EDUCATION AND MICROFINANCE AS A COMBINED EMPOWERMENT APPROACH FOR THE MICROFINANCE CLIENTS: A Multiple Cases Study of Two Local Microcredit Organizations in Bandung City in Indonesia.

EDUCATION AND MICROFINANCE AS A COMBINED

EMPOWERMENT APPROACH FOR THE MICROFINANCE CLIENTS: A Multiple Cases Study of Two Local Microfinance Organizations in

Bandung in Indonesia

A Dissertation Submitted

In Partial fulfillment of the Requirements For the Degree of Doctor of Education To the Department of Pendidikan Luar Sekolah

At the School of Postgraduate of Universitas Pendidikan Indonesia

By

Wamaungo Juma Abdu NIM: 1103889

UNIVERSITAS PENDIDIKAN INDONESIA 2014

APPROVAL

Promotor

Prof. Dr. Mustofa Kamil, M.Pd.

NIP: 196111091987031001

Co-promotor

Prof. Ace Suryadi, Ph.D.

NIP: 195207251978031001

Team Member

Prof. Dr. Achmad Hufad, M.Ed.

NIP: 195501011981011001

Endorsement of the Head of Department

Dr. Jajat S Ardiwinata, M.Pd.

iii

DECLARATION

This dissertation is presented in partial fulfillment of the requirements for a degree of Doctor of Education at the Graduate School of Universitas Pendidikan Indonesia. The author has used different sources though there is no written request to the authors of the work(s) used in-here, appropriate academic procedures have been applied where necessary. The author has followed required academic rules in recognizing the varying contributions.

Bandung, 7th January 2014

Microfinance Clients: A Multiple Cases Study of Two Local Microcredit Organizations in Bandung City in Indonesia

ABSTRACT

This research is about the education and microfinance as an empowerment approach for the poor. The study attempted to examine and describe the education and microfinance integrated approach in poverty alleviation used by both MiSykat and BMT Khalifa to help empower the poor. This dissertation aimed: 1. to find out how MiSykat and BMT Khalifa describe their education and microfinance empowerment approach used in poverty alleviation; 2. to investigate how education and microfinance approach work to empower the poor clients of MiSykat and BMT Khalifa; 3. to examine how the education and microfinance approach support the enhancement of entrepreneurship knowledge and business skills of the poor microcredit clients; and 4. to establish themes which best describe the education and microfinance empowerment approach of MiSykat and BMT Khalifa.

To achieve the above objectives, the researcher conducted a qualitative study, using a multiple cases approach comprising two cases: MiSykat and BMT Khalifa. The interview technique, observation, and the study of documents were used. The data collection and data analysis resulted into a thesis and several major themes: the thesis being that “MiSykat and BMT Khalifa’s education and microfinance approach is different from the credit with education model of the Freedom from Hunger”. The education and microfinance approach of Misykat and BMT Khalifa is implemented based on religious values of Islam, while the credit with education model of Freedom from Hunger integrates education into a microfinance delivery system to address the informational as well as the economic and the complexity and scale of malnutrition of the poor.

The themes established included: community social change, holistic and all embracing community empowerment, push me to do the impossible, linking the poor based on solidarity, responsive mentorship, and knowledge with capital etc. The conclusion is that to help the poor it is important to understand their condition, the possible ways to help them, the possible measures, the appropriate implementation process, and the goals they wish to achieve. The researcher wishes to recommend that, “since education and microfinance approach has shown success in the cases studied, it possible to be implemented at a broader scale by the credit providers”. However, to be more appropriate further studies are needed (quantitative, action research and model development) to help establish a more appropriate solution to poverty alleviation.

Key words: education, education and microfinance combined approach, empowerment, and microfinance clients.

TABLE OF CONTENT

APPROVAL ... i

DECLARATION ... ii

ABSTRACT ... iii

PREFACE ... iv

ACKNOWLEDGEMENT ... v

TABLE OF CONTENT ... vi

LIST OF TABLES ... ix

LIST OF FIGURES ... x

LIST OF APPENDICES ………. xi

CHAPTER ONE: INTRODUCTION ... 1

1.1 Background ... 1

1.2 Problem Identification ... 6

1.3 Problem Statement ... 10

1.4 Objective of the Study ... 10

1.5 Conceptual Framework ... 12

1.6 Significance of the Research ... 16

1.7 Scope and Limitation of the Study ... 18

1.8 Research Organization Structure ... 20

CHAPTER TWO LITERATURE REVIEW ... 22

2.1 Nonformal Education as an Empowering Process ... 22

2.2 Islamic Concepts on Empowerment and Poverty Alleviation ... 24

2.3 The Economy and Poverty in Indonesia ... 26

2.3.1 The Economy ... 26

2.3.2 The Poor and Poverty ... 29

2.3.3 Poverty Reduction Efforts in Indonesia ... 33

2.4 Education and Human Development ... 39

2.4.1 Education ... 39

2.4.2 Human Development ... 42

2.5 Microfinance in Indonesia ... 50

2.5.1 Social Business ... 53

2.6 Education and Microfinance ... 54

CHAPTER THREE RESEARCH METHODOLOGY ... 61

3.1 Qualitative Research Method ... 61

3.2 Multiple Cases Approach ... 63

3.3 Description of (City) Location of the Study ... 66

3.4 Research Guide (Instrument) ... 67

3.4.1 Interview Guide ... 67

3.4.2 Document Analysis Guide (Examining Records) ... 69

3.4.3 Observation Guide ... 70

3.5 Setting of the Study ... 72

3.5.1 Procedure of the Study ... 72

3.5.2 Subject ... 73

3.6 Data Collection Techniques ... 74

3.6.1 Interviews of the Microfinance Trainers and Trainees ... 74

3.6.2 Focus Group Discussion ... 75

3.6.3 Observation: Understand the Changes that Take Place Due to Integration of Education Services in Microfinance ... 75

3.6.4 Study of Documents: To Learn of the untold Documented Cases on Microcredit Education for the Beneficiaries or Clients 76 3.6.5 Audio-visual/Video Analysis: To Tress for the exact words of the Participant or Respondents ... 77

3.7 Data Analysis Procedure ... 78

3.7.1 Analysis in the Field ... 81

3.7.2 Analysis after Data Collection ... 82

3.8 Coding Categories ... 83

3.9 Authenticating and data verification ... 85

3.10Operational Definitions and Questions ... 85

CHAPTER FOUR DATA ANALYSIS, PRESENTATION OF FINDINGS AND DISCUSSION ... 88

4.1 Organization Background ... 89

4.1.2 Background of MiSykat ... 91

4.2 Presentation of Findings ... 93

4.2.1 Existing Education and Microfinance Approach ... 93

4.2.2 How Education and Microfinance Work to Empower the Poor 109

4.2.3 Education and Microfinance as an Approach in the Enhancement of Skills ... 130

4.2.4 Themes that best describe Education and Microfinance Empowerment Approach of MiSykat and BMT Khalifa ... 148

4.3 Discussion of the Findings ... 160

4.4 Resume of the Study ... 167

CHAPTER FIVE CONCLUSION AND RECOMMENDATIONS ... 172

5.1 Conclusions ... 172

5.1.1 The Existing Education and Microfinance Combined Approach 172 5.1.2 How Education and Microfinance works ... 172

5.1.3 Enhancement of Skills of the Poor ... 173

5.1.4 Themes that Emerged ... 174

5.2 Recommendations ... 174

5.2.1 Recommendation to Education and Microfinance Practitioners 174

5.2.2 Recommendation to Researchers ... 175

5.3 Findings of the Study ... 177

5.3.1 The Nature of Baitul Maal Wa Tamwil (BMT) ... 177

5.3.2 The Characteristics of the Clients ... 177

5.3.3 Education and Microfinance Approach ... 177

REFERENCES ... 179

LIST OF TABLES

Table 1.1: Participation in schooling in Bandung in 2007 ... 8

Table 3.1: Interview Research Guideline ... 68

Table 3.2: Document Analysis Instrument (Worksheet) ... 69

Table 3.3: Observation Guide ... 71

Table 3.4: Observation Guide: Specified Question ... 76

Table 3.5: Operational Definitions ... 86

Table 4.1: Illustration of the mentorship Activities ... 128

Table 4.2: Illustrating Practical Budget Developed by BMT Khalifa Clients Practical Knowledge ... 137

