The Role of Social Capital In Improving Performance Bank Perkreditan (BPR) Sungai Rumbai – West Sumatera Indonesia

Abstract

Economic activity in the countryside in general is dominated by small-scale farms with the main actors of farmers, farm workers, traders and agricultural inputs, agro-processing, and home industries. The businesses are generally still faced with the problem of limited availability of capital, capital constraints may limit the space for agricultural activities in the rural sector (Hamid, 1986).

Although the government has implemented a variety of loan programs, but the performance results are deemed still not in line with expectations. This is reflected in the performance of financial institutions has not been satisfactory.

According Martowijoyo (2005) the weak performance of financial institutions as financial intermidiasi institutions can be viewed from three aspects: (1) low levels of loan repayment; (2) low morality of the implementing agency, and (3) low level of mobilization of public funds. The disadvantage of these has consequences for not continuing financial institutions set up after the program is completed.

To answer the problem of limited capital and banking institutions are difficult to access for small farmers, it is necessary to further optimize the potential of financial institutions which 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 rural banks (BPR). One of the BPR that are in the river Rumbai Dhramsraya District of West Sumatra Province.

The existence of Rivers Tassel rural BPR could play a role serving the needs of small farms, is the result of the institution-based social capital. Fukuyama (2002) argues that social capital, focused on the importance of the relationship (relationship), honor one another (mutually respectful) and the relationship of trust (trusting relationship) between citizens. Furthermore, Putnam (1993), has also shown evidence that economic growth is positively correlated with the presence of social capital.

Other institutions have been successful in utilizing local institutional as financial intermediaries with rural communities is a non-bank credit institutions such as LPD and Lumbung Bali Pitih Nagari (LPN) in West Sumatra.