Indonesia is one of the countries in the G-20 group. The G-20 is the name for an economic association, both developed and developing countries. Indonesia is currently in the developing country category. It is not surprising that the economic conditions of most people are still below the average of developed countries, the United States being an example.
Many Indonesian people still have low incomes which causes them to live below the poverty line. With such complicated conditions, an institution is needed that can collaborate with them to improve their standard of living, especially in improving their economic conditions. For this reason, we need a financial institution that can be present in society to help stabilize economic conditions.
Maybe many of us are still wondering whether there is an institution like that? The answer is yes, namely microfinance institutions. This institution is a financial institution which is devoted to providing services in the form of services to those (people) who have minimal income and are in the poverty circle, as well as to small or micro entrepreneurs who still need help. The form of assistance can be in the form of loans, micro business financing and savings management. Here we will explain several roles of microfinance institutions, especially in Indonesia.
The Role of Poverty Alleviation
Poverty alleviation can be done with many means and programs, both direct and indirect. These facilities and programs include encouraging productive small businesses or micro businesses through the provision of small-scale loan facilities. In this way, food will be able to increase community productivity and grow small and micro businesses at lower levels such as villages.
The Role of Driving Economic Growth
In an effort to increase economic growth rates, the government must be able to reduce unemployment rates by encouraging the micro business sector. This business can take the form of providing credit with small interest. Apart from that, it also develops micro production in larger quantities, such as providing credit to property businesses and other types of businesses. This is because small and micro businesses have clearly proven to have the ability to survive in the face of high crises. When the economic crisis was being experienced by ASEAN countries, including Indonesia, in 1997-1998, the property business sector experienced a relatively deep downturn, while the micro business sector was still able to stand up. It is also micro businesses that are able to keep Indonesia from getting worse.
Types of MFIs in Indonesia
Broadly speaking, microfinance institutions in Indonesia are divided into three, namely: formal, semi-formal and non-formal. What is meant by formal is that which is regulated and supervised directly by Bank Indonesia. Examples of these formal ones are the microfinance divisions of large banks, such as: BRI, Bank Danamon, Bank Mandiri, and Bank Bukopin, as well as BPR. Next is semi-formal. Semi-formal is an institution whose establishment and institutional operations are regulated by the banking regulator, but whose supervision is carried out independently or outside of the banking regulator. An example of a semi-formal financial institution could be a pawnshop.
And the last one is informal. This type of financial institution does not have a clear legal framework or basis. Examples of non-formal institutions are credit cooperatives, financial cooperatives and savings and loan cooperatives. These institutions have a very important influence on the provision of financial services for the lower middle class.