Table 4.3: Religious Values, Education, and Microfinance Curriculum ... 141

Table 4.4: Shows the Education Levels to Be Reached Misykat Clients ... 143

Table 4.5: Showing Integration of themes from Observation Data ... 149

LIST OF FIGURES

Figure 1.1: Credit with Education Benefits Process ... 4 Figure 1.2: Conceptual Framework ... 13 Figure 1.3: Elements of Education and Microfinance Cycle ... 14 Figure 1.4: Education and Microfinance Combined Approach Framework:

Summary of Findings of the Researcher’s Preliminary Study ... 16 Figure 2.1: Target Groups of Nonformal Education in Indonesia ... 23 Figure 2.2: Achieving Indonesia’s 7 percent annual growth target will require

labour productivity to grow 60 percent faster than 2000-10 ... 28 Figure 2.3: Poverty Reduction(s) in the Framework of National Development

Plan ... 33 Figure 2.4: Three Clusters in the Poverty Alleviation Program ... 37 Figure 2.5: Illustrates the Government Scheme on Protecting Rice

Consumption, Education, and Health of the Poor Households .... 38 Figure 2.6: Indonesia’s Development Phases for the Period 2005-2025 ... 44 Figure 2.7: Education and Economic Development, (1980–1996) ... 49 Figure 3.1: Map of Bandung Metropolitan Area ... 66 Figure 3.2: A Framework Showing the Process for Data Collection and

Data Analysis ... 80 Figure 4.1: An Illustration of BMT Khalifa’s Financial Management Education

Progamme ... 111 Figure 4.2: Empowerment framework of MiSykat ... 126 Figure 4.3: BMT Khalifa’s Service Delivery Model Based on the Condition 139 Figure 4.4: Shows the Process of Helping Cleints Attain Skills ... 142

LIST OF APPENDICES

Appendix 1 : Letter for Field Observation ... 186

Appendix 2 : Appointment Letter of the Team of Promotors ... 187

Appendix 3 : Letter From Misykat ... 189

Appendix 4 : Operational Guide of the Research ... 190

Appendix 5 : Activity Plan ... 191

Appendix 6 : Interview Transcript One (I) ... 197

Appendix 7 : Interview Transcript Two (II) ... 208

Appendix 8 : Intervew Transcrip Three (III) ... 218

Appendix 9 : Interview Transcrip Four (IV) ... 232

Appendix 10 : Interview Transcript Five (V) ... 237

Appendix 11 : Observation Comments ... 244

Appendix 12 : Document Content Analysis ... 258

Appendix 13 : List of Identified Themes ... 269

Appendix 14 : A List Of The Education/Mentorship Programme of Misykat . 281 Appendix 15 : Activity Photos ... 283

CHAPTER ONE: INTRODUCTION

1.1 Background

To address the problem of poverty, governments the world over massively adopted and implemented the modern microcredit model, while to reduce the number of those leaving school prematurely and in an effort to avoid illiteracy the education for all (EFA) framework became a guide for most of these countries. However, poverty has continued to present itself in multidimensional ways. In developing countries, Indonesia inclusive poverty is caused by many factors which include unemployment. Heryaldi and Yusuf (2013) point out that “among the critical problems in Indonesia is underemployment and low absorption rate of the formal labour market, which absorbs only 60% of the working labour force of the country, where by the earnings are below the normal working hours”.

The situation is reported to have become worse after the economic and monetory crisis of 1997-1998. Several years after the Asian crisis, a majority of Indonesia’s population continues to live in poverty (Indonesia-European Community Strategy Paper, 2007-2013). According to the National Forum Coordination on Education for All (2005) the country’s economy experienced a negative growth and it became sluggish in the next years. 52 % of the population is estimated to be living with less than US$ 2 a day. Achieving Millennium Development Goals (MDGs) required targeting the poorest segments of the population (Indonesia-European Community Strategy Paper, 2007-2013). To eliminate poverty several steps have been taken more so after the start of the reform period. Among such measures is mentorship as a nonincome component in poverty alleviation and capital provision to poor clients.

However, despite the growing recognition of the nonincome dimensions of poverty, most attention tends to be focused on incomes when defining the number of people affected e.g., those living on less than $1 a day (Steele, Oviedo, and McCauley, 2006). In Indonesia after the Period of Reform, a new chapter on how the Government handles poverty (Andrianto, 2006) set in. Evaluation of the prior

centralised approach to poverty alleviation and public consultations with government, universities, NGOs, donor organisations, economic players and poor communities (Andrianto, 2006; Kikis 1999) indicate that “the centralized approach is outdated and that poverty alleviation should be specific to local conditions. Poor communities should no longer be seen as objects of development, but rather participants to the solution”. The grass-root community organizations, religious organizations and also other non-government organizations were established. Some of these organizations have been and continue to offer education with credit Programmes. Among them is Misykat and BMT Khalifa. The present study attempts to examine and describe the education and microfinance integrated approach in poverty alleviation of both MiSykat and BMT Khalifa to help empower the poor in Bandung area.

MiSykat and BMT Khalifa approaches are different from the credit with education model of the Freedom from Hunger. The education and microfinance approach of Misykat and BMT Khalifa is implemented based on religious values of Islam. Islam teaches that “Everyone has a direction to which he turns”. According to Basri (2001), some questions may arise given the above verse. Among such questions are: 1. is the economic field of any role in helping a given community to realize its vision? 2. are the different communities having different visions? 3. can the prevailing differences get reflected in the social approaches to community development?

MiSykat and BMT Khalifa hold the view that Muslims have their own vision. It because of this vision that during several decades ago the Muslim community developed it systems which ranged from the political, social and economic aspects the developments at this time aimed to attain the Islamic vision (Basri, 2001). The Muslim community believed that this vision could only be obtained through education. According Ainain (1978: pg. 147 see: Abdullah in the translated copy by Mutammam, 1991: pg. 36) education in Islam is comprehensive and it is not limited to certain aspects in life, but it is all embracing.

According to a translation of Sunan Abu Dawud by Hassan (Book 9, Number 1637), it is revealed that the prophet Muhammad (peace be upon him) empowered the poor by encouraging them to work. This is reflected in a hadith narrated by Anas ibn Malik (see chapter II of this report). The verse and the hadith imply that every effort must be made to avoid poverty. Everybody is required to work to avoid living a poor’s life and of course a begging mentality. This makes accessing credit crucial in order to enhance entrepreneurship and self-employment throughout every strata of society for both women and men in Indonesia (Mustapha, R. B.; Jung-Kim, J and Zapata). Based on the above verse and hadith, Misykat and BMT Khalifa have integrated Islamic principles in their education and microfinance empowerment approach since they believe that Islam is the solution to the prevailing problems.

The religious component makes the approach different from the credit with education approach which integrates education into a microfinance delivery system as well as integrating impact evaluations and operational learning (MkNelly and McCord, 2002). The components of this combined approach reinforce each other by addressing the informational as well as the economic obstacles (Dunford, 2001). MkNelly and Watson mention that credit with education model is based on the assumption that to address the complexity and scale of malnutrition requires innovative and multi-level efforts (2003). They further point out that Freedom from Hunger’s strategy in the form of an integrated microfinance and education programme called credit with education attempts to respond to challenges. It addresses malnutrition’s principal underlying factor, poverty, while also providing information and problem-solving forum to address the more immediate factors, such as illness and deity quality (MkNelly and Watson, 2003). They also illustrate this argument using a figure. The figure depicts the hypothesized benefit of the credit with education strategy, reflecting both intermediate and ultimate impact goals (MkNelly and Watson, 2003). The figure is as below:

Figure 1.1 Credit with Education Benefits Process

Source: Adapted from Barbara MkNelly and April Watson, October 2003

This figure shows that inputs of credit and education channeled through women’s associations have the potential to produce intermediate benefits, or first-order effects, which include change in knowledge and practice, increased self-confidence and improved income savings (MkNelly and Watson, 2003). The implication of this framework is a proof that education is the best effective tool for human transformation. Through education people work cooperatively and serve each other (UNESCO, 2006), and are also empowered. Thus, the integration of training activities in microfinance services for the empowerment of clients is a proof that in today’s world, the academics, practitioners, and professionals of microfinance have accepted that there is need for a shift in the microfinance sector which need reform in service delivery to the poor people.

Providing education to microfinance clients on topics ranging from marketing to reproductive health is one of the key ways in which microfinance institutions (MFIs) can serve the broader needs of their clients (Capsuto, 2010). Ideally, this implies that a combination of microfinance and other development services (Dunford, 2002) such as education can help to eliminate the multiple sufferings faced by the poor. Using a multiple cases approach, this study examines

Misykat and BMT Khalifa’s education and microfinance approaches in the empowerment of the poor clients. The two cases are just a small sample of Baitul Mal Waatamwil (BMTs). In Indonesia, microcrocredit organisations are divided into different categorises.

