Microentrepreneurs’ Contribution to Microcredit Too Long Ignored
Microentrepreneurs' Contribution to Microcredit Too Long Ignored
This week ushers in the United Nation's International Year of Microcredit. In eight different countries, a local Microentrepreneur will ring the bell to open their respective national stock exchange. These eight microentrepreneurs --winners of the inaugural annual Global Microentrepreneurship Awards (GMA) in their respective countries-- represent the real champions of Microcredit.
For too long, the microentrepreneur's contribution to microcredit has been ignored. We cherished microcredit as a powerful developmental tool that enriches communities by creating entrepreneurs out of the poor.
We hailed its institutions, risk-tolerant credit facilities and banks who are willing to lend -- earning a tidy premium -- to the poor. And we paid tribute to its drivers: bankers and loan officers who continue to toil daily to extend credit at the grassroots.
But we forgot about the microentrepreneur. They were cast as self-interested actors desperate for an escape from poverty, happy to embrace whatever the developed world could offer. We disregarded their struggle, their innovation, their success.
But they are the real champions. Let us now celebrate the Microentrepreneur.
The UN has declared 2005 as the International Year of Microcredit. As one of many initiatives under the auspices of the Year, the Global Microentrepreneurship Awards seeks to promote excellence in microentreprise through national competitions.
In Indonesia, the GMA convened twenty microentrepreneurs at The Millennium Hotel in Jakarta between November 3rd and 5th. These microentrepreneurs were chosen as finalists - whittled down from a national pool of more than five hundred applicants - to be lauded as paragons of microentrepreneurship. They were also given the opportunity to exchange knowledge and learn from one another. International consultants and experts were assembled to provide technical assistance workshops.
Following much deliberation, an expert panel of judges selected Indonesia's first ever Microentrepreneur of the Year. This represents a significant milestone in recognizing more than a century of perseverance by the Indonesian Microentrepreneur.
During the Dutch colonial period, Indonesia's financial sector was dominated by seven large foreign commercial banks. Badan Kredit Desa (BKD) and Bank Rakyat Indonesia (BRI) constituted the local presence. In Java's great rice-producing countryside, BKDs, or village banks and granaries, offered small farmers freedom from the grip of usurers.
Microfinance thus did not only provide an escape from poverty, but was also a tool of social emancipation. Arising from a brutal recent history that included the exploitative colonial cultuurstelsel system, Microcredit offered Indonesian microentrepreneurs the opportunity to finally enjoy the fruits of their labor. It gave them a way out of poverty and a place in society.
BRI, established in 1895, primarily served civil servants up till 1968. Nationalistic government banking policy then facilitated the growth of BRI's Unit Desa system, which was charged with providing subsidized credit for rice production.
At the turn of this new century, microenterprises make up 94 percent of the business entities in Indonesia, covering over 136 million people or two thirds of the population. It is no wonder that Indonesian Microentrepreneurs have made BRI the largest microlender on earth, with lending facilities at 4,100 locations.
Indonesian microentrepreneurs today command enterprises ranging from farms to restaurants. These are tiny businesses, having no formal payroll and very little capital. Some have grown in the face of conflict and most have grown to face hardship.
But surprisingly, these microentrepreneurs are not driven by profits alone. Rather, social objectives are just as important. They want to help friends, relatives and others in the village community get a job. They want to give youth who could not finish school a life away from the streets. They want to help the physically handicapped do something productive at home.
That is all the more reason then to celebrate our Microentrepreneurs. By aligning social objectives with economic gain, they are continually developing their communities. At the most minute of levels, they are the country's engines of growth. Indonesia's new president, an expert in agricultural economics, would surely agree.
The writers are graduate students at Harvard University’s Kennedy School of Government. The university is teaming up with the United Nations to organize the global microentrepreneurship awards in conjunction with the 2005 International Year of Microcredit.