The Impact of Local Television in Today’s Society

Local Television in Today's Society Since the early 1940's, it has been clearly evident that television has played a crucial role in the way people receive and perceive news media on a day to day basis. According to State of the News Media, viewership and ratings have drastically changed over the years and as of 2012, it is suggested that it is in large part due to the pressing and irreversible shift towards social media.Now our country not only relies on our friendly local newscasters to fill us in on the weather or breaking news irst thing in the morning, but also on the latest KRQE tweet on Twitter or status update on Facebook. Our world is turning digital and as hard as many may try to stop it, there is no denying that a future in news will rely heavily on the efficiency and effectiveness of social media. So where does this leave our local television stations and ultimately, how will this digital frenzy effect their overall viewership, ratings and longevity?This is the prominent concern in our local news media world today and a question that must be discussed and actively researched to ensure the future of local elevision news. Throughout the course of this semester, the students in this Media Management course have had the opportunity to pick the brains of various news anchors, producers, directors, and Journalists to question and investigate this shift from both print media and local television, to our growing reliance on internet and various social networking sites.Each of our guests was forced to explore the same question: In a time of slipping credibility and growing opinion, how do you succeed in the digital era while maintaining values and traditions of great Journalism that rought us here in the first place? With no surprise, each speaker responded with a similar statement. The gist being that as a society, we must, as a whole, focus on seeking the truth behind any story. We must provide valid, reliable and timely information that pertains and relat es to the lives of every member in our community and remain a trustworthy source of news for years to come.We must place precedence on social responsibility. Seems a lot easier said than done considering there has been a noticeable decline in local TV news viewership since 2007. And lthough there was a slight increase in 2011, the mostly steady decline has been cause for great concern in the news world. While reading the substantial amount of information that State of the News Media provided on this issue, it was apparent that network and local stations alike are predominantly losing viewers (or in some rare cases reaching a time of stabilization) in both primetime television spots as well as in nontraditional time slots.The research suggests that although there is the occasional increase in viewers during times of national or worldwide distress, there is indeed a uantitative measure proving simply a sta bilization ot local news audiences in specific time slots (no increase) versus the drastic decline that was evident beginning in 2007. However, this ‘improvement' was not substantial enough to propose that local TV news has entered a period of new audience growth. According to SNM, â€Å"viewership of network affiliates was up for newscasts in both the morning (5 to 7 a. m. ) and late evening (11 p. m. when averaged across all sweeps periods studied. In the early evening time slot (5 to 7 p. m. , viewership was down slightly. † Delving a little deeper into the sweeps periods offered a clue to at least one reason behind the improvement – there has been higher interest in the news (for example the coverage of the chaos, rebellion, and distress surrounding Egypt and Libya earlier in the year or the 2012 Presidential election. ) But breaking news or continuous coverage of a significant event may not always dominate the airwaves considering there are times when news is slow and not as easily accessible.At that point reporters must rely on heir o wn investigative skills and creative thinking to find their own stories to dissect and examine. These facts were reiterated by a large number of our guest speakers in class including Alex Tomlin, Bill Anderson, Doug Fernandez and Jessica Garrate. They all made it a clear point to discuss the importance of understanding the average news consumers' daily routine, the most critical time of day that any one individual can be reached and what it is that truly attracts a news consumer to a particular station. That is the indeed the key to success for any local station.Understand the consumer and their wants and needs, take initiative on finding imperative stories regarding our community, and consistently provide viewers with the most up to date and relevant news possible while maintaining a good reputation by being credible, reliable and original. In todays news world, this in many instances means Jumping on that social media bandwagon and making the decision to provide consumers with pla y by plays via the internet. â€Å"Almost every station in the country now has a Facebook page, according to the annual RTDNA/Hofstra survey, and almost 90% have t least one Twitter feed. (SNM, 2012) This move to digital news has proven to be in some cases effective, and in others somewhat irrelevant to the success of local stations (or newspapers) as mentioned by Bill Anderson, general manager of KRQE, and Dan Mayfield, Sr. writer for NM Business Weekly. However, although results of viewer increase due to social media is not definitive; it has great potential to become a positive influence for any news team because social media can encourage consumers to sample any station's newscast.And once that seed has been planted, it becomes the responsibility of the news team to deliver a quality show that maintains that viewers' interest. Alex Tomlin, news reporter and correspondent for KRQE, discussed in great detail the value of delivering hard and entertaining news, without focusing on the trend of social media. She mentioned briefly how a reliance on networking sites is viewed in the news world as a method of being lazy and therefore unreliable because it is difficult to attribute any fact to the alleged statements being made.

Environmental pollution: its effects on life and its remedies Essay

The term pollution refers to the act of contaminating ones environment by introducing certain hazardous contaminants that disturb the ecosystem and directly or indirectly affect the living organisms of that ecosystem. Pollution in general is the activity of disturbing the natural system and balance of an environment. The increase in the pollution over the years by man has caused severe damage to the earth’s ecosystem. It is responsible for global warming which is leading to the end if all the lives on earth. Over the years there is an extreme increase in the rate of human diseases, and death rate of various animals and plants on earth, and that is all because of the pollution caused by man himself. AIR POLLUTION: According to the dictionary, air pollution is the contamination of air by smoke and harmful gases, mainly oxides of carbon, sulfur, and nitrogen. Some examples of air pollution include: Exhaust fumes from vehicles The burning of fossil fuels, such as coal, oil or gas Harmful off-gasing from things such as paint, plastic production and so on Radiation spills or nuclear accidents Air pollution is linked to asthma, allergies and other respiratory illnesses. You can more about how the environment affects human health here. LAND POLLUTION Land pollution is the degradation of the Earth’s surface caused by a misuse of resources and improper disposal of waste. Some examples of land pollution include: Litter found on the side of the road Illegal dumping in natural habitats Oil spills that happen inland The use of pesticides and other farming chemicals Damage and debris caused from unsustainable mining and logging practices Radiation spills or nuclear accidents Land pollution is responsible for damage done to natural habitat of animals, deforestation and damage done to natural resources, and the general ugly-ing up of our communities. Light Pollution Light pollution is the brightening of the night sky inhibiting the visibility of stars and planets by the use of improper lighting of communities. Some examples of what causes light pollution: Street lamps that shine light in all directions, instead of with a hood to point light downward toward the street. Unnecessary lights, especially around the home Light pollution uses more energy (by shining more light up instead of down), may affect human health and our sleep cycles and most importantly, corrupts our kids telescopes and their curiosity. Noise Pollution Noise pollution is any loud sounds that are either harmful or annoying to humans and animals. Some examples of noise pollution: Airplanes, helicopters and motor vehicles Construction or demolition noise Human activities such as sporting events or concerts Noise pollution is disruptive to humans’ stress levels, may be harmful to unborn babies, and drives animals away, causing nervousness and decreasing their ability to hear prey or predators. Thermal Pollution Thermal pollution is the increase of temperature caused by human activity. Warmer lake water from nearby manufacturing (using cool water to cool the plant and then pump it back into the lake) Included in thermal pollution should also be the increase in temperatures in areas with lots of concrete or vehicles, generally in cities These kinds of environmental pollution can cause aquatic life to suffer or die due to the increased temperature, can cause discomfort to communities dealing with higher temperatures and can even affect plant-life in and around the area. Visual Pollution Visual pollution is what you would call anything unattractive or visualiing damaging to the nearby landscape. This tends to be a highly subjective topic, as we all find different things attractive and unattractive. Some examples of visual pollution: Skyscrapers might block the view of a mountain Graffiti or carving on trees, rocks or other natural landscapes Billboards, litter, abandoned homes and junkyards could also be considered among three kins of environmental pollution Mostly visual kinds of environmental pollution are annoying, although some may say they are also depressing (such as when they can’t see a view through a billboard). Water Pollution Water pollution is the contamination of any body of water (lakes, groundwater, oceans, etc). Some examples of water pollution: Raw sewage running into lake or streams Industrial waste spills contaminating groundwater Radiation spills or nuclear accidents Illegal dumping of substances, or items in bodies of water Biological contamination, such as bacteria growth These kinds of environmental pollution are linked to health issues in humans, animals and plant-life. You can read more about how the environment is affecting our health here.

Huck Finn’s Consciousness

In Mark Twain’s quote, â€Å"a book of mine where a sound heart and a deformed conscience come into collision and conscience suffers defeat† evidently has symbolism. The deformed conscience in this quote refers to southern society in Huckleberry Finn’s world, while the sound heart refers to individuality and Huck Finn being an individual. There are many influences that contributed to Huck Finn’s â€Å"deformed society†. Some are the southern society he grew up in, the fact that Jim is a slave, his heart and individuality, and the fact that he feels that Jim is a person and not a slave.In Huckleberry Finn, Huck and Jim, a slave, take many adventures together. The problem is that the time period is pre-Civil War. Slavery is still huge in the South and blacks are looked down upon. This troubles Huck and often causes internal conflict. Southern society in this time period was difficult. Huck was often struggling with the fact that his society was tellin g him one thing, but he believed another. Society has a huge affect on Huckleberry’s feelings and actions and often cause conflict. This society has â€Å"deformed Huck’s conscience† because he doesn’t know what to believe or what is right.Another thing that deformed his conscience was the fact that Huck thought of Jim like a person and a friend, and not a slave. This was a problem for a few reasons. First of all, tying back into southern society, Jim was a slave and he was looked down upon. No one would think of befriending a slave, let alone trying to help him escape. Huck, however, is trying to escape himself from his society and environment with his dad. In today’s world, the society still affects the way we respond and think. Like Huck, if our society tells us one thing that we don’t agree with, we have trouble.Most people would want to fit into their society and do what everyone else believes, but sometimes it doesn’t work out. Today’s society runs in a way that influences everyone around us. There are many forces, however, that attempt to change the â€Å"deformed conscience†. These forces can be known as leaders in society. People from the president to world-wide leaders can help change this process and can change how society affects people in the community and their take on life and the society around them.

