The Quest of an Equitable Participatory in Microfinance through Financial Inclusion

The storyline of MFI as the part of its transition from the MF 1.0 to 2.0 reveals two major critical questions such as should we abolish microfinance?  And, is there any better solution available for poor people and policy makers to choose?  Microfinance after all should not be presumptuously terminated in reference to its original establishment value as a financial self-help group among the unfortunates. Moreover, while it is true that microfinance practices are ticklish in some areas, these have cultivated tremendous positive achievement in other places.  The discussion shall be focusing on evaluating the MFIs’ conformities as well as disconformities with the most current approach for improving serviceability and outreach to the (untouchable) poorest, which is the financial inclusion.  In addition, identifying the challenges of coping with the disconformities by deploying the contemporary collaborative governance approach and provides recommendation for the future improvement. Learning from the case study of LPD (Lembaga Perkreditan Desa) in Bali, Indonesia to observe the second part, LPD and its support system – as the community owned financial intermediaries – shows a strong conformity with every element that comprise the collaborative governance approach. This is pivotal as regard to find an alternative solution to improve participation within financial inclusion. 

CASE STUDY

In order to discuss the collaborative governance practice on the financial inclusion issue of MFIs, we must focus on observing the collaborative method by using the empirical case of MFI in Bali, Indonesia. In the local language, the MFI is called as LPD (Lembaga Perkreditan Desa) or Village Credit Organization and owned by community. The community ownership takes several forms such as the LPD’s products and services are exclusive for people from the same village only; LPD is managed only by the local people; and its profit should return to the village. One customary village owns only one LPD, although there are also some cases where two or more villages collide to make one LPD due to the size of the village and the shortage of resources – financial and human resources. Each village has several stakeholders including the village chief and administrators (usually not more than 10 persons), the leaders of community group (youth group, housewives group, interest group, etc.), households, and the representatives of national government (police and national security). The representatives of each stakeholder gather several times a year for the village general assembly meeting, takes place in a Banjar or a community activity hall owned by the village, to discuss a wide array of issues such as village ceremonies, problems in society, the national government programs, and the LPD’s financial performance. Especially for LPD as the only community owned MF in respective village, this forum is also designed to evaluate the overall performance and to absorb challenges that are faced by the LPD management. However, this forum still lack of chances to allow community to speak up regarding their concerns in the sense of what products and services they actually intended to have that fit their necessity. This gap deteriorates the spirit of participation in order to improve inclusiveness. Again, inclusion is not merely about alleviating the numbers of the unbanked people, but also increasing the regularity. In the case of community owned financial intermediary, the concept of collaborative governance will be straightforward.