According to Possumah and Baharuddin (2012) they refer to Baitul-Mal as one of the financial institutions in Islam. They further refer Baitul Mal Waatamwil as an alternative Shariah financial institution that has a social and productive dimension at both national and even global scale to foster Islamic economic development. In Indonesia, Islamic banking was started in 1992 with the establishment of Bank Muamalat Indonesia (BMI) which served as the first Islamic Bank in the country. The establishment process was supported strongly by the government. There was a community gathering in Bogor, West Java led by President Soeharto to raise the initial capital of the bank (Budi, 2007). Since 1995, Baitul Mal Waatamwil, as an alternative financial institution for the lower income groups of society has developed and grown rapidly (Hamzah, Rusby and Hamzah, 2013). It has been proved by the data taken from Incubation Center of Small Business (PINBUK) on 12 February 1998, that there were around 2000 units of BMTs established in Indonesia, but only 384 units of BMT registered in PINBUK, within a total number of investors being 79,325 people, and a total number who receive financing being 28,430 people, with the total amount of financing being IDR 11 billion (± MYR 31 million) (Hamzah, Rusby and Hamzah, 2013; Adiwarman, 2009).

Zahria (2012) has “established that there were approximately 3900 active BMT by the end of 2010. Total assets under management reached a value of Rp 5 trillion; customers served were around 3.5 million people, and the number of workers was approximately 60,000 people across Indonesia. In 2010, for West Java, it is reported that, according to the development trend, the polarization of economic activities in the region mainly the central region, growth (core areas) grew stronger, while the peripheral regions, called the rural, semi rural, urban and semi urban had a slow growth. It is noted that the disparity between the

rich and the poor widened. The poor areas grew became more poor because of the unequal distribution in development”.

1.2 Problem Identification

Just like the researcher mentions in the background, this research emanates from a prior study which was about the “Post-Literacy Microcredit Social Empowerment Model (PMSE-M)”. Several issues were noted which have been raised in this research since it was the foundation of this Dissertation. In a prior study conducted in Bandung in 2010, it was established that:

1. Indonesia’s literacy programme faced a lot of challenges which included the re-emergence of post-illiterates and the limited facilitation of the programme. This was said to be related to wide spread unemployment and poverty which are still some of the main problems faced by Indonesia more so the West Java Province.

To back-up this point, the August (2009) report on employment, reported that 8.96 million people were unemployed, that is about 7.87 percent, from a working age population of 113.83 million people. And according to the Indonesian Bureau of Statistics report of February 2009, 27.09 percent were graduates of primary education and below, 22.63% were graduates of first class of junior secondary education, 25.29% were graduates of the advanced level secondary education, 15. 37% were graduates of the vocational schools and 9.63% were diploma level and degree level graduates.

And also, a total population of 10% was said to be a population of those who did not get chance to obtain the formal education. The latter was said to be the most disadvantaged group having no hope for the future, hence leading to a total vicious circle of poverty, being the biggest factor for unemployment and of course wide-spread poverty in Indonesia. 2. To be specific, the following were the identified main problems:

 The number of job seekers was bigger than the number of jobs available.

 There was lack of or inappropriate skills in relation to the required competences needed by the job market;

 The high rate of school dropout which continuously contribute to unskilled labour;

 The rate at which people are stopped from work also became high due to lack of proper workers’ policies for both the Government and the Private sector; and

 Also lack of effective literacy programme that combined the cognitive, affective and psychomotor aspects in order to improve the life of the disadvantaged groups including the poor.

Being specific about Bandung city, several problems were identified. When the researcher visited the city council, was referred to the Centre for Statistics (BPS) in Bandung which is located on Suci Street. According to the literature obtained, the following was established:

1. Demographic composition: a survey on the management of BOS in Bandung city of 2010 revealed that Bandung city has a population of 2,329,928 people and according to the 2008/2009 BPS statistic it is categorised in groups of the productive age population which is the ages of 20-24 years old (227,781 people), followed by 25-29 years old group (242,637 people), 30-34 years old group (210,437 people), and 15-19 years old group (207,967 people). This composition is influenced by the quality education in the region, implying that the majority population are the young generation with weak economic muscles. Besides education, the other factors acting as a pool of people to Bandung city is the promising business climate, like the service industry, trade and other promising sectors.

2. The employment rate. BOS management report also mentions that there are majorly three dominating sectors in Bandung city which act basic sectors for emplyoment, namely: trade (37%), service (25%) and manufacturing industry (24%). The absorption rate of the three sectors surpase any other sector. However, on the one hand, it is noted that the

unemployment rate in Bandung stands at 12%, meaning that the 12% needs special attention to prevent economic hardships. Among them include the microfinance clients who are among the vulnerable groups, they are majorly from the very poor families with no special programme for their knowledge and skills improvement.

3. Education: the report also presents data from the national statistics department (BPS) of 2008/2009, showing the the education level of the people of Bandung city. It reports that 528,685 people out of the total population are elementary school (SD) graduates, while 636,224 people are said to be graduates of high school. The table belwo shows the particition rate in schooling in the year 2007.

Table 1.1: Participation in schooling in Bandung in 2007

Education Male Female Number

Not/not yet attended school 2,481 9,278 11,761

Still attend school 213,145 168,240 381,588

No longer attend school 775,099 802,852 1,577,746

Total 990,725 980,370 1,971,095

Source: Bandung Dalam Angka, BPS, 2007; A Report on the Survey of BOS, 2010

From this table, we note that the school going population is 381,588 people, while those not attending school are 1,577,746 people. If compared to the population in school, this group comprised of 25% of the population. This is quite a big population that needs attention and proper programmes including competence or knowledge and

4. Macroeconomic growth of Bandung city in 2008: Still BOS survey report shows that there was significant improvement in the education and health sectors of Bandung City. The revenues are reported to have increased by 20% this implied that the aggregate performance of the economy of Bandung City improved significantly.

Besides, the researcher also established some of the following problems which are of relevance to the study. They included:

1. However, in the same period, it is noted that the microfinance banking sector provided many types of financial services to small and micro customers, which fall generally into the categories of loans/credits of various types and saving facilities (The Asia Foundation, 2002). Yet the microfinance clients rarely have any formal training in business skills (Karlan, and Valdivia, 2009), neither do they have any programme on entrepreneurship knowledge development something that renders them disempowered in the changing business climate.

2. There is increasing competition in the microfinance industry, many of the institutions are struggling to establish new clients or retain existing clients whose needs or expectations have changed. Some of the microfinance institutions have tried to develop new products including the social business approach to the clients. In the process education is part of the service menu for the clients. In Indonesia, small financial providing institutions to the poor have moved away from the credit perspective. They have incorporated education activities in the microfinance programme to empower their clients and ensure efficient service delivery to the clients. The institutions are then categorized as the formal, semi-formal, Informal microfinance institutions and also government programmes.

3. Though education and microfinance is taking root in most of the micro-lending industry, for Indonesia, little is known. In this research I intend to examine the education and microfinance combined approach which for over a decade now have been merged to increase the entrepreneurship knowledge and business skills and productivity of the microcredit clients in Indonesia. Education and easy access to credit services are fundamental elements in the support of the microfinance programs. Education activities on finance greatly enhance microfinance projects by improving the level of understanding of the clients about monetary management, fiscal policies, budget allocation and proper decision making before embarking on any venture. In a study by Karlan and

Valdivia (2009), they found that effects of training on institutional outcomes such as repayment and client retention.

1.3 Problem Statement

Since the microfinance clients comprise of mostly the disadvantaged people in society, the normal existing human resource development system does not cater for their education and learning needs. This is made worse by the fact that though there are many studies which have been conducted about the economic influence, and the impact of the empowerment programme of Misykat and BMT Khalifa, the education and microfinance approach has had little attention by academics, researchers and students alike. Hence, making the existing education activities integrated with micro-lending activities of BMT Khalifa and MiSykat less researched and less promoted, calling for special attention. Based on this, the current study sought to answer the following questions.

1. How is the existing education and microfinance combined approach for the empowerment of the microcredit clients of both Misykat and BMT Khalifa?

2. How does the education and microfinance approach work to empower the poor clients of MiSykat and BMT Khalifa?

3. How does the combined education with microfinance approach support the enhancement of skills of the poor microcredit clients of MiSykat and BMT Khalifa?

4. What are the themes that appropriately describe the education and microfinance combined empowerment approaches of MiSykat and BMT Khalifa in Bandung city?

