The need
Indonesia has entered a new stage of economic growth, but as the number of people below the poverty line decreases, the levels of poverty are intensifying. The International Fund for Agricultural Development states that "those who are poor are now worse-off than they were before the devastating 1997 financial crisis that swept the region and the gap between rich and poor is widening. About half of the population lives just above the national poverty line." This report speaks of a need that the statistics – decreasing from 17% poverty rate in 2004 to 12.4% in January of 2013 – do not portray.

Others have noticed this pressing issue. Abdurrahman Syebubakar, senior policy advisor at the Indonesian Institute for Democracy Education, warns that "the number of people living on the brink of absolute poverty is estimated at 70 million." These people, representing 27.6% of Indonesia’s total population, live in a precarious situation; the slightest shift in the economy could send them into absolute poverty.
This developing nation clearly could utilize stability in its economy. While the net growth may be positive, there are always natural fluctuations that could plummet much of the population into dire need. Why not provide support and eliminate the threat before it evolves into an issue?

The opportunity

In northern Sumatra, one of the westernmost islands of Indonesia, lies Medan, the nation third largest city. Mrs. Sora a Batak, a resident, saw a need in her area and took action to fulfill it. In July of 2013, she met with Mr. Subastias, who used to work with a local Credit Union that secured funds from the Indonesian government to run a MicroLoan pyramid scheme. That model was based on the Credit Union starting their own business and then loaning funds to individuals who would purchase goods from them and in turn sell those goods. The Credit Union was making most of the profit and was not supporting their customer base. 
Mr. Subastias was not happy and felt that this was not empowering people and equipping them to succeed, so he agreed to partner with Mrs. Sora. Together, they developed their own model based on Grameen Bank of Bangladesh developed by Nobel Prize winner Muhammed Yunnus.

Mrs. Sora invested her inheritance in this project called Pertiwi which would aid village women in northern Sumatra. Each woman receives a loan of $100 and training to start her own business, as well as continual support through the course of the payback.
Next Step is currently in the process of raising $100,000 to fund Pertiwi’s next stage. As of mid-October, we have raised $38,000 and we are looking for partners to support this project with an additional $62,000.

The process

The program grows when existing borrowers refer other women. Groups of five women in a single village, with permission from their husbands, start the process by coming together for a five-day training process. The first lesson they learn is their word is their collateral, so they must honor any agreements they make. They also learn basic accounting principles and throughout the entire process, the cooperative instills in the women the values of working individually while aiming toward a collective goal, which embodies the vision and mission of Pertiwi. Attendance and timeliness are vital each day. After completion of the training, the women attend a public ceremony and each receives her $100 loan.
The agreement states that loans are paid back on a weekly basis with an amount of $5 or less per week. There is an administrative fee and a 2.5% interest charge they must cover. Along with paying back her loan, each woman starts a savings account.

Important distinctions regarding the borrowers

  1. Each loan is always given to a team of five women who become responsible for each other’s success. This involves their personal business as well as the repayment of their loans. If one defaults, the others are responsible to ensure that the loan is repaid in full.
  2. The women come together every week to share their stories and repay their loans. During this time, they meet with our staff who advices them in their plan and implementation.
  3. They are reminded to follow four important values: 1) Tithe and give to people in need, 2) Save 10% of their income, 3) Pay their debt, 4) Shop for only those things they need.
  4. The women are taught to develop self-esteem and realize that they are capable of achieving success. In this way, they learn to love themselves. They are also taught to love their neighbors by caring for those who have less than they have and to seek those things that are truly valuable. In loving themselves and loving their neighbors, they discover the Golden Rule and learn that this is how they should love their God.
  5. They are taught how to use money effectively and how to sell products that are useful and beneficial to society and the environment.
  6. They also learn that life is meant to be lived in mutually interdependent relationships. Each person is responsible for herself and her neighbor. Community is a very high value.

Important distinctions regarding the loan

  1. Each loan is paid back in 6 months. After a successful payback, the borrower qualifies for a new loan of $200.
  2. The interest and the administrative fee fully cover the operational costs. One staff member effectively serves 400 borrowers.
  3. After payback of the loan, the original $100 is available to be reinvested with another borrower.

Women of Pertiwi
Location: Jentera; Kecamatan (Sub district) Sei Wampu; Kabupaten (Regency) Langkat 
Total of 1,300 families living in the district.
Monthly income for factory workers is Rp. 1,200,000 ($120).


Name: Siti Fatiamah
Business: Selling second-hand clothes
Siti travels to the center of Medan where she buys the clothes and then brings them to her own village. Travel to Medan takes 2.5 hours (49 kms) and she spends the rest of the day choosing and purchasing the clothes. She used to come once a week, but since receiving the loan she has been able to reduce it to once a month. She pays Rp. 7,000 ($ 0.70) per item. Each month, she buys 285 items. She sells them for Rp. 15,000+ ($1.50). Her net profit is from Rp. 40,000-50,000 ($4-5) per day up to Rp. 100,000 ($10).



Name: Mu Inah
Business: Selling tempeh
Mu is 70 years old and her husband cannot work due to illness. She makes tempeh which she consigns to roadside stalls for sale. From 7 kg of tempeh, she makes a profit of Rp. 40,000 ($4). She had a loan from another cooperative, but she was paying a monthly interest rate of 25%.





Name: Pida
Business: Selling new clothes and cosmetics
Pida has been involved for two years. She has a second job as a factory employee. She offers an installment program for repayment to customers, who pay weekly. She dreams of doing business and having her own little shop. Upon repayment of her current loan, she could get a second and third loan up to $300.





Name: Fitriany
Business: Selling banana chips
Fitriany started a business with her own Rp. 50,000 ($5), buying green bananas from a farm. She sliced the bananas, fried them, packaged them, and had her children sell them in school. When she got her loan from Pertiwi, she cried; no one had trusted her with a loan before. She now makes up to 500 packages per day and consigns them to roadside stalls. She initially earned Rp. 60,000 ($6) of profit per day, but has now received a second loan and is able to clear at least Rp. 100,000 ($10) daily.




The outcome
Pertiwi has given out 1,000 loans to different women in the first year with an amazing payback rate of 98%. The cooperative is capable of doubling this number in the next year. Women who may not have the skills or means to start their own businesses (normal interest rates are often as high as 40%) are now able to borrow money safely at reasonable rates and also receive the training and support they require.

Web site
5 ways to avoid microfinance corruption
America’s Big Bet on Indonesia


Next Step is a nonprofit organization engaged in the facilitation of micro-finance lending to low-income women entrepreneurs in Indonesia. Next Step's primary purpose is to provide financial aid in the form of loans. Next Step believes that its lending model fosters a sense of community, responsibility and success for borrowers who repay their loans. The principal purpose of Next Step’s lenders in funding loans is to improve the lives of these entrepreneurs, and not to make a profitable financial investment.

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