Tsunami Response

Siti Atah and other women from her village have doubled their income through an ADB microfinance scheme.

An entrepreneurial revolution is underway in the village of Lamcot, nestled in Indonesia's tsunami-ravaged Aceh territory.

Over the past two years, Siti Atah and seven other women from her village have doubled their families' incomes by developing home businesses selling karah, a traditional Acehenese sweet rice cake. Today the production of karah is the village's specialty, and group members say that they can barely keep up with orders from local vendors.

The Asian Development Bank provides funding and training that helps women like Siti Atah escape poverty by developing and growing their own businesses. This is part of a larger US$10 million ADB initiative to extend microfinance directly to impoverished families in Aceh, modeled on the pro-poor microfinance programs established by Nobel Laureate Muhammad Yunus and his Grameen Bank.

"Increasing families' incomes is one of the best and most immediate ways we can help families escape poverty," said ADB Vice President Larry Greenwood on a recent trip to Lamcot.

"When families earn enough income, they have a greater ability to keep their children healthy, well-nourished and in school, and are better equipped to provide for all of their other basic needs."

With the additional income her mother is earning, Nur Ani is able to attend college.

Every single member of the Lamcot group says that they have seen their monthly income dramatically increase through the microcredit initiative. The benefits of this newfound prosperity cannot be overstated.

Before this project, Siti's 18-year-old daughter, Nur Ani, never dreamed of continuing her studies once she graduated high school. Her family simply couldn't afford it. When her mother joined the microenterprise group, however, the additional income enabled Nur Ani to go to college, where she is currently studying computers and communications.

She hopes to secure a job working for a business after she graduates.

"I hope to get a job, so I can help my other sisters and brothers get an education," Nur Ani says. "[Then] I can share my salary with my mom, to help the family. We can repair our house and stop it from leaking, and we'll be able to live a good life, a comfortable life."

Microcredit programs are globally recognized as one of the best means to empower families to lift themselves out of poverty. Under ADB's program, groups of eight women borrow the equivalent of US$ 55 each, with the agreement that they will repay the loan within four months. The loans are repaid on a weekly basis, and once fully repaid, the group members become eligible to apply for progressively larger loans.

"Investing in poor families returns a whole range of dividends," says Edgar Cua, Country Director of ADB's Resident Mission in Indonesia, "and what we see demonstrated time and time again, is that with the right support and training, poor families can in fact be a very good credit risk."

The benefits of the program are not limited to the group members – other families in Lamcot are realizing benefits from the microcredit program as well.

Though not a member of the group, Masyita has also reaped benefits from the microcredit initiative.

Although Masyita is not a member of the group, all of the members subcontract her services each weak to operate a rice mill, which she says has almost doubled her monthly income.

On most afternoons outside of Masyita's home, one hears the steady thumping of a rice mill as she slowly pounds rice into meal, before sifting it through a fine cloth to make rice flour. In nearby kitchens, after the rice flour is mixed with cassava and sugar, the solution is poured through a strainer into a wok full of hot oil, and then slowly folded into delicious treats that are packaged and sent to market three times a day.

Towards a Brighter Future

Under ADB's program, group members receive training before receiving their loans, and village level financial centers are established to coordinate the financial transactions of all group members.

Once the loans are disbursed, this infusion of cash enables group members to acquire all of the materials that they need for their operation well in advance, and in bulk.

"Before we received these loans we didn't have enough money to buy much rice, cassava and cooking oil ahead of time, so we could only produce small quantities of karah, and we couldn't always [accommodate] larger orders," says Ariani, the youngest member of the group, who also serves as the group's leader.

"Now that we can buy in bulk and stock our supplies, we save more time and money, and can meet most of our customers' orders."

She says that group members are planning to further scale up their production when they receive their new round of loans, and to diversify the products they are currently offering.

By banking on the hard work and determination of the women of Lamcot and other villages in Aceh, ADB is helping families parlay their own initiative into currency they can use to better their lives.