The Effectiveness of Lumbung Pitih Nagari on Social Capital Based As a Local Financial Institutions in West Sumatra

Abstract

Activities in the rural economy is still dominated by the efforts of small scale farms with the main actors of farmers, farm workers, traders and agricultural inputs, agro-processing, and household industry. However, businesses in general are still faced with the classic problem of the limited availability of capital, capital constraints may limit the movement of agricultural activities in the rural sector (Hamid, 1986).

In the long term, the scarcity of capital could be the entry point of the chain cycle of poverty in rural farming communities that are difficult to break. Although the incidence of poverty is factually not limited by spatial and sectoral aspects, but it is undeniable that the majority of the poor live in rural areas and generally work in the agricultural sector. According to Central Bureau of Statistic (BPS) , the number of poor in 2012 reached 29.31 million people and as many as 18.48 million (58.8%) of them work in the agricultural sector.

Weak capital economic actors in rural areas has been recognized by the government, the state government has launched several programs for credit to farmers and small farming businesses. Starting with the credit Bimas 1972, then followed Credit Small Investment (CIC) and the Permanent Working Capital Loans (KMKP), Project Income Farmers / Fishermen Small (P4K) Farmer Business Credit (KUT), and to this day still occurred People's Business Credit (KUR). Although the government has implemented a variety of loan programs, but the achievements of results are deemed still not in line with expectations. This is reflected in the performance of financial institutions has not been satisfactory, especially in the financial institution as the executor.

According Martowijoyo (2005) weak performance of financial institutions as a financial intermediary can be seen from three aspects: (1) low levels of loan repayment; (2) low morality executive officers, and (3) low levels of mobilization of public funds. The weaknesses has consequences for not continuing financial institutions set up after the program is completed. As a result, program participants will generally re-experiencing a shortage of capital.

To answer the problem of lack of capital and banking institutions are less accessible to small farmers, it is necessary to further optimize the potential of financial institutions that can be an alternative source of funding for farmers and rural communities. One of the financial institutions that can be exploited and encouraged to finance micro segment is the Informal Financial Institutions (IFIs), yet can not be used optimally.

IFI built by individuals able to exist and contribute to serving the needs of capital in low-income communities in rural development although in these institutions received government assistance. Existence IFIs could play a role in serving the needs of rural small and medium enterprises, although it is still limited in the scope of a particular group. This indicates the existence of internal capital mobilization in the communities of farmers / rural, so the issue of small and medium business capital is not always only be overcome by relying on external capital mobilization (government)

Subandi (2007) said the success of microfinance institutions is influenced by several factors, namely; (1) each institution usually makes its own concept of credit in accordance with the conditions in which the institution is located, (2) the ability to foster a sense of kinship among members raises openness, and those who receive loans are really in need, (3) beliefs, dogma and or certain myth that states that the poor will have difficulty in repaying the loan.

This dogma was still firmly attached among lenders both formal and informal, including the government. These conditions are characterized by making rules which in principle is for securing a loan, but on the other hand a constraint that is very burdensome for employers farmers in low-income and (4) the main factors that hinder the success of microfinance institutions to finance farming is not to include an element of social capital in calculus analysis.