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Indonesia-Japan – Institutionalizing Micro Finance in Africa

Organization(s):

Directorate of Technical Cooperation, Ministry of Foreign Affairs, Government of Indonesia (GoI), Japan International Cooperation Agency/JICA, Government of Japan (GoJ), and Non-Aligned Movement Centre for South-South Cooperation (NAM-CSSTC)

Country (ies):

Indonesia, Algeria, Ethiopia, Kenya, Uganda, Sudan, Zambia, Namibia, Madagascar, Mozambique, South Africa

Overview:

NAM CSSTC--in cooperation with the GoI, and JICA/GoJ—has implemented a training programme on microfinance for African region since 2004.The Batch I (2004-2006) focused on the operational aspects of microfinance, whilst the Batch II (2007-2011) emphasized the establishment and management of microfinance institution (MFI). The idea is also based on positive feedbacks expressed by the alumni of the past TCTPs.

Background:

It has been widely recognized that a properly designed and implemented micro credit schemes is central to alleviate poverty by providing supports for lower-income groups to increase their income. NAM CSSTC has been actively involved in the effort to promote the development and mobilization of micro credit schemes in the NAM member countries.

As a follow up to the recommendations of the Expert Group Meeting on "Identification of Major Issues in Eradicating Poverty and Fostering Rapid and Equitable Development in NAM Member Countries", convened by NAM CSSTC in April 2001, a group of eminent policy makers and practitioners from NAM member countries were invited to a workshop held in Jakarta, in June 2002. They have deliberated on the relevant aspects concerning key issues, technical and policy aspects, and came up with a set of recommendations to enhance the sustainability of micro finance institution including people's involvement in micro financing scheme.

The Workshop recommended that NAM CSSTC to take initiative to increase cooperation in the fields of comparative studies, training programme in micro credit services and technical assistance. NAM member countries should promote transparency in micro credit services by setting up standard performance, establishing rating agencies and promoting internal control. The Workshop also identified specific actions and recommendations that could be taken by NAM CSSTC to promote and mobilize micro finance practices in NAM member countries to achieve sustainability in the programme. Based on the recommendations of the workshop, NAM CSSTC started to hold a series of regional trainings on micro credit schemes. Three training programmes have been successfully conducted. The first one was held in Jakarta, Indonesia in August 2002 for East Asia and the Pacific region, the second one was held in Pretoria, South Africa in October 2002 for Southern Africa Region, and the third one was held in Dhaka, Bangladesh for South and Central Asia Region in March 2003.

Following the three training programmes, NAM CSSTC in cooperation with the Islamic Development Bank (IsDB) conducted an Expert Meeting to Formulate Basic Guideline on Microfinance, in Jakarta, in March 2004. The meeting was attended by competent experts from Bangladesh, Brunei Darussalam, Egypt, Indonesia, Iran, Pakistan, Peru, Singapore, South Africa, and Zimbabwe. Meantime, in 2000, the GoJ assisted NAM-CSSTC through Grant Aid based on the commitment for Tokyo International Conference for African Development (TICAD II). As a follow-up of this assistance, the GoJ decided to cooperate in training programme on microfinance in 2006. The overall goal is to encourage African participants to establish and manage Micro Finance Institution (MFI) for the benefit of the low income group.

The project purpose is to provide the African participants with an opportunity to improve their knowledge and techniques in the field of microfinance, especially on how to establish and manage Micro Finance Institution (MFI). The course will also provide them with the opportunity to exchange ideas, information and experiences among participants concerning policy and technical aspects of MFI operations. This training programme is conducted in line with the commitment of the GoI to support the United Nations "International Year of Microfinance 2005", and the "New Asia Africa Strategic Partnership" (NAASP) as an important document resulting from the Asia Africa Summit held in Bandung 2005.