Nurse Practitioner Essay Example | Topics and Well Written Essays - 1500 words

Nurse Practitioner - Essay Example They also act as a psychiatric in some cases as their main focus is on the prevention of illness and they do so by educating their patient about his illness and the causes which help him to take preventive measures to avoid illness. The can provide services to patients of all ages, they can treat acute as well as chronic conditions. They also have discretion to provide medications and therapies to their patients. The three primary function of practitioner are to provide prevention, wellness and education to their patients. Their scope of working broadens when they take into care the effect of patient's illness to the people around him along with a focus on patient's condition. This preventive style of care helps reducing the future illness, medications and therapies to the patients and hence lesser expensive treatments. Nurse practitioner may easily provide diagnosis and management facilities to their patient for diseases such as Pneumonia, BP, or Diabetics. This autonomy comes from the specialized training that they receive in their particular area of interest during their degree program for Nurse Practitioner. They are also allowed to obtain medical histories of their patients under care and to decide upon and conduct the type of medical examination they think is appropriate for the patient. They are also allowed to prescribe diagnostic studies such as lab tests, x-rays etc to help gain an insight of the causes of patient's illness. They are also entitled to refer patients to physicians if needed or other professionals for better treatment of patient's illness. And for the reason they have good relationships with most of the physicians and surgeons. Pursuing nurse practitioners as a profession also brings some interference and questioning to your efforts from other medical professionals around you. It is not always the case that the services of a nurse practitioner will be welcomed. Medical professionals some times think nurse practitioner as a threat to their scope of working. Specially the diagnosis and the referral part of working of a nurse practitioner is always questioned and a clear-cut definition of a nurse practitioner's role is yet to be outlined. "There are times that the autonomy of the nurse practitioner is directly challenged by other medical professionals that it is it sometimes difficult for a nurse practitioner like me to work on some specific cases (Wadsworth et al, 2002)". Many medical professionals refuse a nurse practitioner's judgments and decisions just because of the fact that he/she does not a doctor written with his name. According to a study conducted by the RNC Nurse Practitioner Association, refusal to honour the referrals and diagnosis made by nurse practitioner is quite common. "About 44% of the nurse practitioners surveyed by the association reported that their request for X-rays and referrals were refused on the basis that these request and referrals are made by 'nurses, not by doctors' (Jane Ball, 2006)". The refusal from some medical professionals and service providers to honour the requests made by nurse practitioner creates a big obstacle in the practice of NPs' profession. It is sometime not only frustrating but also discouraging to the passion of a NP towards his or

Trademark Laws Case Study Example | Topics and Well Written Essays - 500 words

Trademark Laws - Case Study Example Given this initial interest confusion, an actionable theory, the court found that the public was likely to be confused to some extent and this was enough for the court to further find that trademarks could not be used as metatags. The ruling, however, was rather specific or limited. The facts of this case provided that the MovieBuff trademark owned by Brookfield could not be used as a metatag; however, the court mentioned several variations that would not be unlawful. First, the court noted that simply putting a space between the movie and the buff would be a lawful metatag; this would be a nearly identical use of language and protect West Coast from lawsuits. Second, the court stated that trademarks can be used descriptively in metatags and on web pages. The trademark, for instance, could be used to make comparisons or to draw contrasts. Thus, in short, the ruling was very specific in that it found the exact use of a trademark in a metatag to be unlawful while at the same time articulating a few safe harbors. The court's reasoning seems sound and persuasive.

Critical analysis of petition Essay Example | Topics and Well Written Essays - 750 words

Critical analysis of petition - Essay Example The college’s rationale into college algebra in the applicant’s curriculum is to satisfy the college’s minimum level mathematics competence into the course, to meet requirements for graduation, to develop an all round academic competence, and to be creative. Either the applicant meets the threshold for the reasons or the reasons are unrealistic to the applicant’s objectives and potential benefits to the society. The applicant’s experience that identify academic competence in algebra, professional application of mathematical concepts, potentials as an all round person, and the ability to outsource expertise in mathematics also justify the application for waiver. He records that he â€Å"already poses ample math skills,† and was â€Å"a machine and welding contractor† an area in which h applied algebra (Adams n.p.). A utilitarian perspective to the issue would consider the benefits that the college’s requirement for a college alge bra unit would offer to a student, the university, and the entire community that the college and the student will serve. For a student, inclusion of college algebra is justified if the unit is fundamental to the student’s profession or subsequent academic programs and if the student has not shown competence in the unit. Factors such as excellence in a similar unit and previous application of the unit’s concepts in the applicant’s profession and at advanced levels however mean that undertaking the course will not benefit the student. The requirement will also not benefit the school’s objective in the student because the student has already developed relevant competence to the college’s interest. This further means that the society derives no benefit from the requirement. The requirement also denies the applicant... The essay is related to an author, who is an Indian American and a student at the Arizona State University undertaking justice studies. His concern is that while the university requires him to take an algebra course, registering for the unit will require him to take one more semester in his current course and this will mean missing ASU College of Law entry in the fall 1993 and yet the course unit will not add value to his profession. This paper analyzes the submission and argues in its support. In the analysis of the essay, we go through the cons and pros of the situation. The pros would be that Adams’s plea for a waiver on the mathematics requirement is valid and his reasons justify this. The college’s rationale into college algebra in the applicant’s curriculum is to satisfy the college’s minimum level mathematics competence into the course, to meet requirements for graduation, to develop an all round academic competence, and to be creative. With cons, i t is however an alternative perspective regarding the waiver. The college has set its requirements for college algebra as a â€Å"minimum level of math competency† into the course and â€Å"to satisfy the university’s math requirement† for graduation and professionals agree to its existence (Adams n.p.). This means that it has been applicable to other learners and rule ethics as well as equality supports its application on the applicant. The conclusion of the essay tells us right away that Adams is an adult learner with work experience.

Aboriginals and the Fur Trade Essay Example | Topics and Well Written Essays - 1000 words

Aboriginals and the Fur Trade - Essay Example After mixing with the invaders an indigenous culture was created. The Canadian aboriginals survived mostly on the fur trade with the Europeans that enabled them to get iron tools like knives to facilitate hunting and household activities. The ‘made beaver’ was the principal used by the aboriginals in trading since they preferred to bargain over prices. Fur trade in Canada led to the establishment of the oldest industry, Hudson Bay industry, as well as economic exploration of Canada which, in a way, exposed the aboriginal’s way of life to the rest of the civilized world. Some interesting accounts have been written about the history of the aboriginals before 1900 which revolve around their way of life, culture, and even administration. Hearn Samuel, in his journey from Wales in Hudson’s bay to the Northern Ocean in search of copper, accompanies us throughout the journey concerning life of the aboriginals in 1769-1774. Samuel Hearne, born in 1745 and died in 1 792, was an explorer and a naturalist. He undertook three journeys in search of copper and a North West passage. In 1969, his guides were aboriginal Indian home-guards. This journey through the Indians’ land with the participation of Indians as guides highlights some aspects of the Indians way of life. Aspects of Indians way of life: Hearn’s journey in the 18th century taught him a lot about adaptation. He had to adapt to the Indians way of life during his journeys in an experiential way. He learnt that travel was only possible by following buffalo’s migration routes and habits since they were the only source of food available. Hearn’s expedition takes us through various aspects of the aboriginal Indians life in North America, describing how they survived with their rudimentary knowledge and technology. The aboriginal Indians could learn the behavior of animals, for example, migration, and this enabled them to travel without fasting since they hunted anim als like buffaloes, caribou and musk-oxen. Lack of fire made the aboriginal Indians' eating raw musk-oxen a habit, also adopted by Samuel Hearn in order to survive during the snow period when making fire was impossible.1 The Indians small canoes could only be used to cross rivers. This made them (and Hearn too) walk for long distances during their traveling. The Indians were very much used to such exercises. During the third journey when they found copper in July 1771, the Indians who were eager to join their waiting wives turned back. They increased their pace, and this made Herne, who was not accustomed to walking such long distances on foot, lose his toe nails. This is one amazing aspect of life that can be found among the aboriginal Indians: they were used to walking long distances and in harsh conditions. The aboriginal Indians who were traders in fur could undertake such juorneys in order to exchange their wares with others, and they had learnt the seasonal movements of animal s which were their sources of food when traveling.2 The aboriginals' ability to survive inland, as highlighted by Hearn, was due to their knowledge of seasonal animal migrations, use of furs as clothing and their ability to withstand harsh conditions, for instance, fasting a lot or eating raw meat. The aboriginals' rudimentary technology and lack of canoes made trade impossible inland3. This made Samuel Hearn advise the London committee to introduce more posts, which were to involve the natives in an extended usage of canoes in order to be able to advance trade inland. The aboriginal Indians were very vital for the success of trade in Europe. Trade had suffered a lot in September 1873 after the arrest of Hearn. The reason for

Assignment Example | Topics and Well Written Essays - 1000 words - 33

Assignment Example Furthermore, the health department of Northern Carolina would always seek to ensure that the vaccination record of a child is checked once the child under consideration enrolls in a school, or a child care facility. It is important to provide an explanation that a child is not allowed to enroll in a school, whether it is private, religious, or even public without the same child receiving all immunizations that are appropriate and useful for their age. This policy is aimed at reducing the chances of a child to acquire diseases that are preventable through vaccination, as well as reducing the chances of such a disease spreading to vulnerable children. It is the following ailments that the state of North Carolina actively vaccinates its citizens against, HPV, Hepatitis A, and B, Diphtheria, Anthrax, Influenza, Mumps, Rabies, Tetanus, Typhoid, etc (Department of Health, 2014). Furthermore, for purposes of turning this vaccination policy into a success, the Government of North Carolina has developed a vaccination schedule that all health care agencies must follow while vaccinating children under the ages of 18 years. This schedule contains the identification of the ages in which children are supposed to be given certain doses of the vaccine, and identifies the type of vaccine to be administered. These vaccination schedules do not only identify the vaccination programs of children, but they also identify the vaccination programs of adults. In the medical field, a cohort study is always used to obtain evidence for purposes of disapproving the existence of an association between the causes and effects of a disease or medical condition. It is important to provide an explanation that by failing to disapprove an hypothesis, then chances are high people will start having confidence in it. It is important to understand that the cohort study can be a useful method in reporting on HPV, and tracking the disease. This is because scientists will identify a

Organisation Behaviour Essay Example | Topics and Well Written Essays - 2750 words

