MICRO FINANCING SCHEME BASED ON OPTIMIZATION OF NETWORK (MFS-ON): APROPOSED IMPROVEMENT ON
Moch. Doddy Ariefianto
Faculty of Economics and Business, Ma Chung University Malang
Jl. Villa Puncak Tidar N-01 Malang, 65151
Telp. + 62 341 550 171; Faks. +62 341 550 175
One important method in reducing poverty was through finance.The poor were lack of qualification and capacity to borrow from formal financial sector. Therefore they should resort their financing needs to informal sources albeit very high cost implication.This dependency in turn would disrupt their productive capacitysince the interest was very high. We focus on special segment of theproductive poor. We reviewed various financing scheme that widely practiced both domestically and globally. We perceived that existing schemes were inadequate from several perspectives: (1) partial nature, (2) substandard business practices, (3) lack of cooperation and (4) limited coverage. We proposed an alternative financing scheme.The spirit of the approach emphasized the critical role of self-sufficiency of Microfinance Institution (MFI). Through self sufficiency, MFI could develop a healthy business with reasonable rate of return. In addition to self sufficiency, first, the proposal also included financing from private sector through mobilization of Corporate Social Responsibility (CSR) funds. The funding sources became broad and economics scale could be achieved. Second, the proposal improved risk sharing mechanism by introducing the regional government banks as well as insurers. Third, the proposal made the distribution channel optimum by involvement of society elements.
Key words: micro finance, poverty elimination, network optimization, productive poor