Mirco Working Capital (MWC): Grameen Bank Approach

MBK has adopted the Grameen Bank methodology initiated by Nobel Laureate Professor Muhammad Yunus and further developed by Grameen Bank in Bangladesh.

MBK focuses exclusively on the bottom 25 percent of the households. The programme is implemented using a specialized delivery mechanism and with specialized people. Its system follows seven principles:

1. MBK provides small working capital for additional or new income-generating activities (Rp.3-6 million or $200-$400 in the first cycle) to be repaid in small     instalments over a period of up to one year. Working capital can increase by a maximum of 10 percent every year.

2. Clients are members of a self-selected group (5 women) and of a village centre (20-25 women).

3. There is no collateral and no guarantor; however other women in the centre provide peer support, and are requested to assist clients who are not able to meet     their weekly instalments due to temporary cash flow problems.

4. Clients must repay their working capital in full on a timely basis in order to qualify for follow-up working capital.

5. Clients attend weekly village centre meetings, during which they repay their working capital in weekly instalments.

6. The working capital must be used only for agreed income-generating activities.

7. Account officers visit their clients in their village; the clients do not visit the MBK office, the reverse of conventional banks.

Based on the experience of leading microfinance institutions in Indonesia and abroad, as well as its own experience in Indonesia, MBK has developed detailed operational manuals and forms to implement its field programme.

Account officers must undertake working capital utilization checks for every client twice during each cycle using special forms.

Branches are audited twice a year by full-time auditors as well as Area Supervisors from other areas. MBK has developed detailed check-list forms to implement its audit programme.

Four Key Success Factors

MBK believes that the implementation of a successful microcredit programme requires the following four factors (see figure below):

1. High degree of credit discipline for both clients and staff

2. Human resource development

3. Efficiency, Transparency and Accountability

4. Strong supervision and internal control all the way to where the lending activities takes place