The Effectiveness of Agribisnis Microfinance Institutions Based Social Capital As A Financial Institution of Agriculture In The District Agam West Sumatra

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. However, businesses in general are still faced with the classic problem of the limited availability of capital, capital constraints may limit the space for agricultural activities in the rural sector (Hamid, 1986).

Weak capital owned by economic agents in rural areas has been recognized by the government, with the state government launched several programs for credit to farmers and small farmer entrepreneurs. Starting with the credit Bimas  on yeras 1972, then followed Credit Small Investment (KIK) and the Permanent Working Capital Loans (KMKP), Income Generation Project Farmer / Fisherman Small (P4K), Farmer Business Credit (KUT), and to date they occurred People's Business Credit (KUR). 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, especially on the financial institution as the executor.

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. As a result, program participants generally will again experience a shortage of capital.

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 Microfinance Institutions (LKMA), yet can not be used optimally.

LKMA built by the Government is able to exist and contribute to serve the capital needs of low-income rural development although in these institutions received government assistance. LKMA existence in the countryside could play a role serving the needs of small farms, although it is still limited in scope particular group. This shows their internal capital mobilization in the communities of farmers / rural, so the issue of capital is not always small farms can only be solved by relying on external capital mobilization.

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