Organisation Behaviour - Essay Example According to Rahmati and Fard (2012) and Sease (2013), metaphors refer to a form of speaking where one thing would be expressed in the light of another so as to describe the character of the subject. They play an important role in understanding and interpreting organisations. To bring this into perspective in this paper, two metaphors borrowed from Images of Organisation, namely, organisation as an organism and political organisation will be used to describe Apple Inc., as the chosen case organisation. Apple Inc. Apple Inc. is a multinational corporation with its headquarters in Cupertino, California dealing with designing, developing and selling personal computers, computer software and consumer electronics. The American company known for its hardware products such as Mac computers, iPhone smartphones, iPad tablet computers and iPod music players and software such as iTunes media browser and Safari web browser among others was founded by Steven Wozniak and Steven Jobs in 1976 and in corporated in the following year. In the first year of its incorporation, the firm released the first Apple computer, Apple I. Today, Fortune 500 Magazine (2012) documents Apple Inc. as the second largest information technology company globally, after Samsung Electronics, by revenue and has been ranked third largest as a mobile phone maker. In 2008 through 2012, it was documented by Fortune 500 Magazine as the most admired firm in America and globally. Going by market capitalisation, it ranks second among the largest publicly traded corporations globally with its value as of January 2013 estimated at USD 414 billion. Its 2012 annual revenue was USD 156 billion as retrieved from its website (http://www.apple.com/). The Late Steve Jobs has been widely accredited for the success that Apple Inc. enjoys today. Together with Steve Wozniak, Steve Jobs co-founded Apple Computers Inc. in 1976, having both dropped out of college (Mittan, 2010). Following the success of their computers in the market, Steve Jobs and the then president, Michael Scott got entangled in power struggle. Though Scot resigned in 1981, tension continued to escalate causing Jobs to quit the company he had co-founded in 1985. NeXT, the company consequently formed by Jobs was purchased by Apple in 1996 seeing the re-entry of Jobs who later in 1997 became the CEO, steering the firm to greater achievements. In 2011, Tim Cook took up Jobs’ roles after his resignation from being the Chief Executive so as to have ample time to concentrate on his deteriorating health, but died later in the same year. Cook has since steered forward the corporation in its operations. Analysis of Apple using Morgan’s Metaphors Apple as an organism Morgan (2006) uses this organism metaphor of organisations to describe their survival through varied environments. According to Black (2003), this metaphor makes humans to view organisations as living units or organisms which must adapt to the changing environment in order to survive. In this case, Apple Inc. considered as an organism would be pegged on its evolution through varied business environments over time. On its inception in 1976, the firm started as a company dealing purely in computers. With time and due to demand, the company

You choose it Essay Example | Topics and Well Written Essays - 500 words - 5

You choose it - Essay Example Future cities will be urban nightmares. As seen in the research conducted by KPMG Africa (2013), megacities are extremely unsustainable. This results from the fact that the cities continue to expand and increase in population. On the other hand, the non- human nature is slowly depleted. It is even worse with the thought that no younger cities are growing or economies. This explains an automatic stagnation in the cities that is characterized through the rising poverty levels and a primitive society. Megacities will also become a city of despair going with the fact the rise of cities has become the source of pollution, and other harms to the human body. KPMG Africa (2013) explains how the growth of cities have affected the cities in terms of the pollution from the smoke emitted from different forms, different types of foods have been chemicalized, and even the water for consumption has been polluted. It is worse to see how the human population is struggling to adjust to these changes. Some of the human species struggle to adjust with the changes in globalization (KPMG Africa, 2013; MlrdnTv, 2014). The status of the humans has therefore become extremely complex with them dealing with issues that result from urbanization such as climatic changes, deforestation and even technology. KPMG Africa (2013) continues to explain how the process of urbanization has been linked to high levels of poverty, high unemployment levels and food uncertainties. This trickles down to the access to health opportunities, other basic necessities such as water and sanitation services. This explains that in as much the population in the urban centers may be a working population, they live in terrible conditions. The growth process will then be slowed down since the cities will be extremely impoverished and will not meet the needs of all persons. Nonetheless, megacities can be termed as major sources of opportunity. KPMG Africa (2013)

Cyber search Assignment Example | Topics and Well Written Essays - 250 words

Cyber search - Assignment Example Assignments are also forwarded through a portal which is inbuilt inside the application. The teacher can then modify their instructions to meet the student’s individual needs.one can also organize important documents and customize it to fit in all classrooms needs.  This application makes students better educators because it is perfect for busy teachers, it will allow me to track students’ achievements quickly and easily. Teachers use a different mode of teaching when dealing with special education students. This is to make sure that the students are deprived the right to education. In case of deaf students, the teachers may use gesture to deliver the massage and educate the students. Teachers use braille and assist students in the learning activities Special students share some similarities, in a class one may find all of the students suffer from one disability; therefore it becomes hard for them to assist each other. On the other hand, you might find a class with extremely quick learners while still in the same class there are slow learners when it comes to the mastering of gestures and the braille language making it difficult for some students to communicate. . There are similarities between general and special students. Both groups of students need to work together and how to avoid discrimination among themselves (Foreman, 2009). The special students sometimes have adverse emotions having a mentality that they are discriminated by the entire society. They have different interests in life which they would like to accomplish. When addressing the needs of cultural diverse and the second language learners we have to consider about their back ground, this is to make sure there is a smooth transition as there are in a process of learning the new culture and language. Various procedures can be used to increase awareness in students by having motivational talks, it

Audit Proposal Essay Example for Free

Audit Proposal Essay For more classes visit www.assignmentcloud.com Management at Kudler Fine Foods now wants to see the proposed audit schedules for the systems analyzed by the team in Week Two. †¢ Prepare a 700- to 1,050-word brief that: †¢ Distinguishes between the types of audits that could be used for each process. †¢ Recommends the audit most appropriate for each process. †¢ Explains how the audits will be conducted. †¢ Identifies events that could prevent reliance on auditing through the computer.

An analysis of the budgeting in management accounting

An analysis of the budgeting in management accounting With the fast development of in the area of management accounting, more and more managers are aware of the importance of the budgeting, budgeting is an important control system in almost all organizations (Stephen C. Hansen, Wim A. Van der Stede, 2004, Management Accounting Research, Multiple facets of budgeting: an exploratory analysis,), and it provides an expression of the steps which management must take in the current period if it is to fulfil organizational objectives. (M.W.E.Glautier and B.Underdown. (1997) Accounting Theory and Practice, p531, 6th Edition, Great Britain: PITMAN PUBLISHING). This paper will discuss that what is budgeting and the budgeting committee, the budgeting purpose and types of budget, the benefits and limitations in the budget, and how to be a successful budgeting. The budgeting process focuses on the medium term period, normally one year, and it is an expression of plan in monetary terms, which is aim to achieve the organizational objectives, as Colin Drury said the budget is a financial plan for implementing the various decisions that management has made.(Colin Drury. (2008) MANAGEMENT AND COST ACCOUNTING. p10, 7th Edition, China: GENGAGE Learning) The various decisions are covered in cost and revenues, cash flow, assets and liabilities. In additional, the annual budget likely to be sub-divided for reporting periods, such as monthly budget reports, because the risk can be reduced in the monthly budgets and it helps managers easy to find the problems during the operation. In organizations, budgeting is often in the hands of a budgeting committee (M.W.E.Glautier and B.Underdown. (1997) Accounting Theory and Practice, p533, 6th Edition, Great Britain: PITMAN PUBLISHING), so the members of the budget committee is very important. For example, in the sales budgeting process, marketing department may be deliberately underestimated future sales, thus contributing to their performance evaluation. However, underestimate the quantity of sales will result in a corresponding reduction in production, which means the production will not be able to achieve the most efficient state. Another example, some department may padding the expenses in order to get more budget funds, resulting in a waste of money. Therefore, the budget committee should consist of the various important department managers, and some high-level executives be the leader. Furthermore, it usually has an accountant to be the budget officer in the budget committee, the role of the budget officer is to coordinate the individual budgets into a budget for the whole organization, so that the budget committee and the budgetee can see the impact of an individual budget on the organization as a whole. (Colin Drury. (2008) MANAGEMENT AND COST ACCOUNTING. p357, 7th Edition, China: GENGAGE Learning). The budgeting purposes and types of budget setting There are six useful purposes of budgeting, which are planning, coordinating, communicating, motivating, controlling and evaluating. Therefore, the budget will help managers through the planned activities to determine the target of the organisation and allowed managers to consider all possible situations. however it not only to reflect projected revenue and expenditure budget as of the amount of financial figures, the budget is a kind of resource allocation, input and output of the program content, quantity, and the input-output timing details. Through the budget, so that business managers can have clear objectives. In addition, the budget serves as a vehicle through which the actions of the different parts of an organization can be brought together and reconciled into a common plan. (Colin Drury. (2008) MANAGEMENT AND COST ACCOUNTING. P355, 7th Edition, China: GENGAGE Learning) and it is an effective way of the communication in the organization. Managers and staff can be motivated b y the budget because of it can help to enhance the predictability and avoid blind behavior and thereby to motivate they to complete the objectives. The Budget is based on quantitative way to show management standards, it can thus be judged according to the budget implementation effectiveness of the work and analyze differences improve their work. Two types of the budget setting are top down and bottom up. The table of illustration as following TOP DOWN BOTTOM UP OVERALL BUDGET FUNCTIONAL BUDGETS DEPARTMENTAL BUDGETS In the top down way, it typically start with overall budget then broken down into functional budgets and then into departmental. If budget setting is top down, it can be directly link to the organization objectives and reflected to the authority and mandatory of budget. However, it may be limited of the information from lower levels thus that separated from reality and may reduce the effect of budget in planning, coordination and control. On the other hand, in the bottom up way, it typically start with departmental budgets then build up into functional budgets and then into overall budget. Similarly, if budget setting is bottom up, although it can solve the lack of the information from lower levels, but the exchange of information in each department may be not enough thus plans of one department is conflict with others, therefore the lack of coordination will arise. To solve those problems, the budget setting should be repeated between individuals and the budget committee. Firstly, the objectives proposed by the budget committee, such as the quantity of sales, production costs and target profits. Next, use those indicators to discuss with the various departments in order to reach an agreement, and then the budget committee will based on the agreement to determine the master budget and give to the departments. After this, the various departments based on the master budget to set out departmental budgets and build up into functional budgets. Finally, the budget committee use those individuals budget to set out the final master budget and gives to each department. The benefits and limitations The budget has some benefits to the organization, and it will show in the figure as follow: Provide a basis for a system of control Budgets Provide a system of authorization Help co-ordinate the various sections of the business Motivate managers to better performance Promote forward thinking and identification of short-term (Perter Atrill. Eddie McLaney. (2008) Accounting and Finance for Non- specialists. P312. 6th edition. Essex: Prentice Hall Europe.) However, the budget has also been found a number of limitations, such as the time lag in the system, which means the results of last month may not be reported in time and be delayed to next month or later. Moreover, there will always be some changes in the organization during the budget period; such as the shortage of funds, labour and materials, and the budget may be impacted thus the objective of organization cannot achieve the optimal state. To be successful budgeting As we have discussed in this paper, there are some limitations of the budget, and those limitations may lead to it hard to implement and dissatisfaction may express regarding how budgeting operates in practice. The following is some way to solve those problems and make the budgeting more successful. Firstly, the budget should be always concerned to achieve the objectives of organization, and need to avoid to only focus on its own target, the reasons of the budget may only focus on its own target and forget the objectives is that it may not properly reflect the requirements of objectives.. In order to prevent the replacement of the budget target, it should enable the budget to more reflect with the organizations objectives. Secondly, the budgeting should be flexibility, it because of that business conditions are always changing. Although we have planned the business conditions for the situation may occur in the future and make appropriate action to deal with changes, but on the one hand the budget setting cannot cover everything, and on the other hand the situations are always changing that some problems cannot be foresee. Therefore, it is necessary to view the budgeting process as a guide to future action, rather than a rigid plan which must be followed irrespective of changing circumstances.(M.W.E.Glautier and B.Underdown. (1997) Accounting Theory and Practice, p532, 6th Edition, Great Britain: PITMAN PUBLISHING) Conclusion In conclusion, budgeting is an important tool for management planning and control, and it has some useful functions for businesses and organizations, but it also has great limitations. The key point in the budgeting is make the benefits of it to be maximum, and reduce the limitations and solve problems during the period, thereby the budgeting can be achieved the most effective level. References ¼Ã… ¡ Colin Drury. (2008) MANAGEMENT AND COST ACCOUNTING. 7th Edition, China: GENGAGE Learning M.W.E.Glautier and B.Underdown. (1997) Accounting Theory and Practice. 6th Edition, Great Britain: PITMAN PUBLISHING Perter Atrill. Eddie McLaney. (2008) Accounting and Finance for Non- specialists. 6th edition. Essex: Prentice Hall Europe. Stephen C. Hansen, Wim A. Van der Stede. (2004) The electronic journal: Management Accounting Research, Multiple facets of budgeting: an exploratory analysis. P415-439. ScienceDirect [online] ¼Ã… ½ Available at ¼Ã… ¡http://www.sciencedirect.com/science?_ob=ArticleURL_udi=B6WMY-4DN9VP9-1_user=128592_rdoc=1_fmt=_orig=search_sort=d_docanchor=view=c_searchStrId=1095268002_rerunOrigin=google_acct=C000010620_version=1_urlVersion=0_userid=128592md5=f55e2a67d72ee304d2f1bc3f24de73eb

