P4K - Phase III

This IFAD/Asian Development Bank project is building on the previous phases. The first project, carried out between 1980 and 1986, showed that low-income farmers and fishers are worthy of credit and show economic initiative if they are organized into self-help groups. The pathfinder project was scaled up in 1987. In the second phase, more than 32,000 self-help groups were formed and about 2,000 existing groups were strengthened. Group members were helped to obtain loans, once they developed solid savings habits and prepared a group business plan. The loans were used to finance a wide range of activities that involved relatively small investments in terms of cash and labour. Group members selected about 200 different types of investment activities, including livestock raising, small-scale trade, food processing, handicrafts and microenterprises.

By continuing to promote skills development and microfinance support services, the third phase of the project will provide opportunities to some of the poorest people in the rural areas of 12 provinces to improve their income-generating capacity.

In the project's second phase, more than 48,000 self-help groups were set up by the Ministry of Agriculture. About 37 per cent of them were made up exclusively of women and 25 per cent were mixed. About 38,000 groups received at least one loan from the Bank Rakyat Indonesia, and nearly all of them received training in financial planning and management. Total savings stood at US$3.3 million and total borrowing amounted to US$47.0 million, with a loan repayment rate of 86 per cent. The incomes of participating families rose by between 41 and 54 per cent on average.

The method used in the project – identifying a village, contacting potential group members and training them to achieve self-reliance – proved to be effective. The third phase will expand on this dynamic formula, which could be replicated throughout most of rural Indonesia.