url
18
Jun
2014

THE IMPORTANCE OF MONITORING AND ENTREPRENEURSHIP CONCEPT AS FUTURE DIRECTION OF MICROFINANCE: Background of Microfinance Programs

Below is the overall summary in terms of the key features of the four programs studied, namely AIM, TEKUN, LZS and YBK Selangor. Summary of the comparison is based on secondary information that has been published and from observations and interviews that have been conducted on executive officers of micro-finance program.
TEKUN
TEKUN program, established by the Malaysian government in 1998, aims at providing additional capital to the poor and middle income groups consisting of hawkers and small traders. TEKUN also has the objective of guiding participants to become high quality entrepreneurs, competitive and encourage savings among borrowers. However, until December 2008, the total proceeds received through reimbursement only accounted for RM500 million compared with the total amount of micro credit issued at RM1.13 billion. This means that only 44.2 percent of total credit facilities have been recovered. Unsatisfactory repayments will influence the capability of TEKUN program in the future. Basically, a good micro-financing program is able to generate its own funds and have a better cash management through the collection of repayments, as well as continuing to reduce dependence on government provisions or donations from the private sector. A very poor collection of repayment performance will reflect the weakness of TEKUN’s monitoring and credit management capabilities. If the participants of TEKUN failed to generate business profits continuously and consistently, their ability to repay micro-financing facilities will undoubtedly be affected.
LZS
This business capital assistance program was established by the Selangor state government in 2003 through the LZS with the aim of improving the economic status of the poor and the needy in the state. Through its Asnaf Entrepreneurship Development Program, LZS provides business capital assistance to poor recipients. These potential recipients are identified to be viable and have expertise in the field of applied technology or have been involved in businesses with the aim of increasing sources of income for the poor recipients. Basically, capital assistance is channeled in two situations. The first is the distribution of capital assistance based on the application made by the recipients to operate their own businesses. Secondly, LZS also provides assistance for capital projects, and selected businesses that have been identified by the management. However, based on interviews conducted with officials coordinating the project, the production of noodles in a group project, for instance, which began in 2007 was dismissed in 2008. This was caused by problems associated with the quality of noodles produced and the difficulty of marketing the product. Similarly, a product marketing program which started in 2007 was discontinued shortly after due to difficulties in marketing the products that were purposely purchased and distributed to the poor and needy recipients.
Through observation and interviews with the participants at Desa Kasih Sungai Kajang, Tanjung Karang and Desa Ehsan Permatang Pasir, Banting, the business of manufacturing chips, yellow noodles, crackers lekor, cakes, powdered beverages, sewing workshops, restaurants, and retail stores, were no longer in active operation due to the problems of capital, lack of monitoring and the attitudes of participants coupled with the lack of business experience and confidence and independence. The monitoring of LZS program participants is done by appointed consultants and not by LZS officers.
According to MAIS Audit Report 2007, the percentage of program participants who were able to maintain and grow their business was too small, accounting for only 9 percent, while the percentage of participants who failed to continue the business amounted to 11 percent. The percentage of participants who are still doing business but has no improvement in terms of revenues generated from the business is about 48 percent. Program participants who have high potential for success in maintaining and developing the business accounted for 32 percent. The result of this report has shown that the LZS program is not meet satisfactory and failed to achieve the objectives of the program. Although the report shows the percentage of successful program participants is still small, LZS is highly confident that the poor recipients can be successful as business entrepreneurs as long as they are given the right support and encouragement.The success of the ‘Asnaf Entrepreneurship Development Program’ highly depends on the program’s procedures and processes and the officer’s qualifications, attitudes and experiences in helping the participants to start a microenterprise.

Below is the overall summary in terms of the key features of the four programs studied, namely AIM, TEKUN, LZS and YBK Selangor. Summary of the comparison is based on secondary information that has been published and from observations and interviews that have been conducted on executive officers of micro-finance program. TEKUN TEKUN program, established by the Malaysian government in 1998, aims at providing additional capital to the poor and middle income groups consisting of hawkers and small traders. TEKUN also has the objective of guiding participants to become high quality entrepreneurs, competitive and encourage savings among borrowers. However, until December 2008, the total proceeds received through reimbursement only accounted for RM500 million compared with the total amount of micro

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Kevin J. Brandon

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