Questions/Answers

GERBANG SERASAN is a Development Movement through Community Empowerment in Bumi Serasan Sekundang held by Muara Enim Regency Government to accelerate poverty reduction in a more focused and integrated way through empowerment of Small and Medium Enterprises and Cooperatives (SMEs&C), done by a) optimizing banking credit scheme, b) providing loan interest rate subsidies and insurance premiums to SMEs&C which will ease the burden of SMEs&C in returning their loan and give confidence to the banks, c) offering Bank Partner Financial Consultants as SMEs&C companion related to banking credit and capacity building, and d) providing GERBANG SERASAN Secretariat as a home for SMEs&C. SMEs&C have become the backbone of national and regional economy because of their enormous roles especially in absorbing manpower, creating business opportunities and alleviating poverty. In Indonesia, livelihoods widely depend on SMEs&C sector. Most of these small businesses are concentrated in trades, foods, processed foods, textiles and garments, woods and processed products and non-metallic mineral productions. Overall, SMEs&C are estimated to account for more than 50% of Gross Domestic Product (mostly in the trade and agriculture/plantation sectors). The main problems faced by SMEs&C in this Regency were lacked of capital and access to banking, product marketing and weak management capacities of SMEs&C. Therefore, the Regency Government made an innovative breakthrough through GERBANG SERASAN. The positive impact of this program was the empowerment of 4,721 SMEs&C with capital strengthening from GERBANG SERASAN credits between 2009 until 2017 amounting USD$13.080.491 (USD$1=Rp.13.778,- per 4th February 2018). The amount of interest rate subsidies issued was USD$1.148.155 and insurance premium was USD$31.177. Revenues of the participants increased by an average 59% compared to before joining GERBANG SERASAN, while new business opportunities increased by 33%. This indicates positive correlation towards eradicating poverty in Muara Enim Regency from 17.98% in 2008 to 13.19% in 2017.

GERBANG SERASAN is a strategic program by the Muara Enim Regency Government in an effort to empower the community through SMEs&C, aimed to increase the income and welfare of SMEs&C as well as to accelerate poverty reduction in the Regency. With the launching of GERBANG SERASAN, SMEs&C can be supported in capital strengthening through subsidized loan interest rate and insurance premiums which leads to expanding their businesses to become solid as well as improving their income and welfare. GERBANG SERASAN program is in line with the National Poverty Reduction policy, particularly on Cluster III known as the Poverty Reduction Program based on the empowerment of micro and small enterprises that aims to provide economic access and strengthening for micro and small business owners.

1) GERBANG SERASAN providing loan interest rate subsidies and insurance premiums to SMEs&C. The Government also provides Bank Partner Financial Consultants to facilitate SMEs&C on strengthening their capacities, hence they are assisted on credit proposals to banks as well as business management and development. 2) GERBANG SERASAN enables access to banking services for SMEs&C and helps to strengthen their capacities. Participants of GERBANG SERASAN are SMEs&C with difficulties in capital and business expansion. Lasted for years, these conditions resulted in most of them especially small businesses end up living below the poverty line. 3) GERBANG SERASAN is implemented by establishing a partnership between Local Government, Banks, Bank Partner Financial Consultants, SMEs&C and Regional Representatives Council to strengthen the capital and capacities of SMEs&C. 4) To ensure transparency in its implementation, GERBANG SERASAN program implementation report is published on the Regency Government’s website (www.muaraenimkab.go.id) periodically that is accessible to public, as well as leaflets and brochures. 5) As an accountability of its implementation, the Regency Government reports the program's activities to the Regional Representatives Council, Governor of South Sumatra and BankIndonesia Palembang.

GERBANG SERASAN supports on achieving the SDGs’ 8th target of 8.3 and the 8.5. This initiative has contributed in the economic growth improvement, the creation of decent employment for the community, assisting on strengthening the capacities of SMEs&C and enabling them to access banking services. GERBANG SERASAN participants experienced increase in revenues averaging 59%, while employment by SMEs&C increased to 23.8% upon receiving credit assistance through this program. Previously, most of the SMEs&C lacked access to banking and hence borrowed from loan sharks with monthly interest rates between 10-15%. After joining GERBANG SERASAN, SMEs&C have easy access to banking and obtain loan interest rate subsidies and insurance premiums. SMEs&C are also assisted by Bank Partner Financial Consultants in strengthening their capacities, enabling them to expand their business. GERBANG SERASAN participants are dominated by women, some whom are poor. Approximately 35.96% of SMEs&C applying for the loan were women while about 12.07% were vulnerable low-income earners. This shows that GERBANG SERASAN provides opportunities for them to improve their businesses through GERBANG SERASAN capital strengthening credits.

