rochman - MICROFINANCE INSTITUTION, SOCIAL CAPITAL AND...

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MICROFINANCE INSTITUTION, SOCIAL CAPITAL AND PEACE BUILDING: EVIDENCE FROM WEST KALIMANTAN, INDONESIA Rochman Achwan, Center for Research on Inter-group Relations and Conflict Resolution (CERIC), University of Indonesia, [email protected] Theme: Social Transformation ABSTRACT Microfinance institutions have been rapidly growing in Indonesia in recent years. The Fountain of Love Credit Union (FLCU) in West Kalimantan is an exceptional case. Relying on own social capability, it scores an unparallel financial performance. The success lies on the leadership to create simultaneous macro, meso and micro social capital. In the context of past authoritarian regime and frequent ethnic violence, however, F LC U is still unsuccessful to build an extensive bridging social capital that allows other ethnicities to become its members. Only recently FLCU is able to create Reconciliation Credit Union , promoting and supervising new credit unions run by other ethnic groups. INTRODUCTION Indonesia has been undergoing the most dynamics development of microfinance institutions (here-after refer to as MFIs) in comparison to other countries in recent years (Rosengard et al, 2007). A variety of financial technologies has been embraced by NGOs, banking and government based-MFIs. Currently, there are 53.228 outlets of microfinance, serving almost 16 million loanees and 38 million depositors (Ismawan dan Budiantoro (2005). So far, studies on Indonesian MFIs have been dominated by conventional economists focusing on government based-MFIs and applying technical measures to assess their performance. Although such studies are important in showing causes of success and failure of financial performance, they fail to uncover mechanisms of various social groups to have access to MFIs. Very few studies focusing on self- society management of MFIs has taken place in Indonesia. In line with the rapid growth of market of microfinance and in order to fulfil that void, this paper discusses a success story of the Fountain of Love Credit Union (hereafter refer to as FLCU) by showing, first, the capabilities of creation of social capital and second, the challenges it faces in the contribution to peace building in an environment of inter- ethnic hostility. FLCU operates in the province of West Kalimantan, Indonesia as a type of self management of saving-led MFI, without any intervention of government and donor agencies but thickly embedded in ethnicity. FLCU was established in 1987 and nurtured by Dayak ethnicity, one of big five ethnicity in the province.
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The prime concept being employed in the study is social capital. In general it is defined as social relations among individuals or groups who are able to develop norms of mutual trust and to form social networks in order to achieve certain social and economic purpose (Putnam, 2000). This definition seems to ignore social context because it assumes every individual or group to have an equal access to join in. In reality, however, such assumption is difficult to verify. A high inequality of social stratification based on social
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This note was uploaded on 10/24/2011 for the course UNIV 2201 taught by Professor Staff during the Fall '08 term at University of Georgia Athens.

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rochman - MICROFINANCE INSTITUTION, SOCIAL CAPITAL AND...

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