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Tirta Makmur Co-operative and Water Utility of Kudus District: Serving the People and 2,500 New Connections 1

Bank Syariah Mandiri Kudus: Microfinance Commitment for Low-income People 3

Let’s Install First, Pay by Installments! 4

PHOTO CREDIT: IUWASH JAWA TENGAH

NEWSFLASH EDITION | MICROCREDIT

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The community of Lane Number 3, RT 03/ RW 01, Undaan Tengah village, the location of micro finance for PDAM water connection for low-income people as a result of microfinance cooperation among Bank Syariah Mandiri, Tirta Makmur Co-operative and PDAM Kudus.

Lane Number 3, Undaan Tengah village

Kudus. The Water Utility of Kudus District (PDAM Kudus) currently serves 26,000 customers. Around 96 percent of them are household customers, and the rest are small business units, middle business units, government offices and public (social) offices. PDAM Kudus only covers 19 percent of 758,000 population of Kudus District, which is covered by nine PDAM branches in nine subdistricts.

The connection fee to tap into piped water system of PDAM Kudus varies from Rp 850,000 to Rp 1.5 million. The fee depends on customer’s house distance from nearby pipe network. PDAM Kudus already has an installment scheme for household connection. However, they do not have sufficient funds to meet the enthusiasm of 80 percent prospective customers, who prefer installment method.

PDAM Kudus owns Tirta Makmur Co-operative, which was established in 1997 and has 140 members – all of them are PDAM staff. Since 2009, business thrived and the co-operative has been managing motorbike credits, household appliances as well as managing loans for members up to the amount of Rp 50 million, which should be paid off within three years.

Tirta Makmur Co-operative and

Water Utility of Kudus District:

Serving the People and

2,500 New Connections

2 | iuwashnews flash edition / microcredit

In line with the funding opportunity from Bank Syariah Mandiri (BSM) Kudus, PDAM Kudus appointed Tirta Makmur Co-operative to establish leasing for household connection for prospective customers, who cannot pay in cash.

Tirta Makmur Co-operative holds a critical role that determines successful Cooperation in Microfinance for Household Connection with BSM. Tirta Makmur Co-operative guarantees low non-performing financing and smooth installment payments from PDAM customers. In addition, PDAM Kudus as the co-operative adviser commits to work hard to ensure star performance of its cooperative.

The microfinance cooperation with BSM Kudus contributes to achieving the target of PDAM Kudus to establish 2,500 new connections in 2012.

“Now we feel more comfortable to grant requests for new household connection, thanks to funding from BSM, which is Rp 3 billion for 2012. By God’s Will, we are going to achieve the target of PDAM this year,” said Ayatullah Humaini, the Customers Relations Manager of PDAM, who also serves as the Head of Tirta Makmur Co-operative.

The principle of Tirta Makmur Co-operative is to help its members and

Satellite Image from Google Map, Lane Number 3, RT 03 RW 01, Undaan Tengah village, which shows the location of PDAM water connection as a result of microfinance cooperation among Bank Syariah Mandiri, Tirta Makmur Co-operative and PDAM Kudus.

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Location of PDAM household connection through microcredit scheme

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serve the public, including customers of PDAM Kudus. The co-operative expects to become a public company and establish an office in each branch of PDAM Kudus.

Gusril Bahar, Ardita Çaesari/ IUWASH Jakarta

At the moment our co-operative manages to distribute dividend or share of the profits. It’s Rp 6 – 7 million per month. Hopefully the amount will increase with the new household connection program funded by BSM. We have been having problems with sources of funds, while the demand for household connection leasing is pretty high

Ayatullah Humaini, Head of Tirta Makmur Co-operative

iuwashnews flash edition / microcredit | 3

credit ceiling of Rp 3 billion for 2,000 household connections, equal to Rp 1.5 million for each connection. With financing for new connections secured, PDAM can focus on providing good service and conducting marketing strategy to prospective customers.

After several meetings between BSM Kudus and BSM Head Office, finally Tirta Makmur Co-operative and PDAM Kudus signed an agreement with BSM Kudus on January 9, 2012.

“It took us quite some time to discuss technical details with PDAM and Tirta Makmur Co-operative to make sure that the payment scheme is really feasible in the field. The result is pretty good. So far, BSM has financed around 500 households. We have disbursed Rp 500 million of credit within one month,” said Agung Wibowo, the Head of BSM Kudus Branch.

Kudus.The microfinance concept of Bank Syariah Mandiri (BSM) is quite different than that of conventional banking system and other microfinance institutions. BSM applies a buy-and-sell system at a profit, while conventional microfinance system applies interest system.

BSM Kudus buys water connection package from PDAM Kudus and sells the connection package to customers through Tirta Makmur Co-operative, as an official intermediary agent, appointed by PDAM Kudus and acts representative of BSM. The BSM microfinance product is also known as Murabaha or buy-and-sell at a profit.