1.4 Objective of the Study

The purpose of this study was to investigate the “education and microfinance approach used in the empowerment of the poor microcredit clients. The integration of education with microfinance programme is assumed to work as a magic approach in poverty alleviation. This research aims to address the existing gap. The researcher conducted a qualitative study to meet the following objectives:

1. To find out how MiSykat and BMT Khalifa describe there education and microfinance empowerment approach for the poor microcredit clients; 2. To investigate how education and microfinance approach work to

empower the poor clients of MiSykat and BMT Khalifa;

3. To examine how this education integrated with microfinance approach supports the enhancement of entrepreneurship knowledge and business skills of the microcredit clients; and

4. To establish themes which can describe appropriately the condition about education and microfinance empowerment approach for the poor microcredit clients of Misykat and BMT Khalifa.

Currently, there is no research about Indonesia’s education and microfinance approach yet almost most BMT’s are used this similar approach.

The research used a qualitative method with the help of a multiple cases approach to establish and describe the approach in use. The study involved collection of the data, field analysis and immediate desk top analysis and sorting out, compiling of the data and interpretation to extract meaning, and analysis of the data to answer the questions of the study. The field research activities comprised of a review of the literature, preliminary study, trial of questions and redesigning the questions for the final study, gathering data through interviews, observation, recording, use of telephone, coding, and transcription and authenticating the data. The researcher decided to carry out a qualitative research using a multiple cases study method, because currently education integrated with microfinance programmes need a thorough investigation if one is to understand how the approach operates and what might be the existing variables for the future research.

MiSykat and BMT Khalifa were chosen after a protractive qualitative survey. The researcher wanted to investigate those credit organizations which consider their clients than only focusing on their services. In the survey the researchers used both primary sources and secondary data. Grassroot means directly involved (both the local and the organization staff) work together to acquire a similar objective. The grass-root who are the clients want to be

empowered and they are actively involved, while the organization staff are the out-side or in-side members of the community who are genuinely working to empower the grass-root community through education and microfinance.

1.5 Conceptual Framework

A conceptual framework explains, either graphically or in narrative form, the main dimensions to be studied, the key factors, or variables, and presumed relationships among them. Thus, frameworks come in several shapes and sizes. They can be rudimentary or elaborate, theory driven or commonsensical, descriptive or causal (Miles & Huberman, 1984: 28; John W. Creswell, 97). Thus, in this research, the conceptual framework has been designed based on the problems which were identified during the preliminary study and also the theories discovered during the study of the various literature, which in turn has been developed to help in answering the problem of the research. This conceptual framework is therefore expected to act as guide in the identification, planning, development and implementation of the study. In the case of this research, poverty is seen as a big problem which comprises of all evils: it kills, it makes one turn into a dangerous creature, and it leads to powerlessness. Poverty is concentrated mostly in developing countries including Indonesia. It contributes to no education or school dropout and also deaths in some families. Worst of all, it also leads to incompetent human resources and luck of family income(s). This has led to innovations which have led to a shift within the microfinance industry. Nonfinancial services have been introduced. The framework is presented as in figure 1.2 below:

The education and microfinance is an innovation which aims to transform the lives of poor people both economically and in skills and knowledge. The idea emerged from the efforts of the Freedom from Hunger’s initiatives and desire to avert the suffering caused by poverty and hunger more so in the poor communities. The credit with education model developed by Freedom from Hunger takes in consideration nutrition, food security and poverty alleviation.

Organizations in Indonesia have implemented almost a similar approach but in a different perspective. In other words with some modifications to suit the local condition of the country, the Indonesia one, the attempt is to look at a human being as a holistic creature who is only curtailed with the limited knowledge and lack of financial resources and others components like nutritional components and food security are just, but a cause of poverty.

The key elements of the approach are developed focused on changing the poor’s brief that they are born to be poor, strengthening them in faith and being creative in their own way. The aim is to solve the extreme poverty and also instill creativity, confidence, and innovativeness and create awareness among the poor. Both the two credit organizations selected as the cases for this research had several points in common. There activities entailed components illustrated in the figure 1.3 below:

Figure 1.3 Elements of Education and Microfinance Cycle

The figure 1.3 above describes the overview of a cycle of education and microfinance in the two selected credit organizations where the research was conducted, established during a preliminary study. It reflects the activities taking place in these organizations.

Community potential is considered an important element the condition about a given community’s potential is attained through mapping. Mapping is carried out to identify as well as to register the qualifying community member who fulfills the organization’s criteria. Once one has fulfilled the selection criteria, is expected to go through training before is allowed to attain credit and also to continue with receiving the mentorship services. All this is done to create a productive economy where there is change in social status, increased incomes, increased knowledge and skills which in turn are expected to lead to a self-reliant and self-sustaining community or individuals. This implies that each individual must be equipped to seize learning opportunities throughout life, in order to broaden knowledge, skills and attitudes and to adapt to a changing, complex and interdependent world (Delors, 1996). The prime objective is to increase the

Therefore, in this research, the priority is the human being who is the client of microfinance services. Because of the human nature, the microfinance sector which has changed, prioritizing people has become common. Education programmes have entered the system of the industry, since financial needs and people’s changes are expected to suit a given situation and of current, the knowledge economy which looks at “human capital” as a very important aspect, has led to all the possible innovations which can help to strengthen the services of the microfinance industry in helping the poor communities.

The illustration 1.3 below was designed during the Preliminary study. In the preliminary study, it was established that the education activities integrated with microfinance are nonformal education activities. They Include: Training, Mentorship, Life Skills, Entrepreneurship community education, Religious and value education, and Family care, nutrition and health education, while the microfinance services are also carried out to suit the community groups or the target group, among the services include: Credit and loaning scheme for the poor, Savings for the poor and insurance packet for the poor. They education activities were considered nonformal due to the way they are implemented and the principles being used.

The education and microfinance as an approach combines the education with credit programmes which are run concurrently. In this research the approach is then described as a “Combined” approach. The activities in the combined approach include: Increased food security, Nutritional status, Productive economy work, Rotating funds etc, and Family education. The expected end product of the empowerment programme of the education and microfinance is: Productive economy, Self-reliance and self- sustaining, Self-confident, and Improved Household Income. This is illustrated below:

Figure 1.4 Education and Microfinance Combined Approach Framework: Summary of Findings of the Researcher’s Preliminary Study

Training, Mentorship, Life Skills, Entrepreneurship community education, Religious and value education, and Family care, nutrition and health education Nonformal Education Credit and loaning scheme

for the poor, Savings for the

poor, and Insurance packet for the

poor Credit with education model: Increased food security, Nutritional status, Productive economy work, Rotating funds etc, Family education Microfinance

Services NFE & MFS 1. Productive economy 2. Self-reliance and self-sustaining, 3. Self-confident, and 4. Household incomen Outcomes 1 2 ₃ 2 1 4

This empirical education and microfinance figure summarizes the findings during the preliminary study. In this final research, it has been used as one of the basis for the conceptual study. A conceptual framework explains, either graphically or in narrative form, the main dimensions to be studied, the key factors, or variables, and presumed relationships among them. Thus, frameworks come in several shapes and sizes. They can be rudimentary or elaborate, theory driven or commonsensical, descriptive or causal (Miles & Huberman, 1984: 28; John W. Creswell, 97). Thus, in this research, the conceptual framework has been designed based on the problems which were identified during the preliminary study and also the theories discovered during the study of the various literature, which in turn has been developed to help in answering the problem of the research.

1.6 Significance of the Research

The term significance is defined differently, in this research; the term refers to how this research contributes to the field of education and the microfinance

sector. It is to help us understand how important can education practices be in the other fields for this case the microfinance industry. This research will play the following role:

1. In the first place, this research is significant to knowledge improvement. Just like any other research, this study has contributed to my understanding. It has helped to increase my knowledge and probably it will contribute to the knowledge of others: students, researchers, policy makers and practitioners of microfinance and of course education for business or entrepreneurship.

2. Second, this research is to contribute to the practice of education integrated with microfinance services. Because of the changes taking place. Debates have risen on the need to integrated nonfinancial services to the microfinance sector. Education is among the key priorities to the sector. Due to the fact the microfinance industry is changing at a rapid pace hence in need for constructive innovations.

3. Third, this research though not its aim, will also contribute to policy debates. Before policies are implemented, surveys are carried out establish the existing gap and how policies can help fill the existing gap. I therefore hope that this research will also play a significant role in informing debates.

4. Fourth, it will contribute to the educational programme of the microfinance institutions. In the recent decade, researchers and practitioners in the microfinance field have realized that the training and the increment of the business skills of the micro-entrepreneurs is very important. Karlan and Valdivia (2009) point out that attempting to build the human capital of micro-entrepreneurs can improve the livelihood of the microcredit clients and help to further their mission of poverty alleviation. This research has come-up with already existing approaches in Bandung city which are expected to contribute to the knowledge and skills of the microcredit clients.

