Update from the Field
May 27, 2009
Akbaroedin Arif and Nick Taranto
Neighborhood Endowment Fund (NEF)
Neighborhood 01 sub Village Birit Lor, Village Birit
One of the Real Medicine Foundation’s sponsored Neighborhood Endowment Fund (NEF) villages is Birit Lor. Founded on July 15th 2008, the aim of the NEF is to stimulate economic recovery in the wake of an earthquake that wracked Klaten City and surrounding areas in June 2006. In this neighborhood, all members are women. Each member pays an initial membership fee of Rp.5000 ($US .50) and a monthly fee of $US ten cents. Officers in this NEF are: Mrs. Tatik as chairwoman, Mrs Budi as vice chairwoman, Mrs. Lina as secretary, Mrs. Tri Rahayu as treasurer, and Mrs. Suparni as debt collector. The first endowment in Birit Lor was received from the Real Medicine Foundation. Through the RMF’s initial grant and continued membership fees, this NEF, like the dozens of others that exist near Klaten, is now self-sustaining.
The members meet regularly the fifteenth of every month. Each member can borrow money from the NEF. Each member must pay back his or her loan in 5 installments (usually over a 5 month period). Members pay interest at 2% each month, collected up-front. This means that borrowers receive 90% of their loan, enabling interest-free use of their funds for the life of their loan.
Management of the NEF in Birit is robust and dependable. Book keeping is accurate, all financial information is on record, every month all members attend routine meetings, monthly saving is steadily increasing, new members are consistently being brought into the fold, and all money is re-distributed as loans. The demand for loans is very high in this NEF, while repayment rates have stayed around 95%.
Like many other neighborhoods that run NEFs, Birit committed not to distribute collected membership and monthly savings fees as dividends. Expecting more rapid increases in NEF capital stock, members voted not to distribute interest. After half a year, NEF capital stock already increased 40%, allowing for dozens of additional loans.
Mrs. Suwarni, Small Seller, borrower in NEF Birit Lor, Klaten
One member and borrower in NEF Birit Lor is Mrs. Suwarni. Mrs. Suwarni was one of the 200,000 people whose home was destroyed during the earthquake in 2006. She lives with her husband and two kids. Her husband, formerly an employee of the local railway line, is currently on his pension. The Suwarni family’s cash flows are dependent on Mrs. Suwarni’s efforts. She sells snacks and ice from her house to neighborhood children, who congregate on her stoop as a local hangout spot. Before NEF was founded in her neighborhood, she sold very rudimentary snacks. When KOMPIP and the Real Medicine Foundation founded the NEF, she borrowed Rp.300.000 ($US30) and used the loan to diversify her selling.
Before, Mrs. Suwarni’s income was Rp.10.000,-/US$1 per day. But now, her income from selling is about Rp.20.000 to Rp30.000 ($US2 to 3) per day. Though her income is considered very small, she is very happy as her daily cash flow has allowed her family a large measure of independence. “The kids never borrow money. They pay in cash!” she says while smiling.
When KOMPIP asks what her dreams are, she says that she want to grow her sundries business. “I save money to increase my selling by varying snacks. If I have money I want to sell daily needs (soap, shampoo, etc.) to increase my income,” she says.
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