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The Fountain of Love Credit Union: A Vibrant Microfinance Institution in a Hostile Inter-Ethnic Society

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  • Rochman Achwan

    ()
    (Department of Sociology, University of Indonesia, Depok 16424, Indonesia)

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    Abstract

    The Fountain of Love Credit Union (FLCU) is a rare example of a vibrant microfinance institution in Indonesia. Located at the heart of a hostile inter-ethnic society in the province of West Kalimantan, the FLCU invents unique types of social capital and financial organization that bolster its unparallel financial performance. In recognition of this achievement, the Indonesian government presented the FLCU with the 2005 Award for Small-Medium Corporate Excellence.Decades of inter-ethnic hostility inspired school teachers to establish the FLCU in 1987. They dreamt of creating a big microfinance institution and promoting the economic well-being of the Dayak ethnic group. The Dayak, one of Kalimantan's two largest ethnic groups, defines itself as disadvantaged. A sense of grievance evolving around these issues culminated in a series of ethnic conflicts. Today, after more than two decades of operations, the FLCU has not only won the trust of most Dayak people but also inspires other ethnic groups to establish microfinance institutions.This environment has allowed unique types of social capital and financial organization to flourish. The Fountain of Love Foundation (FLF), the parent organization of the FLCU, has set up a variety of social and economic organizations. They work in partnership with the FLCU in all aspects of its business, from recruiting, disciplining, and empowering clients to weaving organizational networks with other microfinance institutions. The latter plays a vital role in curbing the penetration of modern micro banking in the province. The FLF, therefore, has become an ethnic-based conglomerate in which the FLCU functions as one of its driving forces.However, the FLCU faces a number of hurdles. Almost all FLCU clients, in rural and urban areas, are of the Dayak ethnic group. From organizational and policy points of view, the legal status of the FLCU is vulnerable as its assets grow beyond the mandatory requirement of the current banking law.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Asian Case Research Journal.

    Volume (Year): 16 (2012)
    Issue (Month): 01 ()
    Pages: 93-114

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    Handle: RePEc:wsi:acrjxx:v:16:y:2012:i:01:p:93-114

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