5. Fifth, it will contribute to research integrating education and microfinance programmes. Helping to facilitate the shift from the social conscious nature to the new product approach in providing services to micro-entrepreneurs. Historically, the promise of poverty alleviation through microcredit was tied primarily to one product: the productive loan invested in a microenterprise, delivered primarily by one type of provider, a microfinance Institution (Ledgerwood, Earne, and Nelson, 2013). Now, education is recognized as key to development and community transformation. This has led to the discussion human capital and human investment. Entrepreneurship education has been recognized and now integrated with microfinance as a knowledge transfer of how, by whom and with what effects, opportunities to create future goods and services (Hindle, 2007; Fayolle, 2010). This therefore implies that the other significance of this research is its contribution to human capital development within the microfinance industry.

6. Sixth, it will contribute to community empowerment. Today, most governments around the world have adopted microfinance as a tool for poverty alleviation and human welfare. However, with the changing nature of the industry, education has become a vital component within the industry. As we might be aware, the self-employed poor rarely have any formal training in business skills (Karlan and Valdivia, 2009). A research of this kind, will obviously contribute to the training of the microfinance clients, to help them cope-up with the rapidly changing world where one to survive, should be prepared to learn to new things, and

7. Lastly, it will also help to contribute to some of the problems faced by the microfinance and the post-literacy programmes in today’s world.

1.7 Scope and Limitation of the Study

This research covers studies related to education and microfinance. However, on the one hand, due to the limited nature of studies integrating education with microfinance programme, the researcher has also looked at

documents related human development, education rate of return, human investment, human capital and financial literacy and the microfinance industry in general.

The Study is limited to studies of 2001 to the present. The studies include: The new microfinance hand book by Ledgerwood, Earne and Nelson (2013), Teaching entrepreneurship and impact of business training on microfinance clients and institutions by Karlan and Valdivia (2009), A model for microfinance-supported education programs by Khumawala at the University of Houston (2009), Business training for Microfinance clients: How it matters and for whom by Frisancho, Karlan, and Valdivia (2008) and many others raging between 2001 to the present time.

The geographical location of the research was Bandung city. The researcher purposively selected two BMTs, namely: BMT Khalifa and Darut Tahuhiid BMT programme of Misyikat. These institutions were chosen because they are those few institutions integrating education with microfinance in their programmes for community empowerment and they are among the organizations which during the preliminary survey showed the readiness to help the researcher gain access to their education and microfinance programme. Besides they have also been in existence for an average period of 5 years and the most important point is that they have involved community members’ right from the start. Because one of the researcher’s previous researches was about the “Role of Community Participation in the Development of Nonformal Education Programmes through Community Learning Centres”, it was more beneficial to take cases of the organizations which focus much on the client rather than the services they offer.

Though MiSykat and BMT Khalifa are not the only microfinance organizations offering their services in combination (of education and microfinance) to the clients, in the preliminary survey, the researcher discovered that spirit to serve the community was stronger compared to other microfinance institutions in Bandung Area. And lastly, their humble beginning made researcher to carry a more advanced study on their programme.

According to the prior study, it was found out that BMT Khalifa was established due the community needs. One of the reasons was poverty and low level of education of the community around the present BMT Khalifa offices. Darut Tahuhiid also started its services for the poor to help those who had problems with mobile banks or (Bank Keliling).

In this research the researcher seeks to investigate the education and microfinance approach in the empowerment of the microcredit clients in the two organizations of MiSykat and BMT Khalifa. The researcher wants to know whether education and microfinance empowers the poor and whether it helps them to improve the entrepreneurship knowledge and business skills.

1.8 Research Organization Structure

This report is organized of five chapters (5). Each chapter is summarized as below:

I. CHAPTER ONE: INTRODUCTION: This chapter is comprised of the background, Problem Identification, Problem Statement, Objective of the Study, Conceptual Framework, Significance of the Research, Scope and Limitation of the Study and Research Organization Structure.

II. CHAPTER TWO LITERATURE REVIEW: While chapter two (2) leads us to the literature review try to shape the research and give it fresh in relation to concepts and theories about the Economy and Poverty in Indonesia, Nonformal Education as an Empowering Process, Islamic Concept, Education and Human Development , Microfinance, and Education and Microfinance.

III. CHAPTER THREE RESEARCH METHODOLOGY: Chapter three (3) presents the research methodology employed in the study, Qualitative Research Method, Multiple Cases Approach, Description of (City) Location of the Study, Research Guide (Instrument), Data Collection Techniques, Data Analysis Procedure, Coding Categories and Authenticating and data verification.

IV. CHAPTER FOUR: DATA ANALYSIS, PRESENTATION OF FINDINGS AND DISCUSSION: chapter four (4) is about the data

analysis, presentation of findings and discussion. It consists of Organization Background, Background of Misykat, Background of BMT Khalifa, Presentation of Findings and Discussion of the Findings.

V. CHAPTER FIVE CONCLUSION AND RECOMMENDATIONS: chapter five (5) leads us to the conclusion and recommendation of the research and also the major findings of the study.

CHAPTER THREE:

RESEARCH METHODOLOGY

The purpose of this study was to examine and describe the education and microfinance approach used in the empowerment of the poor microcredit clients of Misykat and BMT Khalifa in Bandung city. A multiple cases approach was used. This approach is used to examine several cases ranging from two to as many as possible (Creswell, 2008) cases. With this approach, the researcher scouted for possible places and people (Bogdan and Biklen, 1982) that were considered as subjects of the study. In this chapter, the following sections are described: (1) qualitative research method, (2) multiple cases approach, 3) location and subject of the study, (4) research guide (instruments), (5) setting of the study, (6) data collection techniques, (7) data analysis procedure, (8) coding categories, and (9) authenticating and data verification. This research was conducted to answer the questions:

1. How is the existing education and microfinance combined approach for the empowerment of the microcredit clients of Misykat and BMT Khalifa?

2. How does the education and microfinance approach work to empower the poor clients of MiSykat and BMT Khalifa?

3. How does the combined education with microfinance approach support the enhancement of skills of the poor microcredit clients of MiSykat and BMT Khalifa?

4. What are the themes that appropriately describe the education and microfinance combined empowerment approaches of MiSykat and BMT Khalifa in Bandung city?

3.1 Qualitative Research Method

Gay, Mill and Airasian (2006) refer to qualitative research as that kind of research where there is collection, analysis and interpretation of comprehensive narrative and visual data in order to gain insights into a particular phenomenon of interest. According to Rallis and Rossman (2003), qualitative research is a broad

approach to the study of social phenomena where the researchers are oriented towards the natural world. Qualitative research often involves the simultaneous collection of a wealth of narrative and visual data over an extended period of time and as much as possible, data collections occurs in a naturalistic setting ( Gay, Mill and Airasian, 2006).

One of the main characteristics of a qualitative research is its focus on the intensive study of specific instances that is cases, of phenomenon (Gall, Gall and Borg, 2003). The purposes of qualitative research are broad in scope and centre around promoting a deep and holistic or complex understanding of a particular phenomenon (Gay, Mill and Airasian, 2006). In this research, the researcher used a qualitative multiple cases method.

The researcher decided to use qualitative method because of the case of research which is education and microfinance. This area of study is still new moreso for the case of Indonesia. Therefore it is limited in concept, theory and variables. Because the education and microfinance is limited in theory, concept and variables, it requires a thorough examination or investigation to contribute to theoretical writings (Burgess, 1985) of the field. The method helped the researcher to examine the education and microfinance combined approach by observation of the clients, and focal persons of MiSykat and BMT Khalifa, situations and events (Burgess, 1985) under which they operate and they way they define and implement their programmes for client empowerment.

In the study, some of the attributes below were observable to some extent:  The focus was on programme implementation but the discussions were

some how focused on the social, cultural and historical framework (Burgess, 1985) of the organizations and their clients.

 The researcher moved to the field with a limited number of questions to orient a study (Burgess, 1985), more of the questions evolved during the researcher‟s mingling with subjects to the study.

 The research involved close, detailed intensive (Burgess, 1985) field studies. The researcher actively participated in the data collection process

through observation, interviews, audio-visual recording and the study of documents.

The qualitative method was used to critically investigate the approach being used. The intention was to establish necessary concepts and to establish themes that describe the subjects of the study.

