HUMAN DEVELOPMENT INDEX AND FINANCIAL PERFORMANCE OF LPD

The performance of activities in the real sector in an economy is closely related to the performance of the monetary sector. One source of funding that has a major influence on the Indonesian economy is the banking industry (Fitriyana, 2011). The small and medium scale financial services industry both in banking institutions and the Village Credit Institution (LPD) is an industry that is full of risk, especially because it involves managing public money and playing it in the form of various investments through lending, purchasing securities and investing other funds.

The dynamics of Balinese life as Cultural-Based Tourism Destinations need support in building capacity to maintain Culture. In order to build independence, the Provincial Government of Bali issued Bali Governor's Decree No. 972 of 1984 which regulates the Establishment of LPD. This step is a strategic step considering that Bali is a world tourist destination with a very high velocity of money and some of the velocity of money runs out of Bali. The main purpose of the issuance of the decree in addition to empowering Pakraman Village, also included efforts to protect rural communities from the target of moneylenders. The establishment of this LPD aims to help traditional villages as a forum for socio-cultural unity carry out productive economic activities in order to produce economic added value to build social and religious life and cultural preservation.

The operation of a financial services institution, in this case the LPD, is run based on the principle of trust. Without public trust in banking performance and also vice versa banking trust in the community, banking activities cannot run properly. Bank management must pay attention to the performance of its business to maintain and increase public confidence. One assessment of LPD financial performance is to look at the level of profitability as a measure to find out how high the level of efficiency and effectiveness is achieved in the utilization of operational resources.

The company's operational activities generally aim to generate profits in order to survive and have strong competitiveness. Efforts to generate maximum profit can’t be separated from the effective use of company assets, because the use of assets in a company is closely related to the ability of a company to generate profits. An indicator of the success of a company's performance is profit. The ultimate goal to be achieved by an important company is to obtain maximum profit or profit, in addition to other things (Kasmir, 2008: 196). Therefore, a company's profit becomes an important thing that must be considered by the company's management. Profitability is a ratio to assess the ability of companies to look for profit as a ratio that shows the final results of a number of policies and decisions (Kasmir, 2008: 196; Riyanto, 2010: 331). The profitability ratio aims to determine the ability of a company to generate profits for a certain period and to measure the level of effectiveness of management in carrying out the company's operations. The higher this ratio, shows the ability of a good company in generating profits, the use of profitability ratios intended to measure the efficiency of the use of company assets in generating profits.

This article is based on the strategic role of the LPD in realizing community independence in preserving culture as a contribution of economic resources to Pakraman Village to support the implementation of its duties and responsibilities. The proposed conceptual model incorporates elements of Liquidity Risk, Credit Risk and the Human Development Index (HDI) to predict LPD financial performance. This finding will be very beneficial for the Regional Government in formulating economic empowerment and regional development policies. The proposed research model is the effect of Credit Risk and Liquidity Risk on LPD Financial Performance by incorporating the HDI moderation variable in the area of the LPD operating. The HDI values of the operational areas of all observed LPDs are classified into two categories: regions that have high and low HDI scores based on the median HDI index value.

The concept or definition of human development basically covers a very broad dimension of development. In the concept of human development, development should be analyzed and understood from its human standpoint, not just from its economic growth. As quoted from UNDP (Human Development Report, 1995: 103), a number of important premises in human development are that development must prioritize the population as the center of attention. Development is intended to enlarge choices for the population, not only to increase their incomes. Therefore the concept of human development must be centered on the population as a whole, and not just on the economic aspects. Human development pays attention not only to efforts to improve human capabilities (capabilities) but also to efforts to utilize these human capabilities optimally. Human development is supported by four main pillars, namely: productivity, equity, sustainability and empowerment. Human development becomes the basis in determining development goals and in analyzing options for achieving them. Based on this concept, the population is placed as the final destination, while the development effort is seen as a means to achieve that goal. To guarantee the achievement of human development goals, there are a number of basic things that need to be considered, namely: 1) Productivity, the population must increase productivity and full participation in the process of income and income creation. So economic development is part of the human development model; 2) Equality, residents have the same opportunity to get access to economic and social resources. All barriers that minimize the opportunity to gain access must be removed, so that they can take advantage of the opportunities available and participate in productive activities that can improve the quality of life; 3) Sustainability, access to economic and social resources must be ensured not only for generations to come. All physical, human and environmental resources are always updated. Residents must participate fully in decisions and processes that will determine (the form/direction) of their lives and to participate and make decisions in the development process. The HDI has three composite indicators used to measure the average achievement of a country in human development, namely: length of life, as measured by life expectancy at birth; education is measured based on average length of schooling and literacy rates of the population aged 15 years and over, and living standards measured by per capita expenditure that has been adjusted to purchasing power parity. This index value ranges from 0-100. The definition of HDI issued by UNDP which states that the HDI is one approach to measure the success rate of human development. With the level of education that has an influence on individual capabilities and technological understanding as a condition of increasing economic productivity.