Poverty in Indonesia is still one of the main problems for the government. Various poverty reduction programs have been carried out since the Old Order government (1961–1965) until now, but the level of poor people is still fluctuating. The province that is the highest experiencing poverty is East Java with a poor population of 4,775,970 in 2015 (BPS, 2016).
However, East Java also contributed GRDP to Indonesia in the second place after DKI Jakarta. This means that although East Java has a fairly high GRDP, it has the highest number of poor people. Hence, the government still has the duty to alleviate poverty in East Java.
There are many ways to alleviate poverty, one of which is by providing microcredit. Microcredit is given to poor people to help them form new businesses or to modify their existing businesses to be more developed and advanced (Johnson and Rogaly, 1997; Fasoranti, 2010). This step is carried out by the Indonesian government to alleviate poverty, namely Cluster III Poverty Program.
Cluster III poverty reduction is by providing the KUR (People’s Business Credit) program for Micro, Small and Medium Enterprises (TNP2K). The KUR program aims to strengthen MSME capital so that it can increase productivity and develop its business. In addition to the KUR program from the government, there are also other types of credit options for microenterprises, namely Commercial Credit (KK).
This type of microcredit, KK is not a program from the government but one of the microcredit products provided by commercial banks. So, the type of credit application requirements is more complex and the interest is also higher than the KUR program. KK is another option for micro enterprises to obtain credit other than from the KUR program. However, both of them are options for microcredit to be provided for micro-enterprises.
However, according to the World Bank (2007), there are a number of common constraints faced by micro- enterprises including workers with low productivity, limited access to capital from banks, low profits due to high production costs, and difficulties in accessing markets. To overcome the existing constraints, the government has provided micro credit facilities that can be used to increase productivity. Productivity in micro-enterprises can be improved through improving technical efficiency. The efficiency of microenterprises can be done by using existing inputs so that they can achieve maximum output.
When micro enterprises’ output is maximized and increases, it will also increase the income of microenterprises. When income increases, it can increase the welfare of micro entrepreneurs and alleviate poverty.
The analysis results obtained from the study show that the average technical efficiency of micro business recipients of KUR and KK using the assumptions of the DEA VRS and CRS models is still not 100% efficient. This means that micro-businesses still need to improve their efficiency with existing inputs so that maximum results are obtained.
The factors that influence the technical efficiency of micro enterprises recipients of KUR and KK are profit, experience, geographical location, amount of credit, KUR access, the credit realization period, and dummy variable of food and beverage products. The factors that influence the poverty status of micro-entrepreneurs are technical efficiency, income, KUR access, gender, number of household member, and geographical location. The results of this research can be a material consideration for the government in formulating policies.
Based on the results of efficiency, it will be an evaluation for micro-enterprises to be able to improve their enterprises’ efficiency. Increased efficiency can be achieved by examining the factors that influence the technical efficiency of microenterprises. The government in this case is the Department of Cooperatives and Small Medium Enterprises, which by knowing the efficiency of micro enterprises, can provide assistance to micro enterprises that receive KUR and KK in order to increase the efficiency of production and sales of their products.
The results of analyzing the factors that influence the poverty status of micro entrepreneurs can be a material consideration for the government in formulating policies to reduce poverty. In addition, by knowing the role of KUR in determining poverty status, the government can use it to decide on the continuation of the KUR program in the future. (*)
Author: Atik Purmiyati
Detail information about this research can be seen at: https://content.sciendo.com/view/journals/fman/11/1/article-p131.xml