3.2 Multiple Cases Approach

A multiple cases approach was used. This approach is at times called a collective case study (Creswell, 2008; Stake, 1995). In this study, two cases were examined. Therefore, this research comprised of two case studies which were purposively chosen. The cases of the study were BMT Khalifa and MiSykat community empowerment programme of Dompet Peduli Ummah- Darut Tahuhiid (DPU DT) in Bandung city.

BMT Khalifa: is a community based sharia microfinance institution founded in 2007. It is dedicated to serving and assisting the grass-root communities. It started as a Non-government organization which served as a mosque help group in Kebon Gedang and one of its activities was to provide and distribute subsidized cooking oil and rice. With time, and in relation to a decree by the college of scholars of Indonesia (Majelis Ulammah Indonesia-MUI) forbidding conventional banking transactions which they said had elements of riba, community members volunteered to establish an Islamic Finance Unit, which was eventually named Sharia microfinance Institution (now BMT Khalifa). This cooperative started to operate on 6th June, 2006 after the establishment of a management structure. According to Teh‟ Nurul, the fundamental principle of BMT Khalifa is being conscious of the creator. The goal is to collect and channel funds to its registered members and the grass-root communities who are in need of improving their economic life.

BMT Khalifa offices are within Bandung city, the capital of the West Java Province on Jl. Kebon Gedang, Number 80, Bonanza, Batununggal Bandung 40274. The following are objectives of BMT Khalifa:

 To develop the people‟s potential such that they are able to participate and take part in strengthening the national economy.

 To pioneer economic empowerment of the grass-root communities and minimize unemployment rate.

 To participate and help eradicate poverty through BMT Khalifa‟s poverty alleviation programme.

 To create the source for financing and provision of capital to small scale medium businesses (micro-businesses of the poor).

 To nurture an attitude and culture of saving through motivation and sensitization on the importance of saving.

 To strengthen the bond of brotherhood through networking of the clients. Microfinance Syariah Berbasis Masyarakat: which is shortened as MiSykat is translated to English as “Community Based Sharia Microfinance”. It is an

empowerment programme for the poor. This programme categorises the poor in two groups: the poor people (they own some property but they cannot fulfill most of their basic needs), and the extremely poor (this group of people hardly owns anything except life). It depends on social assistance programme for survive.

Besides being known as a programme, it is also an empowerment Wing of the Dompet Peduli Ummat Daarut Tauhiid (DPU DT) which is a nonprofit organization owned by people engaged in the collection (fundrising) and utilization of zakat (Alms, and Charity) as well as other funds which are halal and legal from individuals, groups, companies or institutions.

MiSykat was established on 16th June, 1999 by KH. Abdullah Gymnastiar (Aa Gym) as part of Daarut LAZ Tauhiid foundation. DPU DT Amil Zakat was confirmed as a Regional zakat collection body by the then Governor of the West Java Province on 19th August, 2002 by decree No: 451.12/Kep. 846 - YANSOS/2002. The basis for establishing MiSykat‟s education and microfinance approach was the fact that Zakat (Islamic alms giving) did not benefit the poor, since the money provided is just used for consumption and it cannot be accounted for. Therefore, MiSykat was established entailing educational activities to support the microfinance-credits to help empower and improve communities through the Zakat funds. MiSykat also established Adzkia Islamic School, plus a training Baby Sitter programme.

Dompet Peduli Ummat Darut Tauhiid which is the mother organization of MiSykat is found at Gedung Pemberdayaan Ummat on Jl. Gegerkalong Girang street No. 32 in Bandung city. More of the information can be found on Website: www.dpu-online.com or contact E-mail: info @ dpu-online.com. The mission of MiSykat:

 The general objective of MiSykat is to empower the poor communities and support self-reliance.

 The specific objective is to lead those unable to a level of being able, through mentorship process until they attain a level of self-reliance.

These objectives are to be achieved by: promoting self-reliance through credit and saving programme integrated with education for human development.

According Bogdan and Biklen (1982), the start of the study is the wide end: the researchers scout for possible places and people that might be the subject or the source of data, find the location they think they want to study and then cast a net widely trying to judge the feasibility of the site or the source (Bogdan and Biklen, 1982). In this research, the researcher investigated and examined purposively these selected credit institutions.

The researcher wanted to discover how these institutions have implemented a combined approach of education and microfinance in the empowerment of the poor microcredit clients. However, this does not make the study representative of what is taking place in the broader microfinance industry of Indonesia, since a few cases have been involved. They are only to help provide a rough picture of what is going on in the microfinance sector which have integrate nonfinancial services such as education with credit services within the Indonesian context.

According to Creswell (2008), the purpose of the research is a statement that advances the overall direction or focus for the study. Researchers describe the purpose of a study in one or more succinctly formed sentences. It is used both in quantitative and qualitative research and is typically found in the “statement of the problem”.

3.3 Description of (City) Location for the Study

A multiple cases method was used. The research comprised of two case studies which were purposively chosen. They were chosen based on the research focus. The research examined education and microfinance as a combined empowerment approach for the poor microcredit clients of MiSykat and BMT Khalifa. These two organizations are both located in Bandung city, found in the West Java Province in Indonesia. Bandung is the provincial capital of the West Java Province and Indonesia‟s third largest city. Situated on a plateau in the beautiful Parahyangan Mountains, Bandung's pleasant climate and lush surroundings have offered an escape from the heat of the lowlands since the mid 19th century when it was the heart of the region's most prosperous plantation area. (http://www.fnetravel.com/travel_info/english/). The figure 3.1 below is a map of Bandung Metropolitan Area:

Figure 3.1 Map of Bandung Metropolitan Area

Source: Adapted from City Development Planning Board (Bappeda Kota Bandung), Oct 2006

The research focused on the study on the education and microfinance as an approach used in poverty alleviation and empowerment for the poor microfinance clients by MiSykat and BMT Khalifa in Bandung city. However, since there are no specific maps on the location of the cases of research, the researcher presents the map of the metropolitan area of Bandung city as seen above. The research was carried out to examine a combination of education and microfinance as a new empowerment approach for the poor clients of the sharia microfinance institutions in Indonesia, only with a purposively selected sample in Bandung city.

3.4 Research Guide (Instrument)

The data collection process consisted of in-depth interviews, study of documents (both print and electronic), audio-tapes analysis, and observations conducted in the two institutions mentioned. This research helped to gain a deeper understanding of the topic and the problem of the study. The researcher visited the field for about 15 times until the required information was obtained. The research was about education and microfinance but the researcher did not intend to study the clients neither did the researcher aim to study the staff nor managers of microfinance service programmes, but the approach itself.

Thus there were instruments used to collect the data. A research instrument is a tool used to collect data by the researcher. All kinds of research have research instruments. In qualitative research, the researcher uses observation research instruments, interview research instruments and among others. According to Fraenkel and Wallen (2007), research instruments can be classified in many ways. Some of the more common are in terms of who provides the data, the method of data collection, who collects the data, what kind of response they require from the subjects (Fraenkel & Wallen, 2007). In this research the instruments used included: observation forms, and interview guide, and document analysis, below is an elaboration on each of the instrument used.

3.4.1 Interview Guide

Interview is a qualitative research technique that involves conducting intensive individual interviews (Neale & Boyce, 2006). The interview instrument is most appropriate for asking questions that cannot effectively be structured into

multiple-choice format. In contrast to the questionnaire, the interview is flexible; the interviewer can adapt the questions to fit each participant (Gay, Mills & Airasian, 2006). One of the principles of the interview instrument is that it helps the interviewer monitor the pace and direction of the social interaction as well as the content of answers and behaviour of the respondents and the interviewer does not show shock, surprise, or disdain but treats the answer in a matter-of-fact manner (Neuman, 2003). The table 3.1 below illustrates an interview instrument guide:

Table 3.1: Interview Research Guideline Introduction Key

Components:

1. Introduction of the researcher

2. Purpose of the interview 3. Duration of the

Study 4. Process of

conducting the Interview 5. Presentation of

sample questions 6. Word of thanks

Dear Manager,

It is Juma Abdu Wamaungo, a student at the Indonesia University of Education (Universitas Pendidikan Indonesia). I have come with the intention to carry out research in your organization. I will recommended by the team of promoters for the dissertation. They told your organization offers credit services integrated with education and since this is inline with the focus of my research, I request for your permission to allow me observe, interview and access documents of your organization.

However, in the beginning, I will carry out interviews with the focal person in your organization and focus group discussion with a small group among some of you clients. It will be conducted in 6 meetings, and each meeting will last for 30minutes.I hope I don‟t interrupt your schedule and that of your clients.

