Overview
Indonesia is the largest archipelagic country in the world and has a population of 230 million people over the span of 6,000 of its 17,508 islands. An estimated 18% of the population, 40 million people, lives below the poverty line of $2 per day. World Hope International (WHI) is working in areas of rural development, education, and microfinance to give Indonesians opportunities to better their lives.

Rural Development
WHI defines rural development as any project that enables people in rural communities to escape extreme poverty. Most rural communities in developing countries routinely experience hunger and a high incidence of disease. WHI’s water and sanitation program provides safe drinking water in communities to reduce disease and death resulting from contaminated water. Two wells were hand-dug in Indonesia in 2007 providing clean water for 258 people.

Education
Schools play an indispensable role in fighting injustice in ways that foster peace and national stability. WHI works to develop schools where none exist. In 2007, WHI provided start-up support for a vocational high school on the island of Nias where 64 students learned to grow crops, process foods and manage a business in the food industry. A boarding house for rural teens with a capacity to house 30 students was also constructed. There are currently 15 students boarding. WHI has provided scholarships for two college students studying rural community development. Additionally, WHI has 98 children in the Hope for Children program.

Microfinance
WHI’s microfinance program in Indonesia made enormous strides in 2007. Most notable was the creation of Koperasi Harapan Sejahtera (KHS)—a new MFI that is specifically oriented toward serving entrepreneurs coming from the poorest and most marginalized communities of central Java. KHS exists as an independent legal entity over which WHI has ultimate governance authority. KHS was created with funding provided by the Sutton Family Foundation and represents an important transition in WHI’s overall programmatic strategy in Indonesia.

WHI initially established Lembaga Harapan Sejahtera (LHS), an agricultural lending program, in 1996. Using funding from the Sutton Family Foundation, WHI planned to modify the program and make it consistent with microfinance best practices.

However, it became apparent that LHS’ agricultural lending program served an important role and was a valuable asset for local small- to medium-sized farmers in central Java. WHI decided to maintain LHS to be an agricultural lending program under WHI’s rural development program and establish KHS as an additional entity under microfinance. At the end of the year LHS had approximately 600 clients and a loan portfolio of about $100,000. ? Although WHI expects LHS (the agricultural lending program) to remain relatively small, it created KHS (the microfinance program) with the kind of system and procedures to handle rapid growth and a much larger loan portfolio and client base. The program is just beginning operations but it has a strong foundation and is expected to grow very quickly in 2008.

In 2007 WHI undertook the following activities to create KHS:

•Recruited staff
•Established and equipped a separate office
•Performed market research
•Provided the staff with extensive microfinance training
•Provided the senior leadership with specialized consulting support
•Created and tested a lending methodology
•Installed a robust loan tracking system
•Created a board of directors
•Established KHS as an independent legal entity

 

Shoe-String Start-Up
One of the reasons WHI is excited about KHS is because it represents a pilot for an innovative approach to starting MFIs, what WHI calls a “shoestring start-up.” Generally, microfinance start-ups require initial grant capital of $500,000 to $2,000,000. WHI created this program with only $75,000 which included approximately $30,000 in loan capital.

KHS’s first loans were issued in December 2007 and by the end of the month the program had ten clients. At the end of January 2008, KHS had 46 clients and no late payments. WHI expects KHS to be generating enough interest from its microloans to fully cover its operating costs, have a loan portfolio of about $187,000, and to be financing at least 2,500 active microbusinesses by the end of 2009.