The process of BSM microfinance service is as follows:

1. Customer or End User propose a channeling financing (PDAM water installation leasing) through Tirta Makmur Co-operative;

2. Based on End User proposal, the Co-operative staff writes a Financial Analysis Proposal/eligibility to be forwarded to Co-operative Financing Committee;

3. End Users that have been approved by the Financing Committee will be forwarded to BSM by batch;

4. BSM conducts verification process and inputs the end users data to their microfinance system. The BSM

Bank Syariah Mandiri Kudus:

Microfinance Commitment for

Low-income People

Microfinance system will announce whether an end user’s proposal has been approved or rejected. When an end user’s proposal has been approved, BSM will ask Tirta Makmur Co-operative to develop a Financing Agreement with the customer/end user;

5. BSM conducts financing disbursement to escrow account of Tirta Makmur Co-operative at BSM;

6. Tirta Makmur Co-operative works with PDAM Kudus to install water pipes at end user’s residence;

7. The end users pay monthly installments directly under the guarantee of PDAM Kudus and Tirta Makmur Co-operative.

BSM is committed to provide a one year ceiling for micro-financing, which meets the business targets of PDAM. The credit application requirements of BSM are also simpler. Credit applicants need to submit a copy of their identity card and family card, fill in a credit proposal form, and state family’s income to pay the installments. BSM will also provide a microfinance system software to be installed at the Co-operative. The system will ease credit proposal and approval process and facilitate financing disbursement process within 2-3 days for every 100 credit applicants.

For 2012, PDAM Kudus targets 2,500 customers, while BSM will provide a

Collaborative Channeling of BSM with Tirta Makmur Co-operative and PDAM Kudus

Bank Syariah Mandiri (BSM)

Tirta Makmur Co-operative

Chanelling contract

Chanelling contract

Chanelling contract

Installment payment Financing

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BSM has financed around 500 households. We have disbursed Rp 500 million of credit within one month

Agung Wibowo, the Head of BSM Kudus Branch

As the head of Kudus branch, Agung Wibowo wished that the microfinance program could be scaled up nation-wide and helps the poor people to access clean and safe water through collaboration with Bank Syariah Mandiri and PDAM.

Supports from USAID-IUWASH to introduce and facilitate such collaboration with PDAMs in Indonesia will help solving problems and monitor program sustainability.

Gusril Bahar, Ardita Çaesari/ IUWASH Jakarta

4 | iuwashnews flash edition / microcredit

”PDAM water is clean. It has many uses”

Kudus. Mrs. Marfuah and Mr. Slamet are a couple who live on Lane Number 3, Undaan Tengah village, Kudus district. For the past 10 years they get drinking water

and water for their household needs from a 165 meter-deep borehole well. Every month they spend Rp 100,000 to pay for the electricity fee of the bore pumps. However, the water quality of their well cannot match that of PDAM.

Having heard about a leasing for household connection from BSM Kudus through Tirta Makmur Co-operative, the couple proposed to get the leasing. Their proposal has been approved by BSM Kudus and Tirta Makmur Co-operative, which followed by installation of and PDAM’s piped water in their house.

”I’m glad to be able to use PDAM water. The water is clean. It feels clean for bathing, unlike the well water. PDAM water can be used for drinking, washing, everything,” said Mrs. Marfuah, adding, ”I hope my electricity fee will go down, because now I rarely use the well water.” Gusril Bahar/ IUWASH Jakarta Kredit Foto: IUWASH JAWA TENGAH

Kudus. Mrs. Hindiyati and Mrs. Marfuah from Undaan Tengah village, Kudus district enjoys clean and safe water from the Water Utility of Kudus (PDAM Kudus), fit for drinking and other household uses. They do not need to fully pay in cash to enjoy the clean water from PDAM Kudus, but they pay by installments through a leasing package for household connection, a collaborative effort among Tirta Makmur Co-operative and Bank Syariah Mandiri (BSM) Kudus as the provider of microfinance for low-income people in Kudus.

“I want to have my own PDAM connection”

Kudus. The marketing staff of Tirta Makmur Co-operative visited a simple house with cement floor in Lane Number 3, Undaan Tengah village, Kudus

district. Mrs. Hindiyati as the house owner received Mr. Muqofifin, the staff of Tirta Makmur Co-operative, who then offered the household connection from PDAM.

”I want to have my own PDAM connection, like those who already installed PDAM water connection. But I don’t have much money. I could only

Let’s Install First, Pay by Installments!

Ibu Hindiyati

pay by installments,” said Mrs. Hindiyati in a wishful tone.

Mrs. Hindiyati and Mr. Maksum, her husband, buy water for drinking. The water comes in jerrycans and it costs Rp 500 for each jerrycan or Rp 30,000 for a month. For bathing and washing they use saline and turbid water from their well.

Mr. Muqofifin explained to the couple about a new service from Tirta Makmur Co-operative, which is a leasing for household connection in collaboration with Bank Syariah Mandiri (BSM) Kudus as the provider of microfinance for low-income people in Kudus.

BSM Kudus provides microfinance through Tirta Makmur Co-operative to finance household connection leasing for Mrs. Hindiyati and Mr. Maksum at the cost of Rp 1 million. The amount of money is inclusive of margin, which can be paid by installments for 10 months. However, the number does not include PDAM water bill of Rp 23,000 per month, which water can be used for all household uses, such as drinking, cooking, bathing and washing.

Mrs. Hindiyati and Mr. Maksum was thrilled to have received the offer. They proposed a leasing for household connection to BSM Kudus through Tirta Makmur Co-operative. Currently, their application has been approved and their family will quickly enjoy clean and safe water from PDAM Kudus.

Ibu Marfuah

List of Installments for end user of PDAM Kudus

NO. CREDIT CEILING (Rp)

TERMS

12 24 36

1 850,000 83,282.72 47,964.53 36,550.98

2 900,000 88,181.71 50,785.97 38,701.03

3 1,000,000 97,979.67 56,428.86 43,001.15

4 1,100,000 107,777.64 62,071.74 47,301.26

5 1,200,000 117,575.61 67,714.63 51,601.38

6 1,300,000 127,373.58 73,357.51 55,901.49

7 1,400,000 137,171.54 79,000.40 60,201.61

8 1,500,000 146,969.51 84,643.28 64,501.72