Rural Economy Micro-credit scheme helps women’s businesses thrive in Aceh

Ernis, a 47-year-old homemaker, made a second business expansion earlier this month under a
scheme aiming to heighten economic activity in rural areas and targets businesses that have the
potential to grow.

The scheme is called the Women’s Savings and Loan (SPP) and is provided by a government community empowerment program called the PNPM Mandiri.

Ernis applied for a loan, amounting to more than double the one she had for the first expansion, and added to her stock clothing for her store at the front of her house in the Koto hamlet of Kluet Tengah district, South Aceh.

“I mostly added T-shirts for boys to my stock,” she told The Jakarta Post.

“Many of my customers have been asking for T-shirts.”

She opened her store with Rp 2 million (US$215) in hand back in 2005.

It was then mostly filled with affordable batik dresses and earned her around Rp 100,000 in sales a day.

The business took a leap last year, when Ernis received a Rp 2 million loan under a scheme.

Soon, the outfitter was adding more expensive gamis — long Muslim dresses — to her collection.

Her daily earning has grown to around Rp 200,000 and Ernis said she could receive up to Rp 1 million in sales every market day once a week.

The mother of three also managed to put aside some of her income to buy two PlayStations
and computer games and is now renting them for Rp 2,000 an hour.

Early in January, she took another Rp 5 million SPP loan and traveled to Medan in North Sumatra for stock for her store.

She is one loan recipient in the district.

Under the SPP scheme, women in poverty-stricken villages in many places across the country can apply for loans to fund their businesses.

In Kluet Tengah, SPP was first implemented in 2007 and has so far reached 504 women in the district.

“There is no limit to the amount of money that the women can borrow.

“If we think that a business has the potential to grow, we are more than happy to lend Rp 20
million or more,” said Irwami, a facilitator of the PNPM program for Kluet Tengah.

At 12 percent a year, the interest rate for the loan is lower than the 14 to 22 percent charged by the government’s micro credit loan.

For many borrowers, especially those whose businesses are not as successful as Ernis’, paying the interest of that amount is a burden.

“We’ve been having a hard time repaying our loan every month,” Tamzalika, a merchant from Lawe Melang hamlet told the Post.

His wife applied for a Rp 2 million loan in 2008 to fund the family’s business selling pecan nuts and fuel.

Repayment of the SPP loan, however, has been running smoothly, according to Irwami.

He said residents in the district had seen an increase in their daily income to an average of Rp 40,000 currently from Rp 30,000 before the PNPM Mandiri programs were introduced in 2006.

The PNPM Mandiri mostly funds infrastructure projects and many SPP beneficiaries now have thriving businesses.

Adrawati, 49, lives one-hour’s drive from Ernis. The resident of Pulo Kambing hamlet in Kluet Utara district earns her money making bed covers, draperies and pillow cases.

She now earns Rp 500,000 to Rp 600,000 a month, up from Rp 100,000 to Rp 200,000 before she expanded her business through a Rp 2 million loan in 2007.

The loan gave her enough money to buy garments of better quality, making her able to set higher selling prices.

Adrawati has purchased two sewing machines and one embroidery machine since she began her business in the 2000s using only one old sewing machine, she said.

“I can now hire a worker to help me when I have many orders flowing in, or when a job needs to be done quickly,” Adrawati said, adding that she paid the worker Rp 20,000 for every set of bed covers produced.

She also said that she was looking forward to taking Rp 10 million of the SPP loan “to buy more and better garments”.

“I think my business can grow even bigger if I can take the amount of that loan,” she added.