BPR Microfinance Institution in Indonesia

BPR Microfinance Institution in Indonesia Chapter 1   Introduction 1.1  Background It is believed that microfinance helps low-income people alleviate their life from poverty circumstances in many developing countries. As an economic instrument which has been raised in the middle of seventies, the thought of microfinance came up from the fact that low-income people difficult to access financial services from commercial or formal banking institution which may disadvantage them or even not including them as potential clients. The reason is that, which often we may hear for several times, low-income people lack of collateral for guarantee some amount of money they want, and in the commercial financial institutions point of view it is costly to serve them due to unequal cost-benefit and high transaction cost: low-income people tend to borrow in small amount but the commercial financial institution maintain high cost for processing and assuring their repayment. These costs are not proportional with the amount of loan given to them. A formal microfinance institution existing in Indonesia is the Bank Perkreditan Rakyat/BPR (People’s Credit Bank or Rural Bank)[1] which is established by the Banking Act. The main objective of the BPR is to serve small businesses[2]. It means that BPRs can enhance their role and contribution in the development of micro and small business[3]. In Indonesia, like other developing countries, micro, small and medium enterprises (MSMEs)[4] play significant role in economy. The role of MSMEs can be viewed as an important factor for Indonesia to recover from economic crisis and to lead economic growth and employment. Statistics Indonesia (Badan Pusat Statistik/BPS) and Ministry of Cooperatives and Small-Medium Enterprises reported[5] that, the average contribution of SMEs’ share to total GDP Indonesia from the period of 2001 2007 was 60.77%, while at the same period large enterprises (LEs) contributed 39.23% which can be seen in Table 1. Source:  Statistics Indonesia (BPS) and Ministry of Cooperatives and Small-Medium Enterprises (various editions) In terms of employment creation, MSM enterprises have passed over large enterprises. Table 3 provides worker absorption by types of enterprises. It shows that small enterprises have absorbed approximately 91% of employment during 1999-2006, while medium and large enterprises have provided by 5% and by 4% of employment in Indonesia. Source  : Cooperative Statistics cited in Nazara and Gitaharie (2008), edited by author Based on the data which are discussed in the previous paragraphs, it can be concluded that micro, small and medium enterprises (MSMEs) have a big role and a potential as a driver of the domestic economy. Nevertheless, they still have several constraints, for instance, product market accessibility, lack of management skills, and limited access to financial sources, especially from commercial banks, to meet their demand for finance. A survey conducted by Statistics Indonesia (BPS) concluded that the biggest problem for micro and small enterprises is lack of capital for financing their business.  The survey recognized that  problem in finance for micro enterprises was accounted for 40.48%, while for small enterprises was 36.63% (Wardoyo and Prabowo 2003: 31). In Indonesia, small and medium enterprises can acquire their finance from several sources. According to Nazara and Gitaharie (2008) which refer to statistical data from BPS 2000; 82,960 SMEs got their finance from non banking financial institution; 385,383 SMEs got their finance from banks; and 661,630 SMEs got their finance from other sources. It is clearly from the data that most of SMEs rely on sources other than formal institutions. These figures were not taking into account for SMEs which have no legal entities (Nazara and Gitaharie 2008: 8). From SMEs point of view, they face kinky administrative procedure and also they have to provide collateral as guarantee to get loans from commercial banks. This condition leads SMEs favoring in Bank Perkreditan Rakyat/BPR (People’s Credit Bank or Rural Bank) and other financial institutions which provide simpler in administrative procedures, but higher in interest rates compared to commercial banks (Nazara and Gitaharie 2008: 8). Even though entrepreneurs are burdened with high interest rates, they do not much complain about it as long as they have access to formal credit (Berry et al. 2001 as cited in (Sunarto 2007: 2)). In line with the condition in which SMEs favoring in BPRs, Sunarto (Sunarto 2007: 4) stated that BPRs have several advantages in serving to SMEs, those are: (1) its location which is close to SMEs, (2) simpler in credit procedures, (3) accentuate a personal approach in its services and (4) more flexible.   This paper is focused on the role and contribution of BPR, one of the formal types of microfinance institutions in Indonesia, as the suppliers of funds to different types of enterprises especially to micro and small. The discussion emphasizes on credit allocation delivered by BPRs to the micro, small and medium enterprises. Comparative analysis will be made between commercial banks[6] and BPRs for analytical purposes in two things. Firstly, the comparison in terms of allocation of credit which does not consider other variables playing a role in borrowing, for instance interest rates and so on. The comparative result is not in the amount of the credit disbursed but in the percentage of allocation for each type of enterprise. Secondly, the comparison in terms of performance will be discussed through some indicators. Furthermore, the performance indicators of BPRs will be compared with their criteria which set by Bank Indonesia to see whether those indicators improving or deteriorating. 1.2  Research Objective and Research Questions Research Objective The objective of this paper is to study the role and performance of Bank Perkreditan Rakyat (BPR), as one of microfinance institutions in Indonesia, in financing micro, small and medium enterprises. Research Questions In order to achieve the research objective, this paper proposes research questions as follows: 1.  What is the role of BPRs as supplier of funds to different types of small and medium enterprises, in particular micro enterprises? 2.  What is the performance of BPRs in relation to credit provision to micro and small enterprises? 1.3  Research Hypothesis Bank Perkreditan Rakyat (BPR) was established with the main objective is to serve small-scale business and people in rural areas. Therefore, the first hypothesis is that BPRs are reaching their main objective as supplier of funds to micro, small and medium enterprises as mandated by regulation (i.e., banking act). In order to meet the objectives, it is needed good performances which are reflected from their performance indicators. Therefore, the second hypothesis is that performance indicators of the BPRs have met with the standards which set by the Indonesia banking authority. 1.4  Organization of the Paper This paper is divided into five chapters. Chapter 1 is introduction which contains background of the research, research objective and research questions, research hypothesis, and organization of the paper. Chapter 2 is review of the literatures and analytical framework for the research. Literature reviews discuss about definitions of microfinance and microfinance institution, the approaches can be taken by a microfinance institution in order to serve the clients, the models of microfinance institutions, the types of microfinance institutions in Indonesia and the pyramid of them in relation to potential customers and performance indicators. Analytical framework discusses about the way in which the research will be achieved. Chapter 3 is the microfinance institutions in Indonesia which contains their brief history and recent condition. Chapter 4 is analysis of the role of BPRs in financing micro, small and medium enterprises which contains overview of the chapter, data source for the analysis, methodology of the analysis, some information about commercial banks and BPRs, and analyzing to answer the research questions. Chapter 5 is conclusion.   Chapter 2   Literature Review and Analytical Framework 2.1  Literature Review There are many definitions about microfinance proposed by several researchers and institutions. This paper uses some definitions given by Robinson, Ledgerwood, Consultative Group to Assist the Poor (CGAP), and Asia-Pacific Economic Cooperation (APEC) to describe microfinance. Robinson (Robinson 2001: 9) defined microfinance as small size financial services (mainly saving and credit) given to people who having farm or fish or herd; people who running micro or small enterprises which producing, recycling, repairing or selling goods; people who offering services; people who working for commissions or wages; people who having earnings from renting the land, vehicles, draft animals, or machinery and equipment; and people or other individuals and groups from both rural and urban areas at the local level from the developing countries. Consultative Group to Assist the Poor (CGAP)[7] which uses terminology â€Å"poor people† and Ledgerwood which uses terminology â€Å"low-income clients† pointed out to person who receives basic financial services from microfinance including self-employed people. Furthermore, Ledgerwood (Ledgerwood 1999: 1) stated that definition of microfinance comprises not only in financial intermediation but also in social intermediation. Many of microfinance institutions (MFIs)[8] provide this social intermediation function (i.e., group arrangement, self-confidence development, training to enhance capabilities and to increase capacities in terms of financial literacy and managements) go along with financial intermediation. Moreover, she argued that microfinance is a development instrument and it is not just banking.   Asia-Pacific Economic Cooperation (Santoso et al. 2005: 7) defined microfinance into two understandings. Firstly, it refers to an institution when it designates to an organization which offer financial services or banking products, especially loans to the poor people. Secondly, it uses for different methods or activities which assigned to the poor people in order to access financial services. The poor people usually ask for loans, meanwhile commercial banks do not qualify them for loans. These understandings are close to each other. An institution which provides products for poor people called as microfinance institution. The usage of products (i.e., credits) which is provided by MFIs will be beneficial for poor people in generating more earnings.   Ledgerwood (Ledgerwood 1999: 65-66) stated that the approaches that can be done by microfinance institutions can be divided into two main categories: the minimalist approach or integrated approach. When MFIs do minimalist approach, they only perform functions of financial intermediation, although sometimes they offer social intermediation in limited services. Premise that underlie this approach is a-single missing piece that can be offered by MFIs to the clients in the form of access to credit for them due to the clients are getting less coverage of services from financial institutions, for instance to grow enterprises. On the other hand, integrated approach is a combination of four aspects those are social and financial intermediation, enterprise development and social services. Thus, it is needed a holistic view of the client when a MFI taking this approach. If MFIs are not able to meet all four services, MFIs only offer services that are really needed by the client as long as this service in line with goal and objective of MFIs. Since the large-scale demand for services microfinance activities is in existence, the activities are shown in many countries. The poor people are usually un-bankable, because of such conditions: low skills, poor capacity and severe inabilities. They might not be served in the commercial banking system. It is because the system needs for formal requirements, along with the proper economic scale and certain guarantee. In official terms, this kind of market is un-named and un-served. There are niche markets for the supply of services for MFIs (Santoso et al. 2005: 8). Clients of microfinance institution can not be classified as the poorest of the poor. Generally, they are self-employed and low-income entrepreneur, including; traders, food vendors at the street side, small farmers, small producers and artisan who produce souvenirs in at tourism area and so on. The nature of their business usually provides a stable source of income (Ledgerwood 1999: 2). In various forms, income is provided by micro