Micro-Loans Make Big Difference for Families in Nias By Jason Rush

Just three months after the Indian Ocean tsunami, a powerful earthquake pounded the Indonesian island of Nias, just south of Aceh off Sumatra's west coast. Over 1,000 people perished and tens of thousands found themselves without a home.

Everything Nur Arfah Tanjay and her family owned was reduced to rubble that day. They lived in temporary community barracks for half a year before finally moving in to her mother's reconstructed home. With no employment prospects and the local economy in tatters, Ms. Tanjay wondered how she could provide for her family's basic needs.

"We were very concerned. We weren't sure how we would get by," she says.

A US$ 15 million ADB micro and small enterprise development program extending finance directly to poor families in Nias and Aceh helped Ms. Tanjay, and thousands of other women, get back on their feet.

"Today I earn 50% more than I did before the earthquake," Ms. Tanjay says.

She derives her main source of income from the sale of "loto sagu", sweet palm cakes, a local delicacy.

Each morning she slowly mixes grated coconut, ripe bananas, raw sugar, fresh cacao, salt and sweet palm flour, spooning a few dollops of the sweet concoction into green banana leaves that she bakes over a pyre of burning coconut husks.

Her teenage son Arfan Zalukhu circles the neighborhood every afternoon after school with a large platter of loto sagu, which he pedals door-to-door.

While the family lives humbly, today they earn enough money to pay for food, and Arfan's school fees. Ms. Tanjay is even able to tuck away a little money each month, and aspires to buy a house of her own in a few more years.

The ADB-supported micro-credit program is modeled after Mohammed Yunus’ Grameen Bank. Groups of six women borrow small amounts of money that they repay over a matter of months. The loans progressively increase in size each time the borrowers successfully pay the previous loan in full, allowing group members to expand their businesses.

"With the extra money I can buy all of the supplies I need to produce larger amounts of cakes. I can sell more cakes, and since I can buy in bulk the cost is less," Ms. Tanjay says.

With a thriving business and access to larger loans, Ms. Tanjay is branching out, using borrowed funds to purchase chickens, ducks and goats. Her son even raises rabbits, which they sell to neighbors as pets.

"One of the best features of this program has been supporting women in assuming a central role in financially supporting their families," says Pieter Smidt, Head of ADB's Extended Mission in Sumatera. "It's wonderful to see their businesses growing. Some of the changes have been dramatic."

The Nias micro-credit program is implemented by the Bank Sumatra Utara. ADB supported training for bank staff, who disburse and collect funds from microfinance groups.

"The provincial bank had never been in this type of operation before," says Mr. Smidt. "There were previously no such micro-credit services in Nias."

"Now that the provincial bank has seen that this model can work effectively, they're thinking about expanding the program to every district in North Sumatra," says Mr. Smidt.

In addition to bringing her community greater prosperity, Ms. Tanjay says the program has helped bring neighbors closer together. A practicing Muslim, she notes that her microcredit group has both Christian and Muslim members.

"In Nias we don't care about these kinds of differences," she says. "We all get along well and help each other. I just hope this program will keep going on so we can all have a better life in the future."