Implementation:

The course is sponsored by the GoI—under the framework of Technical Cooperation among Developing Countries (TCDC) program—in cooperation with the GoJ (JICA)—under the Third Country Training Programme (TCTP). The GoI designates the NAM-CSSTC for the implementation of the course. The Batch I implemented three trainings from 2004 to 2006, focusing on the operational aspects of microfinance, having lecturers from Bank Rakyat Indonesia, an Indonesian microfinance institution renowned worldwide.

After the evaluation of the Batch I, it was decided to shift the focus to the establishment and management of microfinance institution (MFI) so as to expect more tangible results. With lecturers source from PNM-Inkowan (National Corporation for MSME & Cooperative Development, Tertiary Women Cooperative), the Batch II is being implemented from 2007 to 2011, already implemented three trainings, and another two trainings are projected. While implementing the Batch II, continuously the course was improved based on the evaluation made by the participants. Recently, the course aims to improve its quality, encouraging more participants per country, with more narrowed down beneficiary countries, so that training effects can be multiplied with the network of ex-participants in their own beneficiary country.

After the second implementation in 2008, one of the beneficiary countries, the government of Uganda (GOU) requested a follow-up of ex-participants. Together with the cost sharing made by the GOU, GOI, NAM-CSSTC and JICA jointly dispatched a follow-up mission to Uganda.

Outcomes:

Each trainee is expected to gain knowledge and skills on:- Economics and banking system;- Principles of microfinance development;- Establishment and operation of MFI; and- Supporting aspects for MFI development; By the end of training, each participant produces 'Back Home Plan' (BHP) for further consideration to be implemented in participants' home countries.

In the Batch I, 45 practitioners of microfinance was trained, while in the Batch II, 33 participants have been trained by the third implementation of all five implementations. In total, 78 participants have been trained. Many training participants were highly interested in the non-conventional, interest free, Shariah microfinance scheme in Indonesia.In order for training results to be sustainable, post training activities in participant's host country is considered to be very important. NAM-CSSTC maintains contact with ex-participants after the training, gave advises to them when required. When the ownership of utilizing the training outcome can be expressed by the beneficiary institution and government, a follow-up mission was dispatched and conducted on-site assistance to the ex-participants. Especially after the follow-up mission to Uganda in 2009, the relationship between the resource country and the beneficiary country have been transforming to be more equal partner relation. This is due to the strong ownership and initiative of beneficiary country (Uganda), which provided assistance to the follow-up mission.

Aid Effectiveness:

Taking an example from the experiences of follow-up missions to Uganda (a mission is being dispactched in February 2010), we could draw an important lesson, the use of Country System was closely linked with the Ownership of the beneficiary country, then it contribute to equal partnership with the resource countries. This combination of key aspects was found to be very effective when the training effects are utilized by ex-participants. The government of Uganda, the beneficiary country, implements Rural Financial Services Programme (RFSP) under Ministry of Finance, Planning and Economic Development (MFPED), which was the driving force of this activity. In fact, RFSP uses Back Home Plan (BHP) of ex trainee of the training in 2008 as a base for a planning program for implementation. Since the MFPED formulated Microfinance Policy Framework for the delivery of microfinance in Uganda, the training results were well aligned with the national development goal of the beneficiary country. Bank of Uganda is also interested in the GoU's plan to develop a 'dual window system' (conventional and sharia) in Uganda banking system. Ex-trainees creates an association of alumni (of the trainings) to better share their experiences.

Capacity Development:

Since the resource country, Indonesia, is on its way to upgrade SSC in its national development plan, the implementation of this training programme contributed to consider the effectiveness of assistance that the resource country extends, which positive effects are not limited to methodology, but also to institutional framework and its policy making. Microfinance is an area which was created and practiced in the South countries. Indonesia's experiences on microfinance will potentially become important part for the North countries to assist this field.

Duration:

Current phase II : from 2007 to 2011 (Phase I: from 2004 to 2006) Every year, a training program of approximately two week was implemented.

Name of Primary Contact Person:

Achmad Rofi'ie

Title of Primary Contact Person:

Assistant Director for Programme, NAM CSSTC€

City:

Jakarta, Indonesia