Microfinance And Poverty

Poverty has become a main problem in development issues. It is so pervaded so the United Nations put eradication of poverty as the first and foremost objective to be achieved in the Milenium Development Goals (MDGs) in 2000. Although the number of poverty in Indonesia has been declined from 2010 to 2014, the income disparities between the richest and the poorest has been widened as indicated by the Gini Coefficient which increased from 0.38 in 2010 to 0.41 in 2014 . The increased of Gini ratio in the last few years implies that Indonesia has become more unequal in terms of income distribution. Chatib Basri, the former of Indonesian Finance Minister, stated that the increased of Gini coefficient is due to the fact that Indonesia middle class-up

There were many works have been done in the glory of microfinance for poverty reduction. For instance, the work of Obaidullah (2008) comprehensively documented empirical research by Hulme & Mosley (1996), Chowdhury (1996) , Phitt & Khandaker (1996) and others. As for Indonesia, the works of Brower & Dijkema (2002), Ismawan & Budiantoro (2005), SMERU (2005), and Rahmat et.al (2006) have supported the evidences that microfinance contributed positively to poverty reduction.

Although the success story of microfinance in poverty alleviation has been praised, critics have been addressed to it. Fernando (2004) claimed that instead of eliminating poverty, microfinance is in fact perpetuating it. As Robinson (2001) divided group of poverty people into three (poorest of the poor, economically active poor and middle-income poor), Fernando (2004) argued that the requirement set by microfinance cannot be fulfilled by the poorest of the poor groups in the society and thus, they remain neglected and invisible by the microfinance. Bateman (2010) and Duvendack et.al (2011) support his criticism. Bateman criticizes commercialization of microfinance as a local neo-liberalism while Duvendack et.al concluded by a comprehensive analysis on the microfinance impact with various impact assessment tools, that there is no convincing evidence that microfinance improved well-being of poor people. Microfinance doesn’t cure poverty (Kanani

The development achievement should not be seen from external parties of the society. It should be properly identified and evaluated from internal people’s assessment of the community. The resources and development approaches implemented at the community level include material, socio-cultural and spiritual dimensions. This approach brings to re-defining well-being as a development objective beyond income measures. It integrates social, material, and spiritual values of communities (White