Woman Microfinance in Indonesia: Present Status and Future Direction

Microfinance has broadly been used to alleviate poverty and empower women in Indonesia. Many studies have already examined the microfinance performance but mostly on the basis of a client versus non-client comparative method. In this study, we measure the outreach of and impact of microfinance on poverty alleviation through random sampling of poor households. A case study was conducted at the district of Purbalingga to assess the most widespread woman microfinance in Indonesia, Savings and Loans for Women (Simpan Pinjam Perempuan, SPP). While the SPP has a good repayment rate and asset growth, its performance in poverty alleviation is low. Only 18 per cent of the respondents ever benefitted from the SPP, which indicates low outreach to the poor. The impact on income generation and development of social capital as well as empowerment of the poor is weak. The causes are limited fund, lack of prioritisation to the poor and inexistence of assistance to loan utilisation. Institutionally, the SPP is not connected to the local government. These create a low sense of belonging and fund allocation from the local authorities. The continuity of the SPP requires a closer institutional linkage with the local government and bank institutions in order to have better assistance and budgeting while maintaining informality of loan disbursement.