enterprises owned by the poor. This is done by providing employment. The recycling and repairing better than littering a good, making cheap food, clothing, and transportation to be available are some examples. It is also made to them who are from the low level of formal sector that are usually very difficult to live with their salaries. The people of this kind of life are often can cope with such a problem with the typical cases mentioned above, but can not handle the more serious problem. The other types of problem that are often found are deficiency of capital, skill, official status, and business security. In the meantime, naturally they already have the ability to face sharp business sense, strong life skills, long hard work practice, market knowledge, extensive communication and informal support networks. They also used to have the ability to live supported by their flexibility basic consideration (Robinson 2001: 12). A recent study in Bosnia and Herzegovina carried out by Hartarska and Nadolnyak (Hartarska and Nadolnyak 2008) used the financing constraint approach. The approach states that microenterprises that have good access to credit will be less rely on internal funding in their investment. Using the Living Standards Measurement Survey and the existence of the MFIs in their area, they compare sensitivity of investment to internal funds in the microenterprises which there are MFIs in municipalities they located to microenterprises which there is no MFIs in municipalities they located. They concluded that the MFIs reduce the constraint of microenterprises funding when they are exist close to business. There are some models of microfinance institutions. The first model is Grameen Bank. This model is founded in many countries, especially in Bangladesh, from which it established for the first time by Muhammad Junus. In determining target poor clients, Grameen Bank will do it carefully which is usually done through a series of tests. Loans are given to the group in which each group typically consists of five people and each member of the group guarantee the loan of the other members. This model intensively requires supervision and motivation from the staff to the group borrowers. The second model is Village Bank. An implementing agency establish individual village bank together with 30-50 people and sets capital for on-lending to other members. Repayments of the loan are usually in a week until 16 weeks whereas the village bank pays the principal plus interest to implementing agency. The third model is Credit Unions (CUs). Credit Unions are non-profit financial cooperatives which owned and controlled by its members. Besides saving, CU also provides loans for both productive and non-productive purposes to the members. The membership of CUs compared to Grameen Bank is more heterogeneous and usually based on similar bond. The fourth model is ‘self-help’ groups (SHGs). This model is close to the second model, village bank, although their structure is less well compared to the village bank.  The membership of SHGs is based on the similarity in income and the number of membership approximately 20 people. In principle, they use internal funding, that is saving, to lend it to the members, even though they can also seek external funding as additional source of funds. Several NGOs are facilitating and promoting SHGs, but basically, SHGs are directed as an independent institution. The task of seeking additional financing from outside is usually helped by NGOs which link between SHGs and other external parties or other funding agencies. This NGO’s job close related to social intermediary function they have, while other NGOs are functioned as financial intermediaries which funding SHGs  (Conroy 2003: 4-5). In terms of forms, microfinance institutions can be classified as bank (government and commercial), nonbank financial institution, saving and loan cooperative, credit union and nongovernmental organization. Pawnbrokers, rotating saving and credit association, and moneylender also part of MFIs and hold significant roles in functioning financial intermediation although they are more informal in legal status (Ledgerwood 1999: 1). In Indonesia, several institutions have already served microfinance services for such a long period. Those institutions can be divided into four types. The first type is formal microfinance institutions (MFIs). This type of MFI is regulated and supervised as banking institution and therefore their activities as financial intermediaries subject to banking regulation and supervision. Such institutions included in this type are BRI Unit (state-owned microbank), commercial banks with microfinance services and Rural Bank (Bank Perkreditan Rakyat/BPR). The second type is semi formal MFIs which registered and or licensed by state authorities or local governments, therefore they are not regulated by banking authority (Bank Indonesia). Including in this type are cooperatives, Islamic-based cooperatives (Baitul Maal wat Tamwil/BMT), rural credit institution (Badan Kredit Desa/BKD) and microfinance owned and managed by NGOs. The third type is informal MFIs that operate outside the framework of government regulation, among others, are credit union, rotating credit and saving association (ROSCA), moneylenders, landlords and so on. The fourth type is microcredit programs established by the government in channeling credit to subsidize the poor through a variety of institutions (Nugroho 2008: 181-182). Further explanation about these four microfinance services especially the first three types of MFIs will be presented in chapter 3.   In Figure 1 we can see the pyramid of microfinance institutions with their potential customers in Indonesia. The top layer shows formal MFIs (BRI Unit, Rural Banks/ BPRs and LDKPs). They provide financial services for the top level of microfinance market. This type of MFIs is intended to serve small business which has characterized with stable income flows; therefore these MFIs’ potential clients are non-poor and not so poor people. In the middle layer, semi- formal MFIs serve microfinance services for the poor households. This layer includes rural credit institutions (Bank Kredit Desa/BKD), cooperatives, BMT and NGOs. Clients in this layer are characterized by unstable flow of income. At the bottom layer of the pyramid the huge number of potential clients which need microfinance services. They are very poor people which are characterized by unpredictable income. They need the microfinance services in order to ensure their uncertain income, so they need a small loan to overcom e the difficulties of life (Nugroho 2008: 184-185). Figure 1: The Pyramid of Microfinance Services in Indonesia Source: BI and GTZ (2000) cited in Nugroho (2008) As mentioned above, Rural Bank (Bank Perkreditan Rakyat/BPR) is one of the formal types of microfinance in Indonesia. Its existence is established by Banking Act number 7 of 1992 as amended by Banking Act number 10 of 1998. The main goal of the rural bank is to serve small business and rural communities. In order to deliver their services to the customers, a microfinance institution requires a good performance. This performance can be seen from some indicators. Looking at these indicators, we can decide how well they not only can do financially but also it can also build the future performance goals. There are a large number of performance indicators that can be used by MFIs in measuring the financial performance. One of the principles that can be used is the CAMEL system, ACCION. This system examines five traditional aspects which are regarded as the most important thing in the practices of the financial intermediaries. The five aspects (capital adequacy, asset quality, management, earnings, and liquidity) be the sign of the financial condition and operational strength of the MFI in common (Ledgerwood 1999: 205,227,229). 2.2  Analytical Framework Based on the theoretical framework that has been presented in the previous section, the author uses Figure 2 below describing the analytical framework used in the research which answering the research questions asked. There are two parties involved in the financial market.  On one hand, there is a supply side which is financial institutions that act as financial intermediation agents or it might be function as other than financial intermediation like social intermediation or something else. These financial institutions include commercial banks, non-banks financial institutions (insurances company, ventura capital, etc), and microfinance institutions (in different types and forms). On the other hand, on the demand side, there are some parties that require financing for different purposes, among others for working capital and investment usage which is belongs to micro, small and medium enterprises (MSMEs). The problem is that not all of these financial institutions allow MSMEs as their client due to several requirements which can not be fulfilled by MSMEs (collateral and bureaucratic procedures, for instances) or it might be comes from the MSMEs itself that no need too much funds (small financing). Here, microfinance institutions fit with the need of MSMEs. The mechanism then runs as common supply and demand in the market: MFIs, as financial intermediaries, offer credit or loan to MSMEs. Furthermore, MSMEs use the loan for running their operational activities (working capital usage) or for accumulating their physical capital (investment usage). At the end of the story, output of MSMEs will contribute to national income (GDP) and at the same time generates income for the owners and employees. Figure 2: Analytical Framework of the Research: Supply and Demand in Financial Market Source: author’s graph This paper focuses on the supply side of particular financial intermediaries in the financial market those are microfinance institutions. In other words, using Ledgerwood’s terminology mentioned in literature review, the paper mainly looks at the role of MFIs in terms of â€Å"minimalist approach†; how they perform as financial intermediations in delivering credit or loan. Special attention given to Rural Banks, one of formal MFIs in Indonesia in allocating their credit to different types of enterprises such as micro, small, medium and large enterprises. There are several reasons why this paper discusses on Rural Banks as unit of analysis. Firstly, it is states in the regulation (Banking Act) that the main objective of Rural Banks is to serve small scale business and looking into the pyramid of MFIs appeared in Figure 1. It means that Rural Banks have a specialization as small scale business’ banking, especially micro enterprises. This paper wants to see to which extent this mission is successfully executed. Secondly, Rural Banks are the second largest microfinance institutions in terms of asset, third party funds collected and number of debtors. According to Bank Indonesia (2008)[9], they posses 35% of total MFIs’ assets; 30.43% of third party funds collected on total MFIs and 29.15% of total number debtors on total MFIs.   This study proposes two research questions. The first research question relates to the role of rural banks as financial intermediaries in delivering credit to different types of business especially micro and small enterprises. In addressing the first research question, the paper uses comparative analysis and simple calculations in terms of credit disbursement for both commercial banks and rural banks so that the share (percentage) of credit allocation to different types of enterprises to be known. In order to obtain the result, some criteria and assumption are applied in the study. This is done due to there is no data available about the definite amount of credit disbursed by either Rural Banks or commercial banks to different type of enterprises. The discussion focuses only on the amount of credit allocation, so that other variables that determine the credit such as interest rate, collateral, and so forth are not discussed in this study.   