IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0286482.html
   My bibliography  Save this article

Transformation of financial institutions grants from the government to inclusive financial institutions in Indonesia

Author

Listed:
  • Valeriana Darwis
  • Rika R Rachmawati
  • Chairul Muslim
  • Chanifah
  • Asma Sembiring
  • Nyak Ilham
  • Lyli Mufidah
  • Sri H Suhartini
  • Rofik S Basuki
  • Yanti Rina
  • Suharyon
  • Maryam Nurdin
  • Dahya
  • Mario Damanik
  • Dina O Dewi

Abstract

Low-income communities have limited capital and access to money or loans from formal financial institutions. To solve the problems, the government provides solutions, one of them is by forming a microfinance program, namely Rural Agribusiness Business Development (PUAP). PUAP program is one of the grant activities to farmer group association (Gapoktan) with a total capital assistance of IDR 100 million. The problem with the 52,186 Gapoktan units that participated in PUAP activities, only 7,703 units (15%) were transformed into Agribusiness Microfinance Institutions (LKMA). This paper differs from others as it briefly explains the PUAP/MFI’s institutional transformation and the factors that affect its sustainability, which is so far still limited discussed. The paper aims to see what transformations Gapoktan becomes an inclusive LKMA and the level of sustainability of the LKMA. The research was conducted in Kendal Regency, Central Java- Indonesia, in 2022 on 5 LKMA. The process of transforming LKMA into an inclusive financial institution is analyzed descriptively. LKMA sustainability levels were analyzed using a multidimensional scaling (MDS) approach with the Rapfish application. So far, MDS with the Rapfish application is still very limited for microfinance analysis. MDS analysis is employed because it is relatively simple and effective for looking at sensitive attributes in improving sustainability and generating leverage attributes that can be used for policy-making. The result study shows that the transformation of PUAP into LKMA is driven by the ability to improve legality, financial governance and diversify the customer’s business field. The five LKMAs have a sustainability status of ’sufficient’ in running their business, with an index value of more than 50%. The study recommends 1) the Indonesian government could assist LKMA in improving its legality and 2) LKMA’s management should get training by experts to improve its financial capability to manage the cost saving.

Suggested Citation

  • Valeriana Darwis & Rika R Rachmawati & Chairul Muslim & Chanifah & Asma Sembiring & Nyak Ilham & Lyli Mufidah & Sri H Suhartini & Rofik S Basuki & Yanti Rina & Suharyon & Maryam Nurdin & Dahya & Mario, 2023. "Transformation of financial institutions grants from the government to inclusive financial institutions in Indonesia," PLOS ONE, Public Library of Science, vol. 18(6), pages 1-20, June.
  • Handle: RePEc:plo:pone00:0286482
    DOI: 10.1371/journal.pone.0286482
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0286482
    Download Restriction: no

    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0286482&type=printable
    Download Restriction: no

    File URL: https://libkey.io/10.1371/journal.pone.0286482?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0286482. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.