based in Yogyakarta in Central Java, Indonesia. Last month I was received at the office of Nusa Makmur in Yogyakarta. The goal of Nusa Makmur is to serve rural entrepreneurs with community-based financing throughout Indonesia and to increase the prosperity of the 261 million people in Indonesia with 10% in the coming 25 years. Currently NM does this by providing loans to cooperatives, currently 47 in total, reaching more than 7512 entrepreneurs with finance that grows and improves their businesses.
The set up of cooperatives
Nusa Makmur collaborates with regional partner cooperatives that are registered as Savings & Loans institutions, in Bahasa Indonesia: Koperasi Simpan Pinjam (KSP). These cooperatives are locally founded and provide the opportunity towards entrepreneurs to open a saving- and credit account where many of them lack access to credit through conventional banks. Of all end-users, at the moment currently 40% of the end-users connected to Nusa Makmur is female and 60% is male. These partner cooperatives can differ quite a lot in size, ranging from 19000 members (both saving and loan accounts) to 500 members. Sometimes these cooperatives are based on a certain profession, like one specific cooperative that consists of street sellers and small shop holders only.
Nusa Makmur supports a part of the members that are connected to the cooperatives and sets a “plafond” for each cooperative. For each withdrawal Nusa Makmur knows exactly for which entrepreneurs the loan is required. Nusa Makmur supports the cooperatives with personal guidance. The Nusa Makmur team consists of only seven people and all cooperatives have a specific account holder. In this way Nusa Makmur keeps contact with them almost on a daily basis, but at least one time each month.
A growing ambition for inclusive finance
Nusa Makmur is a financial spin-off of Nahdlatul Ulama, a modern Islamic organization that aims to improve the social and economic circumstances in Indonesia. Both Nahdlatul Ulama and Nusa Makmur have a strong social mission and solidarity is crucial to their organizations, and they collaborate with people from all types of religion.
The cooperatives Nusa Makmur works with are spread throughout Indonesia, but the most partners are in Central Java. Through Nahdlatul Ulama, Nusa Makmur is connected to a large network and they hope to be collaborating with 100 cooperatives by the end of 2018. At the moment they work with 27, cooperatives so a lot of work lies ahead. Each of these cooperatives, of course, need to be thoroughly checked and assessed beforehand. After the “plafond” for a loan has been defined, each cooperatives send in requests for each withdrawal and the individual entrepreneurs that will be receiving the loans.
How information systems can change this game
In order to grow, Nusa Makmur will hire four new people. Next to his, they are busy to install all types of digital systems. At the moment each request for a loan has to be processed on paper and a thorough assessment is done from scratch. With the USSI-system Nusa Makmur can make use of score banking in the future. In the digital system the financial agreements will be made. Nusa Makmur is also planning on becoming a member of the Financial Information Service System (SLIK), developed by the government. This SLIK system can give NM access to information of cooperatives, and therefore does not have to collect everything themselves. This will not only make their work easier, it will also become much more transparent as these information systems are widely used in Indonesia.
Nusa Makmur has been founded in 2014 by CEO Fahmy Akbar Idries, a 51 year old professional rural banker and a local celebrity in the rural banking community. He always looking for opportunities to share his knowledge with others to increase financial access across Indonesia. As a senior banker he is registered at the Central bank as certifier for rural bank directors. While I was visiting he got granted a new certificate for this qualification. Sharing knowledge and stimulating the growth of others is central to the mission of Nusa Makmur. For a while now NM has been planning to organize trainings for partner cooperatives on financial management and efficient use of technology. So of course, a potential collaboration between the Lendahand Foundation and NM has been discussed as well!
Nusa Makmur has not given itself an easy job. In order to support SMEs in Indonesia with loans, the team is often travelling throughout the country, past the paved roads. Do you want to know how Nusa Makmur, is able to keep daily contact with the end-users of their loans through local cooperatives? And how cooperatives are organized in Indonesia? This you will read in my next blog!