The second research question indicates the performance indicators of rural banks in relation to credit provision to micro enterprises. These indicators include; Loan to Deposit Ratio (LDR), Returns on Assets Ratio (ROA) and Non-Performing Loan Ratio (NPL) which refer to Director of Bank Indonesia Decree number 30/12/Kep/Dir and Bank Indonesia’s Letter No. 30/3/UPPB about Rural Banks Soundness Evaluation. Furthermore, comparison will be made between these indicators and criteria. Chapter 3 Microfinance Institutions in Indonesia 3.1  Microfinance Institutions in Indonesia As developing country, Indonesia has long experience and history in developing microfinance institution which has made it possible for poor or low-income people to overcome financial constraints and to access financial institutions. For this condition, some researchers like Berenbach and Churchill called that Indonesia is â€Å"the most developed market for microfinance services in the world† (Barenbach and Churchill 1997 as cited in (Santoso et al. 2005: 43)). The development of microfinance institution began for the first time in Dutch colonial era when several well-educated local people saw deteriorating economy happened in their community and they looked for the need of this services and started organize it. The two famous institutions best known as pioneer in microfinance institutions and exist since colonial era are cooperative and Bank Rakyat Indonesia (BRI). As mentioned in chapter 2, microfinance institutions in Indonesia can be classified into four types (Nugroho 2008), those are; formal microfinance institutions, semiformal MFIs, informal MFIs and microcredit program which is established by the government for delivering credit to poor people through several institutions. In this chapter the latter type of MFI will not be discussed. The discussion is emphasizes on three other institutions. Formal MFIs are financial intermediary institutions which refer and subject to banking regulation and therefore supervised by Bank Indonesia. Semiformal MFIs are not regulated by Bank Indonesia as a banking authority, but they are licensed and or registered by other state authorities or local government. Informal MFIs operate outside government regulations. Nugroho (Nugroho 2008) described institutions which include in each type of MFI as follows: formal MFIs including BRI Unit, Rural Bank (BPR) and The Rural Credit Fund Institutions (Lembaga Dana Kredit Pedesaan/LDKP); semiformal MFIs covering rural credit institution (Badan Kredit Desa/ BKD), microfinance NGO, credit cooperatives including Islamic-based cooperatives (Baitul Maal wat Tamwil/BMT); informal MFIs including credit unions, rotating credit and saving association (ROSCA), moneylenders, traders and landlords. Table 3.1 provides map of microfinance institutions by types in Indonesia in terms of units and their financial services. Bank Rakyat Indonesia Unit Lembaga Dana Kredit Perdesaan (LDKP) – The Rural Credit Fund Institutions The Rural Credit Fund Institutions (LDKP) is the term of credit fund institution that operates in rural area, including a variety of non bank microfinance institutions with different names, ownership, organization, services and outreach, that was established on initiatives of provincial government. LDKP belongs to provincial, district or village government which, in their operation, have to obtain license from and was regulated by provincial government within the national regulatory framework. they get technical support and supervision from regional development bank (BPD) which are owned by provincial government.. since it was established in 1970s, the number of LDKP getting less from 1978 to 630 in 2000, this decrease due to the conversion of LDKP to peoples cerdit banks(BPR) and recently only about one quarter of LDKP  have become banks. The Badan  Kredit Desa (BKD) BKD is a profitable and sustainable village level financial institution that provide financial services with a outreach to low income people. it was operated by a committee that controlled by head of village and have sustained the operation since colonial era. On behalf of Bank Indonesia, BRI branch offices supervise and provide technical assistance  for BKD. in 1970s indonesian government did not pay much attention to this system. instead, the government  give more attention to the cooperative system. this make hard for BKD system to developed. in 1990s BRI tried to revive BKD by providing basic capital, improving administrative system and introducing new saving instruments, however, 1992 banking act burden the expanding BKD system. BKD is recognized as peoples credit bank (BPR) and has been operating as a licensed and regulated bank  since 1992 banking act but the frame work setting, supervision and technical assistance has not changed since 2000. Cooperatives Here, the brief history of cooperative in Indonesia refers to Santoso et al (2005) and Ministry of Cooperative, Small and Medium Enterprises’ website (www.depkop.go.id, 2009) as references. The thought of cooperative was delivered for the first time by Patih R. Aria Wiriatmaja at Purwokerto, a small town in Central Java, in 1896. Then, De Wolffvan Westerrode continued his efforts. In 1908, the year of national movement, Dr. Sutomo founded Budi Utomo which played a significant role for cooperatives improving the life of society. Then, Verordening op de Cooperatieve Vereeniging was established. Twelve years after that, in 1927, another type of cooperative called Regelling Inlandsche Cooperatieve was launched. In the same year, to develop bargaining power among local entrepreneurs, Islamic Trader Union (Serikat Dagang Islam) was established. Indonesian National Party (Partai Nasional Indonesia) which had activities in promoting cooperative spirit was established in 1929. 3.2  Bank Perkreditan Rakyat (BPR) Brief History Steinwand (Steinwand 2001) provided detail periodical history about Rural Bank. He divided the history into four parts of periods; the evolution of the colonial BPR (1895-1945), the period from independence to financial sector reform (1945-1983), the period from financial sector reform to financial crisis (1983-1999) and at the present condition. Rural Bank Position in Financial System in Indonesia Chapter 4   Analysis of the Role of Bank Perkreditan Rakyat (BPR) in Financing Micro, Small and Medium Enterprises 4.1  Overview Chapter 4 consists of 6 sections which each section aimed to answer the research questions. Section 1 is a general information about what will be discussed in this chapter; section 2 discusses about the source of the data used in the analysis; section 3 is the methodology; section 4 is about overview the condition of Bank Perkreditan Rakyat (BPRs) and commercial banks (CBs) in Indonesia using selected indicators, third party funds and credits; section 5 tries to reply the first research question by using comparative analysis between commercial banks and BPRs; and section 6 is the last section which answering the second research question about the performance indicators of BPR Microfinance Institution in Indonesia BPR Microfinance Institution in Indonesia Chapter 1   Introduction 1.1  Background It is believed that microfinance helps low-income people alleviate their life from poverty circumstances in many developing countries. As an economic instrument which has been raised in the middle of seventies, the thought of microfinance came up from the fact that low-income people difficult to access financial services from commercial or formal banking institution which may disadvantage them or even not including them as potential clients. The reason is that, which often we may hear for several times, low-income people lack of collateral for guarantee some amount of money they want, and in the commercial financial institutions point of view it is costly to serve them due to unequal cost-benefit and high transaction cost: low-income people tend to borrow in small amount but the commercial financial institution maintain high cost for processing and assuring their repayment. These costs are not proportional with the amount of loan given to them. A formal microfinance institution existing in Indonesia is the Bank Perkreditan Rakyat/BPR (People’s Credit Bank or Rural Bank)[1] which is established by the Banking Act. The main objective of the BPR is to serve small businesses[2]. It means that BPRs can enhance their role and contribution in the development of micro and small business[3]. In Indonesia, like other developing countries, micro, small and medium enterprises (MSMEs)[4] play significant role in economy. The role of MSMEs can be viewed as an important factor for Indonesia to recover from economic crisis and to lead economic growth and employment. Statistics Indonesia (Badan Pusat Statistik/BPS) and Ministry of Cooperatives and Small-Medium Enterprises reported[5] that, the average contribution of SMEs’ share to total GDP Indonesia from the period of 2001 2007 was 60.77%, while at the same period large enterprises (LEs) contributed 39.23% which can be seen in Table 1. Source:  Statistics Indonesia (BPS) and Ministry of Cooperatives and Small-Medium Enterprises (various editions) In terms of employment creation, MSM enterprises have passed over large enterprises. Table 3 provides worker absorption by types of enterprises. It shows that small enterprises have absorbed approximately 91% of employment during 1999-2006, while medium and large enterprises have provided by 5% and by 4% of employment in Indonesia. Source  : Cooperative Statistics cited in Nazara and Gitaharie (2008), edited by author Based on the data which are discussed in the previous paragraphs, it can be concluded that micro, small and medium enterprises (MSMEs) have a big role and a potential as a driver of the domestic economy. Nevertheless, they still have several constraints, for instance, product market accessibility, lack of management skills, and limited access to financial sources, especially from commercial banks, to meet their demand for finance. A survey conducted by Statistics Indonesia (BPS) concluded that the biggest problem for micro and small enterprises is lack of capital for financing their business.  The survey recognized that  problem in finance for micro enterprises was accounted for 40.48%, while for small enterprises was 36.63% (Wardoyo and Prabowo 2003: 31). In Indonesia, small and medium enterprises can acquire their finance from several sources. According to Nazara and Gitaharie (2008) which refer to statistical data from BPS 2000; 82,960 SMEs got their finance from non banking financial institution; 385,383 SMEs got their finance from banks; and 661,630 SMEs got their finance from other sources. It is clearly from the data that most of SMEs rely on sources other than formal institutions. These figures were not taking into account for SMEs which have no legal entities (Nazara and Gitaharie 2008: 8). From SMEs point of view, they face kinky administrative procedure and also they have to provide collateral as guarantee to get loans from commercial banks. This condition leads SMEs favoring in Bank Perkreditan Rakyat/BPR (People’s Credit Bank or Rural Bank) and other financial institutions which provide simpler in administrative procedures, but higher in interest rates compared to commercial banks (Nazara and Gitaharie 2008: 8). Even though entrepreneurs are burdened with high interest rates, they do not much complain about it as long as they have access to formal credit (Berry et al. 2001 as cited in (Sunarto 2007: 2)). In line with the condition in which SMEs favoring in BPRs, Sunarto (Sunarto 2007: 4) stated that BPRs have several advantages in serving to SMEs, those are: (1) its location which is close to SMEs, (2) simpler in credit procedures, (3) accentuate a personal approach in its services and (4) more flexible.   This paper is focused on the role and contribution of BPR, one of the formal types of microfinance institutions in Indonesia, as the suppliers of funds to different types of enterprises especially to micro and small. The discussion emphasizes on credit allocation delivered by BPRs to the micro, small and medium enterprises. Comparative analysis will be made between commercial banks[6] and BPRs for analytical purposes in two things. Firstly, the comparison in terms of allocation of credit which does not consider other variables playing a role in borrowing, for instance interest rates and so on. The comparative result is not in the amount of the credit disbursed but in the percentage of allocation for each type of enterprise. Secondly, the comparison in terms of performance will be discussed through some indicators. Furthermore, the performance indicators of BPRs will be compared with their criteria which set by Bank Indonesia to see whether those indicators improving or deteriorating. 1.2  Research Objective and Research Questions Research Objective The objective of this paper is to study the role and performance of Bank Perkreditan Rakyat (BPR), as one of microfinance institutions in Indonesia, in financing micro, small and medium enterprises. Research Questions In order to achieve the research objective, this paper proposes research questions as follows: 1.  What is the role of BPRs as supplier of funds to different types of small and medium enterprises, in particular micro enterprises? 2.  What is the performance of BPRs in relation to credit provision to micro and small enterprises? 