I will be grateful if given chance to learn from your organization activities. I look forward for your favour.

Best Regards

Juma Abdu Wamaungo

Universitas pendidikan Indonesia

Jl. Dr. Setiabudhi No.229 Bandung Indonesia Questions comprised

of Issues concerning the themes:

Empowerment Education Credit for social purpose

Credit for the poor Religious values in credit services Sustainability and people productivity

Before I came to the field the question I asked were: 1. How does Misykat empower its clients?

2. Are there any existing education activities in the credit and empowerment programme for the poor?

3. How is the existing education programme? 4. How is it integrated with credit services?

5. How does education and microfinance promote client empowerment?

6. How does the approach contribute to the knowledge and skills f the clients

7. What kind of empowerment has the programme brought to the life of clients?

8. How is the management of the education integrated with credit programme?

9. Is the financial help to the poor with interest or interest free?

10. Are there challenges in implementing education with credit?

11. How have managed to overcome such challenges

12. In what way do you work with other partners to serve the poor?

13. Is there any existing education model for the poor? 14. How do ensure sustainability of the programme for the

poor.

15. Are there any outcomes registered by Misykat? 3.4.2 Document Analysis Guide (Examining Records)

Qualitative research involves a number of different data collection strategies (Gay, Mills & Airasian, 2006). This includes analysis of documents. Various types of records were analyzed. The instrument used to examine the documents was document analysis instrument. Documents or records are used to provide the researcher with valuable (Gay, Mills and Airasian, 2006) information.

According to Gay, Mills and Airasian (2006), there are various types of records or documents, including archival documents, journals, maps, videotapes, audiotapes and artifacts. For the case of this research, the researcher used the organization documents. These documents were provided by the focal persons in the two organizations. Besides, the researcher also used other documents like researches which of the previous had been conducted on the condition of the two organizations and with current developments in information, technology and communication (ICT), the researcher also used the organization websites to dig for more data. The table 3.2 below illustrates Document analysis instrument:

Table 3.2: Document Analysis Instrument (Worksheet)

1. Type of documents analyzed:  Activity photo documents

 Audiotape/ audio-video documents

 Organization reports

 Organization activity documents

 Organization Website notes

 Organization profile and also

 Research reports about the programme of th organizations

2. Time of obtaining the documents:

These documents were obtained through on-going process, right from January 2013 until the last time of this research which is July/August, 2013.

3. Author of the documents:

Activity photos - field team of the organization

Audiotape/Audio-video- field team of the organization and the researcher Organization report- organization experts

Research report authors:

4. Audience of the document:

Most of these documents were written for the clients and some for the public and some to the academics and others to the organizations themselves.

5. Document information:

a. List important pieces of information presented in the document.

__________________________________________________________ __________________________________________________________ __________________________________________________________ b. Why was the document written?

__________________________________________________________ __________________________________________________________ c. What evidence in the document helps you to determine why it was written?

Quote from the document.

__________________________________________________________ __________________________________________________________ __________________________________________________________ d. What historical event(s) does this document refer or pertain to?

__________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ e. Write a question to the author that is left unanswered by the document.

__________________________________________________________ __________________________________________________________ __________________________________________________________

Source: Adapted from one designed and developed the National Archives, Washington, D.C. The Huntington (http://www.google.com/)

The table above though adapted from another sources, it was used as a guide during this research to obtain the document notes. The researcher adapted this from Huntington School Programme working sheet which is got from Google source.

3.4.3 Observation Guide

According to Neuman (2003), a great deal of what researchers do in a field is to pay attention, watch, and listen carefully. In observing, qualitative researchers obtain information by simply watching the participants. The emphasis during observation is on understanding the natural environment as lived by participants, without altering or manipulating it (Gay, Mills & Airasian, 2006). This tool as a research technique was used to obtain data that could not easily be

Working Paper: Microfinance In Indonesia: An Assessment Of Microfinance Institutions Banking With The Poor.

Bulletin, Journal, and Reviews

Buiya A. et al. (2007). A Multidimensional Approach to Measure Poverty in Rural Bangladesh, Journal of Health, Population and Nutrition, Vol. 25(2): pg. 134-145.

Copestake, J., Sonia B, and Susan J. (2001). Assessing the impact of microcredit: A Zambian case study, The Journal of Development Studies 37, pp. 81-100.

Cull, R., Demirgüç-Kunt, A. and Murdoh, J. (2009). Microfinance Meets the Market. Journal of Economic Perspectives. 23(1), pp. 167-92.

Elias S and Noone C. (2011). The Growth and Development of the Indonesian Economy: Reserve Bank of Australia, Bulletin/December Quarter, 2011. Hamzah, Rusby Z, and Zulfadli Hamzah Z. (2013). Analysis of Baitul Maal Wat

Tamwil (BMT) Operation in Pekanbaru Indonesia Using Analytical Network Process (ANP) Approach, International Journal of Academic Research in Business and Social Sciences August 2013, Vol. 3, No. 8 James C. Brau and Gary M. Woller. (2004). Microfinance: A Comprehensive

Review of the Existing Literature. Journal of Entrepreneurial Finance and Business Ventures, Vol. 9, Issue 1, 2004, pp. 1-26.

Karlan, D and Valdivia M. (2011). Teaching Entrepreneurship: Impact of Business Training in Microfinance Client Institutions. The Review of Economics and Statistics, May 2011, 93 (2), pp. 501-527.

Kuroda N and Yoshida K. (2006). Professional Human Resource Development Project (II): Field Survey, September 2006: Hiroshima University

Lipton M, Haan de A, and Yaqub S. (1997). Credit and employment for the poor. Politica Internazionale 5(Sep–Oct), pp. 153–166.

Mknelly, B., Watson, A. (2003). Credit with Education Impact Review No. 3: Ch l e ’s Nu l S us

Morduch, J. (1999) Microfinance promise, Journal of Economic Literature.Vol. XXXVII (December 1999), pp. 1569–1614.

Possumah B. T and Baharuddin G. (2012). Governing Baitul Mal towards 2020; Issues and Challenges: Indonesia Experiences, International Journal of Business and Management Tomorrow Vol. 2 No. 10.

Seibel, et al., Journal of National Policy and Strategy for Microfinance Development

Wilson, K. et al. (2001). Volume 3: Journal of Microfinance, Utah, Marriott School at Brigham Young University.

Books

Ahmed, M, and Combs, P. H. (1971). Attacking Rural Poverty: How the Non-formal Education Can Help. Baltimore: John Hopkins University Press. Alvin, T. (1970). The Future Shock.

Augsburg, B. et al (2012) Microfinance, Poverty and Education Yale, Institute of Fiscal Studies.

Basri I. A. (2001). Masa Depan Imu Ekonomi: Sebuah Tinjauan Islam. Jakarkata: GEMA INSANI PRESS bekerjasama dengan TAZKIA CENDEKIA, Terjemahan dari The Future of Economics: An Islamic Perspective by Chapra U. (2000). UK: Islamic Foundation

Becker, G. S. (1964). Human Capital. New York: Columbia University Press. Bogdan, B. and Biklen, S. (1982). Qualitative Research for Education: An

Introduction to Theory and Methods, London, Allyn and Bacon Inc.

Bolnick B. et al. (2008). Indonesia Economic Performance Assessment: Nathan Associates Inc. for review by the United States Agency for International Development.

Boyle G. P. (1981). Planning Better Programs. United States of America: McGraw-Hill Book Company.

Brouwer A. W, and Dijkema D. (2002). Microfinance Dilemma: The Case of Bandung, Indonesia. The Netherlands: Universiteitsdrukkerij Rijksuniversiteit Groningen.

Burgess R. G. (1985). Issues in Educational Research: Qualitative Methods. Great Britain: Taylor & Francis (Printers) Ltd, Basingstoke.

Cahyana A. (2010). Education Development in Indonesia. Jakarta: Widya Aksara Press.

Chakravarti, A. (2005). Aid, Institutions and Development New Approaches to Growth, Governance and Poverty.

Chebair, E.R. (2005). Practical Skills for Microentrepreneurs: ’s Experiences with Its ABCs of Business Training Program, Boston, Insight ACCION.

Creswell, J. (2008). Educational Research: Planning, conducting, and Evaluating Quantitative and Qualitative Research Third Edition. New Jersey: Pearson Merrill Prentice Hall.

Darkenwald G. G, and Merriam B. S. (1982). Adult Education: Foundations of Practice. United States of America: Harper & Row, Publishers, Inc.

Fraenkel, J., and Wallen, N. (2006), How to design and evaluate research in education, Sixth Edition, New York, McGraw Hill.

