url
20
Jun
2014

THE IMPORTANCE OF MONITORING AND ENTREPRENEURSHIP CONCEPT AS FUTURE DIRECTION OF MICROFINANCE: YBK and AIM

THE IMPORTANCE OF MONITORING AND ENTREPRENEURSHIP CONCEPT AS FUTURE DIRECTION OF MICROFINANCE: YBK and AIMYBK economic program was initiated by the Selangor state government in 1996 with the aim of helping the extremely poor to improve their self-confidence, courage and ability to promote economic wellbeing. These goals are expected to be achieved through the provision of capital support, encouragement and coaching technical skills to the extremely poor and relatively poor groups to enable them to improve the socio-economics and living standards of their families. In order for economic programs such as starting a microenterprise to take place, local placement of target group approach and rebuilding of their houses in groups, have been carried out. However, a personal visit to the location of the participants’ project in Desa Kasih showed that sewing workshops have been closed and ceased operation since 2004.

Business financing outlets based on fast foods and instant drinks concept known as D’Kasih Kopie Express which gained capital assistance and business equipment’s to the poor individuals including single mothers also ended up with a failure. Two initial outlets failed to continue with the financing of RM188, 702.82 and RM125, 633.62. Capital assistance provided by YBK to the D’Kasih Kopie Express program was free, with no repayment needed as stated in the contractual agreement between the participants and YBK. The effect from early failure led to the revision of the implementation method where capital assistance in the form of cash, business premises and business equipment’s must be repaid by participants to YBK with zero interest. Although three new outlets have been developed, the participants still failed to run the business due to high operating costs, lack of experience and no interest in business.
This situation occurs due to the inadequate screening procedures and selection of participants. Most of the selected participants do not undergo stringent vetting process before being allowed to use the allocated funds to run the business. Through interviews conducted on 30 participants of YBK Selangor, all claimed to having no basic knowledge on entrepreneurship and business training provided before they are allowed to conduct their business. They also claimed that there was no comprehensive and continuous monitoring done by YBK officers to ensure that the equipment’s, facilities and funds provided by YBK have been used entirely for their businesses or otherwise.
AIM represents another microfinance program among the poor run by private bodies and funding support from the government of Malaysia. This program adopts the Grameen Bank concept where the main concern is building self-confidence compared with operating profits to enhance the confidence of the poor to take opportunities that exist for the benefits of the poor. The implementation of this program is based on the concept of ‘trust’ on the monitoring among members and the pressure among members to enforce loan contracts, accountability and creativity as well as appropriate and reasonable terms and conditions. This program is offered to the poor people who have household incomes of two-thirds of the poverty line, without collateral, without guarantee, interest-free except for some administrative fees, no threat of legal action and simple application procedures, along with training, testing and delivery of direct credits to the poor at their door front.
AIM has so far conducted six impact studies on its program participants. Many empirical studies conducted by Rahmah Ismail and Sow have proven that the AIM program has been very effective in helping participants who come from the poor groups to increase their income. The achievement made AIM program in terms of repayment collection has been very impressive, that is, 99.15 percent and 99.08 percent from 2009 to April 2010 respectively. This results also provide an overview of the effectiveness of monitoring and management of AIM program on the participants through the implementation of a mandatory weekly meeting to be attended by participants and also the formation of the ‘center’ and ‘the concept of sharing liability’ among participants. It also proves the high ability of participants to repay the loans with very low default rate only at 0.92 percent in 2009.
As a summary of the writings and previous studies, we can conclude that there are differences in the characteristics, especially in terms of the program monitoring, processes and procedures, background of the officers involved and the method of conducting training to the microfinance program participants. These program features have an important bearing on the effectiveness of the program objectives.

YBK economic program was initiated by the Selangor state government in 1996 with the aim of helping the extremely poor to improve their self-confidence, courage and ability to promote economic wellbeing. These goals are expected to be achieved through the provision of capital support, encouragement and coaching technical skills to the extremely poor and relatively poor groups to enable them to improve the socio-economics and living standards of their families. In order for economic programs such as starting a microenterprise to take place, local placement of target group approach and rebuilding of their houses in groups, have been carried out. However, a personal visit to the location of the participants’ project in Desa Kasih showed that sewing workshops have been

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Kevin J. Brandon

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