1.3  Research Hypothesis Bank Perkreditan Rakyat (BPR) was established with the main objective is to serve small-scale business and people in rural areas. Therefore, the first hypothesis is that BPRs are reaching their main objective as supplier of funds to micro, small and medium enterprises as mandated by regulation (i.e., banking act). In order to meet the objectives, it is needed good performances which are reflected from their performance indicators. Therefore, the second hypothesis is that performance indicators of the BPRs have met with the standards which set by the Indonesia banking authority. 1.4  Organization of the Paper This paper is divided into five chapters. Chapter 1 is introduction which contains background of the research, research objective and research questions, research hypothesis, and organization of the paper. Chapter 2 is review of the literatures and analytical framework for the research. Literature reviews discuss about definitions of microfinance and microfinance institution, the approaches can be taken by a microfinance institution in order to serve the clients, the models of microfinance institutions, the types of microfinance institutions in Indonesia and the pyramid of them in relation to potential customers and performance indicators. Analytical framework discusses about the way in which the research will be achieved. Chapter 3 is the microfinance institutions in Indonesia which contains their brief history and recent condition. Chapter 4 is analysis of the role of BPRs in financing micro, small and medium enterprises which contains overview of the chapter, data source for the analysis, methodology of the analysis, some information about commercial banks and BPRs, and analyzing to answer the research questions. Chapter 5 is conclusion.   Chapter 2   Literature Review and Analytical Framework 2.1  Literature Review There are many definitions about microfinance proposed by several researchers and institutions. This paper uses some definitions given by Robinson, Ledgerwood, Consultative Group to Assist the Poor (CGAP), and Asia-Pacific Economic Cooperation (APEC) to describe microfinance. Robinson (Robinson 2001: 9) defined microfinance as small size financial services (mainly saving and credit) given to people who having farm or fish or herd; people who running micro or small enterprises which producing, recycling, repairing or selling goods; people who offering services; people who working for commissions or wages; people who having earnings from renting the land, vehicles, draft animals, or machinery and equipment; and people or other individuals and groups from both rural and urban areas at the local level from the developing countries. Consultative Group to Assist the Poor (CGAP)[7] which uses terminology â€Å"poor people† and Ledgerwood which uses terminology â€Å"low-income clients† pointed out to person who receives basic financial services from microfinance including self-employed people. Furthermore, Ledgerwood (Ledgerwood 1999: 1) stated that definition of microfinance comprises not only in financial intermediation but also in social intermediation. Many of microfinance institutions (MFIs)[8] provide this social intermediation function (i.e., group arrangement, self-confidence development, training to enhance capabilities and to increase capacities in terms of financial literacy and managements) go along with financial intermediation. Moreover, she argued that microfinance is a development instrument and it is not just banking.   Asia-Pacific Economic Cooperation (Santoso et al. 2005: 7) defined microfinance into two understandings. Firstly, it refers to an institution when it designates to an organization which offer financial services or banking products, especially loans to the poor people. Secondly, it uses for different methods or activities which assigned to the poor people in order to access financial services. The poor people usually ask for loans, meanwhile commercial banks do not qualify them for loans. These understandings are close to each other. An institution which provides products for poor people called as microfinance institution. The usage of products (i.e., credits) which is provided by MFIs will be beneficial for poor people in generating more earnings.   Ledgerwood (Ledgerwood 1999: 65-66) stated that the approaches that can be done by microfinance institutions can be divided into two main categories: the minimalist approach or integrated approach. When MFIs do minimalist approach, they only perform functions of financial intermediation, although sometimes they offer social intermediation in limited services. Premise that underlie this approach is a-single missing piece that can be offered by MFIs to the clients in the form of access to credit for them due to the clients are getting less coverage of services from financial institutions, for instance to grow enterprises. On the other hand, integrated approach is a combination of four aspects those are social and financial intermediation, enterprise development and social services. Thus, it is needed a holistic view of the client when a MFI taking this approach. If MFIs are not able to meet all four services, MFIs only offer services that are really needed by the client as long as this service in line with goal and objective of MFIs. Since the large-scale demand for services microfinance activities is in existence, the activities are shown in many countries. The poor people are usually un-bankable, because of such conditions: low skills, poor capacity and severe inabilities. They might not be served in the commercial banking system. It is because the system needs for formal requirements, along with the proper economic scale and certain guarantee. In official terms, this kind of market is un-named and un-served. There are niche markets for the supply of services for MFIs (Santoso et al. 2005: 8). Clients of microfinance institution can not be classified as the poorest of the poor. Generally, they are self-employed and low-income entrepreneur, including; traders, food vendors at the street side, small farmers, small producers and artisan who produce souvenirs in at tourism area and so on. The nature of their business usually provides a stable source of income (Ledgerwood 1999: 2). In various forms, income is provided by micro enterprises owned by the poor. This is done by providing employment. The recycling and repairing better than littering a good, making cheap food, clothing, and transportation to be available are some examples. It is also made to them who are from the low level of formal sector that are usually very difficult to live with their salaries. The people of this kind of life are often can cope with such a problem with the typical cases mentioned above, but can not handle the more serious problem. The other types of problem that are often found are deficiency of capital, skill, official status, and business security. In the meantime, naturally they already have the ability to face sharp business sense, strong life skills, long hard work practice, market knowledge, extensive communication and informal support networks. They also used to have the ability to live supported by their flexibility basic consideration (Robinson 2001: 12). A recent study in Bosnia and Herzegovina carried out by Hartarska and Nadolnyak (Hartarska and Nadolnyak 2008) used the financing constraint approach. The approach states that microenterprises that have good access to credit will be less rely on internal funding in their investment. Using the Living Standards Measurement Survey and the existence of the MFIs in their area, they compare sensitivity of investment to internal funds in the microenterprises which there are MFIs in municipalities they located to microenterprises which there is no MFIs in municipalities they located. They concluded that the MFIs reduce the constraint of microenterprises funding when they are exist close to business. There are some models of microfinance institutions. The first model is Grameen Bank. This model is founded in many countries, especially in Bangladesh, from which it established for the first time by Muhammad Junus. In determining target poor clients, Grameen Bank will do it carefully which is usually done through a series of tests. Loans are given to the group in which each group typically consists of five people and each member of the group guarantee the loan of the other members. This model intensively requires supervision and motivation from the staff to the group borrowers. The second model is Village Bank. An implementing agency establish individual village bank together with 30-50 people and sets capital for on-lending to other members. Repayments of the loan are usually in a week until 16 weeks whereas the village bank pays the principal plus interest to implementing agency. The third model is Credit Unions (CUs). Credit Unions are non-profit financial cooperatives which owned and controlled by its members. Besides saving, CU also provides loans for both productive and non-productive purposes to the members. The membership of CUs compared to Grameen Bank is more heterogeneous and usually based on similar bond. The fourth model is ‘self-help’ groups (SHGs). This model is close to the second model, village bank, although their structure is less well compared to the village bank.  The membership of SHGs is based on the similarity in income and the number of membership approximately 20 people. In principle, they use internal funding, that is saving, to lend it to the members, even though they can also seek external funding as additional source of funds. Several NGOs are facilitating and promoting SHGs, but basically, SHGs are directed as an independent institution. The task of seeking additional financing from outside is usually helped by NGOs which link between SHGs and other external parties or other funding agencies. This NGO’s job close related to social intermediary function they have, while other NGOs are functioned as financial intermediaries which funding SHGs  (Conroy 2003: 4-5). In terms of forms, microfinance institutions can be classified as bank (government and commercial), nonbank financial institution, saving and loan cooperative, credit union and nongovernmental organization. Pawnbrokers, rotating saving and credit association, and moneylender also part of MFIs and hold significant roles in functioning financial intermediation although they are more informal in legal status (Ledgerwood 1999: 1). In Indonesia, several institutions have already served microfinance services for such a long period. Those institutions can be divided into four types. The first type is formal microfinance institutions (MFIs). This type of MFI is regulated and supervised as banking institution and therefore their activities as financial intermediaries subject to banking regulation and supervision. Such institutions included in this type are BRI Unit (state-owned microbank), commercial banks with microfinance services and Rural Bank (Bank Perkreditan Rakyat/BPR). The second type is semi formal MFIs which registered and or licensed by state authorities or local governments, therefore they are not regulated by banking authority (Bank Indonesia). Including in this type are cooperatives, Islamic-based cooperatives (Baitul Maal wat Tamwil/BMT), rural credit institution (Badan Kredit Desa/BKD) and microfinance owned and managed by NGOs. The third type is informal MFIs that operate outside the framework of government regulation, among others, are credit union, rotating credit and saving association (ROSCA), moneylenders, landlords and so on. The fourth type is microcredit programs established by the government in channeling credit to subsidize the poor through a variety of institutions (Nugroho 2008: 181-182). Further explanation about these four microfinance services especially the first three types of MFIs will be presented in chapter 3.   