The Government is obliged to provide public services to everyone, including SMEs&C. SMEs&C play important economic roles, regionally and nationally. SMEs&C were able to survive when the economic recession occurred in Indonesia on 1998. SMEs&C could provide jobs, provide business opportunities and able to alleviating poverty. However, there are still many SMEs&C facing constraints such as shortage in human resource, limited market access, low productivity and difficulties in obtaining access to financing from banks. The partnership between the Regency Government, Banks, Bank Partner Financial Consultants and SMEs&C through GERBANG SERASAN has opened access to financing from banks for SMEs&C which have been experiencing capital issues and difficult to develop their businesses. The Regency Government provides loan interest rate subsidies and insurance premiums while Bank Partner Financial Consultants play a role in assisting SMEs&C on the process of credit proposal to banks and capacity strengthening, enabling SMEs&C to develop their businesses. Increase in revenues gained by participants of this program averaged 59% while 23.8% of them increased their employment activities, indicating the contribution of this program towards economic growth, employment, the creation of new ventures and poverty reduction.

Some of the positive impacts from this program include: 1. The empowerment of 4,724 SMEs&C with capital strengthening from GERBANG SERASAN credits amounting USD$13.080.491 between 2009 until 2017 while the total interest subsidies issued was USD$1.148.155 and insurance premiums of USD$31.177 As an illustration, in 2017 several business sectors participated in GERBANG SERASAN - the plantation sector with 338 SMEs&C or 37.73%, 450 SMEs&C from trading (50.23%), 2 SMEs&C from the industrial (0.22%), 6 SMEs&C from the husbandry (0.66%), 1 SMEs&C from fisheries (0.11%), 6 SMEs&C from agriculture (0.66%) and 93 SMEs&C from services (10.39%), with the highest credit absorption from the plantation and trading sectors. 2. Increased revenues with average of 59% compared to before becoming GERBANG SERASAN participants, while new business opportunities increased by 33%. These indicate positive correlation towards poverty reduction in Muara Enim Regency from 17.98% in 2008 to 13.19% in 2017 (Source: Central Bureau of Statistics - www.bps.go.id).

The newly-designed GERBANG SERASAN program is an innovative breakthrough, demonstrated by the following: 1) A new approach in the channeling of bank credits to SMEs&C for capital strengthening through loan interest rate subsidies and insurance premiums provided by the Regency Government. 2) EstablishingGERBANG SERASAN Secretariat, whereby the management is handled by the regional government organizations appointed by the Regent. The Secretariat consists of the Head of Secretariat assisted by the Administration and two sections - the SMEs&C Development Section and Bank Partner Financial Consultants Empowerment Section. The Secretariat shall carry out, monitoring, evaluate and report GEBANG SERASAN’s activities. It also functions as a Home to SMEs&C. 3) Partnership between Local Government, Banks, Bank Partner Financial Consultants, SMEs&C and Regional Representatives Council. The policy of local government in providing loan interest rate subsidies and insurance premiums as well as the roles of Bank Partner Financial Consultants in assisting SMEs&C created confidence to banks to offer credits to strengthen the capital of SMEs&C. 4) The establishment of GERBANG SERASAN Rural Bank by the Regency Government, aimed to increase the total and scopes of SMEs&C that could receive banking credits.