Freire, P. (1993). A Critical Encounter. USA and Canada: Published by Routledge.

Gay L., Mills G., and Airasian, (2006), Educational Research, New Jersey, Pearson Merrill Prentice Hall.

Garrick J. (1998). Informal Learning in the Workplace: Unmasking Human Resource Development: Routledge.

Ginzberg E. (1971). Manpower for Development: Perspectives on Five Continents. New York, U.S.A: Pragaer Publishers, Inc.

Hulme, D., Arun, T., (2009) Microfinance: A Reader. New York: Routledge Johnson, S and Rogaly B. (1997). Microfinance and Poverty Reduction. Oxfam

Development Guidelines, Oxford, UK.

Kindervatter S. (1979). Nonformal Education as an Empowering Process. Center for International Education, Amherst, MA.

Kiyosaki, and Lechter. (2002). Prophecy: Why the Biggest Stock Market Crash in History Is Still Coming and How You Can Prepare Yourself and Profit from It. New York: Warner Books in association with Cashflow Technologies, Inc.

Khan, S. (2012) Topic Guide On Empowerment and Accountability. Birmingham: University of Birmingham, UK.

Knowles S. M, Holton III F. E and Swanson A. R. (2005). The Adult Learner, Six Edith: The Definitive Classic in Adult Education and Human Resource Development. United States of America: Elsevier Inc.

Kowalski T. J. (1988). The Organization and Planning of Adult Education. United States of America: State University of New York Press, Albany.

Maier, I., M. (2006). Microfinance Investment Funds: Leveraging Private Capital for Economic Growth and Poverty Reduction, Berlin, Springer Berlin Heldeberg.n a

Maringe F and Gibbs P. (2009). Marketing Higher Education Theory and Practice: Open University Press.

Maritain J. (1971). Education at the Crossroads. United States of America: Yale University Press. Inc.

Mutammam. (1991). Landasan dan Tujuan Pendidikan Menurut Al-Quran Serta Implementasinya. Bandung: cv. Diponegoro, terjemahan dari Education Theory, A Quranic Outlook by Abdullah (1982).

Neuman, L. (2003), Social Research Methods: Qualitative and Quantitative Approches, Fifth Edition, New York, Pearson Education.

N ble Qu ’ (E l sh) Su h: 2, Ayah: 148. Downloaded from http://www.noblequran.com/translation/surah7.html

Nyssens M. (2006). Social Enterprise: At the Crossroads of Market, Public policies and Civil Society. London and New York: Routledge.

Ohanyan, A., (2008). N.G.Os, I.G.Os, and the Network Mechanisms of Post-Conflict Global Governance in Microfinance. New York: Palgrave Macmillan.

Paterson R.W.K. (2010). Values, Education and the Adult. London: Routledge. Robinson, M., S. (2002). Volume 2: The Microfinance Revolution: Lessons from

Indonesia. Washington, IBRD, USA.

Steele P, Oviedo G, and McCauley D. (2006). Poverty, Health, and Ecosystems: Experience from Asia. Manila, Philippines: IUCN, Gland, Switzerland and Cambridge, UK in collaboration with ADB.

Schuller, T., Preston, J. (2004). The Benefits of Learning the Impact Of Education On Health, Family Life And Social Capital. London, Macmillan Publishers Smeaton, D., Hudson, M., Deraniyagala, S. (2011). Impact Of Big Funding Of Community Enterprise Overseas. Policy Studies Institute and School of Oriental and African Studies.

Social Enterprise Alliance. (2010). Succeeding at Social Enterprise: Hard-Won Lessons for Nonprofit and Social Enterprises. United States of America: Jossey-Bass.

Sundaresan, S. (2008). Microfinance: Emerging Trends and Challenges. Chetterham, Edward Edgar Publishing Limited

Suryahadi, A., et al. (2012). Accelerating Poverty and Vulnerability Reduction: Trends, Opportunities and Constrains.

Veugelers W. (2011). Education and Humanism: Linking Autonomy and Humanity. The Netherlands: Sense Publishers.

Watkins, T. A. and Hicks, K. (2009). Moving Beyond Storytelling: Emerging Research in Microfinance. Bingley: Emerald Group Publishing Limited. White John. (2010). International Library of the Philosophy of Education: The

Aims of Education Restated: Taylor and Francis e-Library.

Wilson P. John. (1999). Human Resource Development Learning for individuals and organizations. London: Kogan Page Limited.

White John. (2010). International Library of the Philosophy of Education: The Aims of Education Restated: Taylor and Francis e-Library.

Yunus M. (2007). Creating a World Without Poverty: Social Business and the Future of Capitalism. The United States: Public Affairs.

Websites

Aguinis H and Kraiger K. (2009). Benefits of Training and Development for Individuals and Teams, Organizations, and Society, Annu. Rev. Psychol. 2009.60:451-474. Downloaded from www.education.gov.uk/publications, 23/11/2013, also retrieved from www.annualreviews.org by Rice University

Asia Foundation. (2002). Microfi nance Services in Indonesia: A Survey of Institutions in 6 Provinces.

Augsburg B, et al. (2012). Microfinance, Poverty and Education: Retrieved from

www.ifs.org.uk/wps/wp1215.pdf.

Babri, M and vom Dorp, M. (2009). The Commercialization Debate: A Contextual Study of Microfinance in India. Umeå University, Master

Thesis. Retrieved from

www.diva-portal.org/smash/get/diva2:310921/FULLTEXT01.pdf.

Becker G.S. (1975). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, 2nd ed. Retrieved from (www.nber.org/chapters/c3733.pdf) on 12/20/11.

Budi U. I. (2007). Baitul Qirad: reconstructing Islamic cooperatives in Aceh, Indonesia. Retrived from http:///ideas.repec.org/p/zbw/uocaef/20076.html", University of Cologne, Development Research Center [Monday, January 2, 2014].

Capsuto T. (2010). Microfinance and Education. Downloaded from

http://fellowsblog.kiva.org/fellowsblog/2010/09/11/ [Monday, December

30, 2013].

Guzman D. (2006). Financially Viable Training for Microentrepreneurs: The Business Model of ACCION ABCs of Business, Insight, Number 20. Retrieved from www.microfinancegateway.org, [23/11/2013]

Halonen, President of Finland, and Mkapa, President of Tanzania. (2004). The report of the independent World Commission on the Social Dimension of Globalization; A Fair Globalization: Creating Opportunities for All. Retrieved from www.ilo.org/wcmsp5/groups/.

Hassan A. (Book 9, Number 1637). Sunan Abu Dawud: English Tanslation with Explanatory Notes. Retrieved from www.teachislam.com/.

Karnani A. (2006). Fortune at the Bottom of the Pyramid: A Mirage How the private sector can help alleviate poverty. University of Michigan: Retrieved from deepblue.lib.umich.edu/bitstream/2027.42/.../5/1035-Karnani_OLD.pdf.

Karang, D. A. (2013). Indonesia Leadership in Post-2015 Agenda. Jakarta Post, March 27, 2013: (www.thejakartapost.com).

Kasat P. (2010). Innovative Approaches to Developmental Microfinance in India: A project submitted in Partial Fulfillment of the requirements For the Degree of Masters of Business Administration at the Faculty of Management Studies, University of Delhi. Retrieved from

http://mpra.ub.uni-muenchen.de/22238/.

Morelli E, et al (2010). Microinsurance: An Innovative Tool for Risk and Disaster Management. Switzerland: The Global Risk Forum GRF Davos. Retrieved from www.microinsurancecentre.org/.

Morduch, J., Wagner, R. (2002). Analysis of the Effects of Microfinance on Poverty Reduction. Retrieved from www.microfinancegateway.org, [28 December 2013].

Sebstad J., Cohen M., and Stack K. (2006). Assessing the Outcomes of Financial Education: Working Paper #3. Washington, D.C. Retrieved from microfinanceopportunities.org/

SEEP Network. (2006). Preliminary Research, Microfinance and Non-Financial Services for Very Poor People: Digging Deeper to Find Keys to Success. Downloaded from p31.itcilo.org e e s e es e u s le .

SMERU. (2010). Research Report: Review of Government’s Poverty Reduction Strategies, Policies, and Programs in Indonesia, organized by Asep et al, Downloaded from www.smeru.or.id/report/research/.

UNEP. (2006). This summary document provides an overview and introduction to the structure and activities of UNEP FI - through its working groups and task forces, and highlights key meetings and publications from 2006. Downloaded from http://www.unepfi.org/publications/about_unepfi/. Zuhria A. (2012). Baitul Mal Wa Tamwil Development in Indonesia. Downloaded