In Figure 1 we can see the pyramid of microfinance institutions with their potential customers in Indonesia. The top layer shows formal MFIs (BRI Unit, Rural Banks/ BPRs and LDKPs). They provide financial services for the top level of microfinance market. This type of MFIs is intended to serve small business which has characterized with stable income flows; therefore these MFIs’ potential clients are non-poor and not so poor people. In the middle layer, semi- formal MFIs serve microfinance services for the poor households. This layer includes rural credit institutions (Bank Kredit Desa/BKD), cooperatives, BMT and NGOs. Clients in this layer are characterized by unstable flow of income. At the bottom layer of the pyramid the huge number of potential clients which need microfinance services. They are very poor people which are characterized by unpredictable income. They need the microfinance services in order to ensure their uncertain income, so they need a small loan to overcom e the difficulties of life (Nugroho 2008: 184-185). Figure 1: The Pyramid of Microfinance Services in Indonesia Source: BI and GTZ (2000) cited in Nugroho (2008) As mentioned above, Rural Bank (Bank Perkreditan Rakyat/BPR) is one of the formal types of microfinance in Indonesia. Its existence is established by Banking Act number 7 of 1992 as amended by Banking Act number 10 of 1998. The main goal of the rural bank is to serve small business and rural communities. In order to deliver their services to the customers, a microfinance institution requires a good performance. This performance can be seen from some indicators. Looking at these indicators, we can decide how well they not only can do financially but also it can also build the future performance goals. There are a large number of performance indicators that can be used by MFIs in measuring the financial performance. One of the principles that can be used is the CAMEL system, ACCION. This system examines five traditional aspects which are regarded as the most important thing in the practices of the financial intermediaries. The five aspects (capital adequacy, asset quality, management, earnings, and liquidity) be the sign of the financial condition and operational strength of the MFI in common (Ledgerwood 1999: 205,227,229). 2.2  Analytical Framework Based on the theoretical framework that has been presented in the previous section, the author uses Figure 2 below describing the analytical framework used in the research which answering the research questions asked. There are two parties involved in the financial market.  On one hand, there is a supply side which is financial institutions that act as financial intermediation agents or it might be function as other than financial intermediation like social intermediation or something else. These financial institutions include commercial banks, non-banks financial institutions (insurances company, ventura capital, etc), and microfinance institutions (in different types and forms). On the other hand, on the demand side, there are some parties that require financing for different purposes, among others for working capital and investment usage which is belongs to micro, small and medium enterprises (MSMEs). The problem is that not all of these financial institutions allow MSMEs as their client due to several requirements which can not be fulfilled by MSMEs (collateral and bureaucratic procedures, for instances) or it might be comes from the MSMEs itself that no need too much funds (small financing). Here, microfinance institutions fit with the need of MSMEs. The mechanism then runs as common supply and demand in the market: MFIs, as financial intermediaries, offer credit or loan to MSMEs. Furthermore, MSMEs use the loan for running their operational activities (working capital usage) or for accumulating their physical capital (investment usage). At the end of the story, output of MSMEs will contribute to national income (GDP) and at the same time generates income for the owners and employees. Figure 2: Analytical Framework of the Research: Supply and Demand in Financial Market Source: author’s graph This paper focuses on the supply side of particular financial intermediaries in the financial market those are microfinance institutions. In other words, using Ledgerwood’s terminology mentioned in literature review, the paper mainly looks at the role of MFIs in terms of â€Å"minimalist approach†; how they perform as financial intermediations in delivering credit or loan. Special attention given to Rural Banks, one of formal MFIs in Indonesia in allocating their credit to different types of enterprises such as micro, small, medium and large enterprises. There are several reasons why this paper discusses on Rural Banks as unit of analysis. Firstly, it is states in the regulation (Banking Act) that the main objective of Rural Banks is to serve small scale business and looking into the pyramid of MFIs appeared in Figure 1. It means that Rural Banks have a specialization as small scale business’ banking, especially micro enterprises. This paper wants to see to which extent this mission is successfully executed. Secondly, Rural Banks are the second largest microfinance institutions in terms of asset, third party funds collected and number of debtors. According to Bank Indonesia (2008)[9], they posses 35% of total MFIs’ assets; 30.43% of third party funds collected on total MFIs and 29.15% of total number debtors on total MFIs.   This study proposes two research questions. The first research question relates to the role of rural banks as financial intermediaries in delivering credit to different types of business especially micro and small enterprises. In addressing the first research question, the paper uses comparative analysis and simple calculations in terms of credit disbursement for both commercial banks and rural banks so that the share (percentage) of credit allocation to different types of enterprises to be known. In order to obtain the result, some criteria and assumption are applied in the study. This is done due to there is no data available about the definite amount of credit disbursed by either Rural Banks or commercial banks to different type of enterprises. The discussion focuses only on the amount of credit allocation, so that other variables that determine the credit such as interest rate, collateral, and so forth are not discussed in this study.   The second research question indicates the performance indicators of rural banks in relation to credit provision to micro enterprises. These indicators include; Loan to Deposit Ratio (LDR), Returns on Assets Ratio (ROA) and Non-Performing Loan Ratio (NPL) which refer to Director of Bank Indonesia Decree number 30/12/Kep/Dir and Bank Indonesia’s Letter No. 30/3/UPPB about Rural Banks Soundness Evaluation. Furthermore, comparison will be made between these indicators and criteria. Chapter 3 Microfinance Institutions in Indonesia 3.1  Microfinance Institutions in Indonesia As developing country, Indonesia has long experience and history in developing microfinance institution which has made it possible for poor or low-income people to overcome financial constraints and to access financial institutions. For this condition, some researchers like Berenbach and Churchill called that Indonesia is â€Å"the most developed market for microfinance services in the world† (Barenbach and Churchill 1997 as cited in (Santoso et al. 2005: 43)). The development of microfinance institution began for the first time in Dutch colonial era when several well-educated local people saw deteriorating economy happened in their community and they looked for the need of this services and started organize it. The two famous institutions best known as pioneer in microfinance institutions and exist since colonial era are cooperative and Bank Rakyat Indonesia (BRI). As mentioned in chapter 2, microfinance institutions in Indonesia can be classified into four types (Nugroho 2008), those are; formal microfinance institutions, semiformal MFIs, informal MFIs and microcredit program which is established by the government for delivering credit to poor people through several institutions. In this chapter the latter type of MFI will not be discussed. The discussion is emphasizes on three other institutions. Formal MFIs are financial intermediary institutions which refer and subject to banking regulation and therefore supervised by Bank Indonesia. Semiformal MFIs are not regulated by Bank Indonesia as a banking authority, but they are licensed and or registered by other state authorities or local government. Informal MFIs operate outside government regulations. Nugroho (Nugroho 2008) described institutions which include in each type of MFI as follows: formal MFIs including BRI Unit, Rural Bank (BPR) and The Rural Credit Fund Institutions (Lembaga Dana Kredit Pedesaan/LDKP); semiformal MFIs covering rural credit institution (Badan Kredit Desa/ BKD), microfinance NGO, credit cooperatives including Islamic-based cooperatives (Baitul Maal wat Tamwil/BMT); informal MFIs including credit unions, rotating credit and saving association (ROSCA), moneylenders, traders and landlords. Table 3.1 provides map of microfinance institutions by types in Indonesia in terms of units and their financial services. Bank Rakyat Indonesia Unit Lembaga Dana Kredit Perdesaan (LDKP) – The Rural Credit Fund Institutions The Rural Credit Fund Institutions (LDKP) is the term of credit fund institution that operates in rural area, including a variety of non bank microfinance institutions with different names, ownership, organization, services and outreach, that was established on initiatives of provincial government. LDKP belongs to provincial, district or village government which, in their operation, have to obtain license from and was regulated by provincial government within the national regulatory framework. they get technical support and supervision from regional development bank (BPD) which are owned by provincial government.. since it was established in 1970s, the number of LDKP getting less from 1978 to 630 in 2000, this decrease due to the conversion of LDKP to peoples cerdit banks(BPR) and recently only about one quarter of LDKP  have become banks. The Badan  Kredit Desa (BKD) BKD is a profitable and sustainable village level financial institution that provide financial services with a outreach to low income people. it was operated by a committee that controlled by head of village and have sustained the operation since colonial era. On behalf of Bank Indonesia, BRI branch offices supervise and provide technical assistance  for BKD. in 1970s indonesian government did not pay much attention to this system. instead, the government  give more attention to the cooperative system. this make hard for BKD system to developed. in 1990s BRI tried to revive BKD by providing basic capital, improving administrative system and introducing new saving instruments, however, 1992 banking act burden the expanding BKD system. BKD is recognized as peoples credit bank (BPR) and has been operating as a licensed and regulated bank  since 1992 banking act but the frame work setting, supervision and technical assistance has not changed since 2000. Cooperatives Here, the brief history of cooperative in Indonesia refers to Santoso et al (2005) and Ministry of Cooperative, Small and Medium Enterprises’ website (www.depkop.go.id, 2009) as references. The thought of cooperative was delivered for the first time by Patih R. Aria Wiriatmaja at Purwokerto, a small town in Central Java, in 1896. Then, De Wolffvan Westerrode continued his efforts. In 1908, the year of national movement, Dr. Sutomo founded Budi Utomo which played a significant role for cooperatives improving the life of society. Then, Verordening op de Cooperatieve Vereeniging was established. Twelve years after that, in 1927, another type of cooperative called Regelling Inlandsche Cooperatieve was launched. In the same year, to develop bargaining power among local entrepreneurs, Islamic Trader Union (Serikat Dagang Islam) was established. Indonesian National Party (Partai Nasional Indonesia) which had activities in promoting cooperative spirit was established in 1929. 3.2  Bank Perkreditan Rakyat (BPR) Brief History Steinwand (Steinwand 2001) provided detail periodical history about Rural Bank. He divided the history into four parts of periods; the evolution of the colonial BPR (1895-1945), the period from independence to financial sector reform (1945-1983), the period from financial sector reform to financial crisis (1983-1999) and at the present condition. Rural Bank Position in Financial System in Indonesia Chapter 4   Analysis of the Role of Bank Perkreditan Rakyat (BPR) in Financing Micro, Small and Medium Enterprises 4.1  Overview Chapter 4 consists of 6 sections which each section aimed to answer the research questions. Section 1 is a general information about what will be discussed in this chapter; section 2 discusses about the source of the data used in the analysis; section 3 is the methodology; section 4 is about overview the condition of Bank Perkreditan Rakyat (BPRs) and commercial banks (CBs) in Indonesia using selected indicators, third party funds and credits; section 5 tries to reply the first research question by using comparative analysis between commercial banks and BPRs; and section 6 is the last section which answering the second research question about the performance indicators of