This is an original innovation with the idea from the Regent of Muara Enim. The SMEs&C problems were discussed in the staff meeting led by the Regent, followed by Focus Group Discussionattended by the Regency Government, community leaders, religious leaders, universities, NGOs and banks (including Bank Indonesia Palembang) and agreed to the GERBANG SERASAN concept. The implemented GERBANG SERASAN program between 2001-2007 was the old system whereby the Regency Government created cooperation with the executing banks facilitated by BankIndonesia (www.bi.go.id). The Regency Government provided Regional Government Budget in the form of frozen demand deposits in executing banks as SMEs&C’s credit assurance. After the audit board of the Republic of Indonesia’s (www.bpk.go.id) audit results on Muara Enim Regional Budget financial report, the Muara Enim Regency was prohibited from becoming the third-party credit guarantor as it was against the Government Regulation No.54 2005. Therefore, the Regency Government began to draft the improvement program of GERBANG SERASAN conducted by several regional working units and coordinated with BankIndonesia. After several FGDs between the Regency Government, Bank Sumsel Babel and Bank Rakyat Indonesia, the Newly-designed concept of GERBANG SERASAN was agreed and implemented since 2008 until present.

Resources used to implement this initiative: 1) Financial Resources. Derived from Regional Government Budget and banking funds. The Budget are used to finance the GERBANG SERASAN Secretariat averaging USD$58.064 annually (Bank Partner Financial Consultants’s salaries and Operational). Realization of GERBANG SERASAN Loan Program from Bank Sumsel Babel, Bank Rakyat Indonesia and Rural Bank between 2009 - 2017 amounted USD$13.080.491 which was allocated to 4,724 SMEs&C, with the amount of interest subsidies totaling USD$1.148.155 and insurance premiums of USD$31.177. 2) Human Resources. The supporters of this program implementation include Bank Partner Financial Consultans with 10 people, GERBANG SERASAN Secretariat (Head of Secretariat, Head of Administration, Head of SMEs&C Development and Head of Bank Partner Financial Consultants Empowerment), Banking (Bank Rakyat Indonesia, Bank Sumsel Babel as well as Rural Bank ofGERBANG SERASAN), Government (Regent, Vice Regent and Head of Other Regional Government Organizations), SMEs&C and Regional Representatives Council. 3) Other Resources. These include the Local Government that provided the GERBANG SERASAN Secretariat Building (also as the Home to SMEs&C) and two-wheeled vehicle transportation for Bank Partner Financial Consultants, as well as the commitment, political support, networking, consistency, and conducive conditions that enabled GERBANG SERASAN to progress well until present.

Yes

Innovation of this program has been transferred to other Local Governments which have conducted studies in Muara Enim Regency, among are West Tanjung Jabung Regency of Jambi Province (www.tanjabbarkab.go.id), Ogan Ilir Regency of South Sumatera Province (www.oganilirkab.go.id) and South Ogan Komering Ulu Regency of South Sumatera Province (www.okuselatankab.go.id), hence these districts could replicate the innovation of GERBANG SERASAN with the patterns suited according to the conditions and capabilities of each region. Points that can be adopted by other local governments are: 1. The cooperation pattern between the government and banks in channeling credits to SMEs&C through loan interest rate subsidies and insurance premiums from the Regency Government. 2. Providing and optimizing the roles of Bank Partner Financial Consultants as facilitators of SMEs&C thus enable to bridge them in accessing credits from banks. 3. EstablishingGERBANG SERASAN Secretariat that also serves as a Social and Business Home for SMEs&C, equipped with free Wi-Fi and also as a place to meet their business partners. It will also be equipped with e-commerce for SMEs&C in the future. 4. The establishment of GERBANG SERASAN Rural Bank by the Regency Government, aimed to increase the scopes of SMEs&C that could receive banking credit.

GERBANG SERASAN program shall sustain based on the following: 1) The presence of MoU with Bank Sumsel Babel (https://banksumselbabel.com) and Bank Rakyat Indonesia (www.bri.co.id) in lending. This program is currently in the process of a joint MoU with Bank Mandiri (www.bankmandiri.co.id) and Bank Negara Indonesia (www.bni.co.id). 2) Institutional aspect of the GERBANG SERASAN Secretariat whereby the management is directly appointed by the Regent. The Secretariat ensures that the implementation of this program is smooth and sustainable by providing and optimizing the roles of Bank Partner Financial Consultants in building the capacities of SMEs&C. 3) GERBANG SERASAN program was developed with the establishment of its Rural Bank. The purpose of this bank is to increase the number and scopes of SMEs&C that received banking credits for capital strengthening, hence the number of SMEs&C that can be empowered could increase. The increased number of capable and solid SMEs&C are expected to boost their contribution on the Gross Regional Domestic Product (PDRB) of Muara Enim Regency and help to decrease the poverty rate of this Regency. 4) The home of SMEs&C becomes a hub for enquiries, complaints, consultations and meetings for business partners. Therefore, this program is capable to strengthen SMEs&C not only on capital but business development as well.

Upon the policy issuance of Local Regulation No.11 2008 concerning GERBANG SERASAN, this program continues to be implemented until now, indicating the commitment, care and responsibility of the Regency Government in solving SMEs&C’s main issues - obtaining easy and cheap capital for business expansion. This policy is part of the government's efforts to improve the quantity and quality of public services and finding the best solution for SMEs&C’s woes. Among other related policies issued are: 1) Regent Regulation No.22 2013 concerning the Amendment to Regent Regulation No.23 2010 concerning Issuance of Interest Rate Subsidy and Insurance Premium for Credit of Participant of GERBANG SERASAN program. 2) Cooperation Agreement between Muara Enim Regency Government and Branch Office of PT. Bank Rakyat Indonesia Muara Enim No.43/VI.B/GS/2014 and No.B.1709/KC.IV/Adk/06/2014 Concerning the Empowerment of SMEs&C by Utilizing Enterprise Credit, Rural Small Enterprise Credit and Plantation Partners Credit Schemes to Support GERBANG SERASAN program 3) Cooperation Agreement between Muara Enim Regency Government and Bank Sumsel Babel No.895/VI.B/GS/2013 and No.149/DIR/P/2013 on SMEs&C Empowerment by Utilizing Enterprise Credit, Rural Small Enterprise Credit and Plantation Partners Credit Schemes to Support GERBANG SERASAN Program. 4) Regent Decree No.83/KPTS/VI/2017 concerning the Coordination Forum and Executive Secretariat of GERBANG SERASAN 2017 (Updated Yearly). 5) Local Regulation No.5 2017 concerning Changes in the Form of Legal Entity Name of Regional Company of Rural Bank of Muara Enim Regency to Rural Bank Private Limited of Muara Enim Regency. Commitment and concrete steps in the preparation, implementation and monitoring of this policy by the Regency Government are efforts to strengthen the integrity and commitment of local government on improving the quality of local public services.

Yes

The Newly-designed of GERBANG SERASAN is implemented based on Local Regulation of Muara Enim Regency No.11 2008 and GERBANG SERASAN Implementation General Guidelines under Muara Enim Regent’s Decree No. 989/KPTS/2008 and Muara Enim Regent’s Decree No. 832 / KPTS / IV /2013. Hence monitoring, evaluation and reporting is done strictly and periodically. Reporting stages are as follow: 1) Internal report and evaluation, consisting of: • The Secretariat reports on the program implementation to the Muara Enim Regent and Coordination Forum quarterly. • The Secretariat also prepares semester and annual reports on the program implementation, addressed to the Regent, Regional Representative Council, Executing Bank, BankIndonesia Palembang Branch and the Governor of South Sumatra. • All reports are supplemented with problems and solution plans and SMEs&C data of GERBANG SERASAN credit recipients “by name by address” - transparent, accountable and valid. • To monitor and discuss several issues that arise, tri-semester coordination meetings are held with related banks and local government organizations. 2) External evaluation - the impacts of successful implementation of GERBANG SERASAN Program are conducted every 2 years in cooperation with competent Universities in the Province of South Sumatra - Bina Darma University (www.binadarma.ac.id).

The outcomes from the impact evaluation of this program are as follow: 1) Increased roles of Bank Partner Financial Consultants in assisting SMEs&C. Professionals in Bank PartnerFinancial Consultants assist SMEs&Cin preparing credit proposals and monitor the progress of those proposals sent to banks. Bank Partner Financial Consultant is also the SMEs&C’s place for business development consultations. 2) More executing banks are involved in this program. Currently a MoU preparation with Bank Mandiri and Bank Negara Indonesia is in progress. 3) The issuance of Local Regulation No.9 2017 concerning Changes in Legal Entity Form and Name of Regional Enterprise of Rural Bank of GERBANG SERASAN of Muara Enim Regency becomes Rural Bank Private Limited of GERBANG SERASAN of Muara Enim Regency. Changes in the form of legal entity will improve the performance of Rural Bank in collecting funds and channeling credits to SMEs&C. 4) Employment rate increased in the trade sector by 4% and plantation sector by 33% after receiving credits. 5) The creation of other businesses by 33% is the impact of this program, therefore it also offers decent employment for the community. SMEs&C revenues increased, averaging 59% after becoming participants of the GERBANG SERASAN program.

Four analysis indicators were used in evaluating this program, formulated in the Poverty Reduction Program Evaluation Manual and prepared by Economic and Social Commission for Asia and Pacific (ESCAP) comprising: 1. Income Indicator. The concept used for this indicator is by comparing the household income of the participants before and after joining the program. This calculation also included the factor of price changes using the Consumer Price Index (CPI) to assess past earnings with the present values. 2. Poverty Reduction, used to measure percentage changes in the number of poor people who became program participants. To measure the impact of this program on the poverty level of participants, a guide on determination of Poverty Line (Rp/Capita/Month) by Central Bureau of Statisticswas used. 3. Employment Absorption Indicator, used to view how massive does this program able to absorb employment. 4. Benefit Indicator, used to view the positive impact of this program in the development of SMEs&C.

Stakeholders involved in this program are: 1) Muara Enim Regency Government - pioneered the basic idea of GERBANG SERASAN program concept refinement in a meeting attended by Head of Legal Affairs, Head of Finance, Head of Livestock and Fishery Services and Head of Regional Planning and Development Agency. Next, the Head of Livestock and Fishery Services was instructed to prepare the concept refinement and conducted FGD with BankIndonesia Palembang, Bank Sumsel Babel and Bank Rakyat Indonesia, and the newly-designed concept was later agreed whereby the Regency Government provided the regional government budget for loan interest rate subsidies and insurance premiums, Secretariat’s operational funds and empowering Bank Partner Financial Consultants. 2) Banking as the executing banks - Bank Sumsel Babel and Bank Rakyat Indonesia distribute credits to SMEs&C participants of GERBANG SERASAN program by optimizing existing banking credits. In 2017, BPR, a bank owned by the Regency Government has distributed credits to the participants amounting USD$181.594. 3) GERBANG SERASAN Secretariat - consists of the Head of Secretariat, assisted by Administration and two sections: SMEs&C Development and Bank Partner Financial Consultants Empowerment. Secretariat plays role in handling the management of the program. 4) Bank Partner Financial Consultant s - SMEs&C facilitator, serves as a liaison between SMEs&C with banks. The tasks of Bank Partner Financial Consultant is to identify and select entitled SMEs&C to receive banking credits, to make tripartite cooperation between banks, Bank Partner Financial Consultants and SMEs&C, to assist on loan proposal and its progress and help SMEs&C on business expansion. 5) SMEs&C – recipients of GERBANG SERASAN program’s benefits. 6) Regional Representatives Council - providing support on Muara Enim Regency Government’s policies, particularly during the Regional Regulation discussion which is the legal form of the GERBANG SERASAN program’s implementation.

The lessons learned in GERBANG SERASAN program: 1) The need for great commitment, support and consistency with great coordination from regional heads, Regional Representatives Council leaders, relevant regional organizations leaders, banks, NGOs and universities and the sincerity of the implementers in the field. 2) Partnership between the Government, banks, Bank Partner Financial Concultants and SMEs&C needs to be well-established. 3) GERBANG SERASAN program can be a reference in the development of similar programs in other regions, particularly in the cooperation between the Regency Government and banks in providing loan interest rate subsidies and insurance premiums, appointment of Bank Partner Financial Consultants, assigning the Secretariat which also functions as Home to SMEs&C. Challenges faced and improvements made in the program implementation: 1) Occurrence of different perceptions from each executing bank leaders, whereas each time during change of the leadership, the Secretariat needs to re-explain about GERBANG SERASAN. 2) There are still SMEs&C that did not meet the banking requirements to obtain GERBANG SERASAN credits. One solution is to utilize a company’s partnership activities through Corporate Social Responsibility Program.