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Cablegate: Indonesia - Comments Regarding a Potential Loan To

VZCZCXYZ0003
RR RUEHWEB

DE RUEHJA #3382 3470343
ZNR UUUUU ZZH
R 130343Z DEC 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 7371
INFO RUEHLP/AMEMBASSY LA PAZ DEC BRASILIA 0204
RUEHBO/AMEMBASSY BOGOTA 0104
RUEHNE/AMEMBASSY NEW DELHI 1486
RUEHME/AMEMBASSY MEXICO 0073
RUEHMU/AMEMBASSY MANAGUA 0035
RUEHIL/AMEMBASSY ISLAMABAD 0456
RUEHML/AMEMBASSY MANILA 3158

UNCLAS JAKARTA 003382

SIPDIS

SIPDIS

DEPT FOR EAP/MTS AND EEB/IFD/OFD
STATE PASS OPIC FOR LOREN RODWIN

E.O. 12958: N/A
TAGS: EINV ECON ID
SUBJECT: INDONESIA - COMMENTS REGARDING A POTENTIAL LOAN TO
MICROFINANCE INSTITUTIONS

REF: STATE 165106

1. (U) Per reftel, Embassy would like to provide information on an
Indonesian-based microfinance institution which may receive loans
through an investment vehicle supported by OPIC loans.

2. (U) Headquartered in Lippo Karawaci (Tangerang - Greater Jakarta
area), PT Mitra Bisnis Keluarga (MBK), which stands for "Family
Business Partner" operates in four rural districts in West Java
(Tangerang, Bogor, Sukabumi, Bandung). Previously a microfinance
foundation (called "Ganesha Microfinance Foundation"), in 2006 it
became a PT (limited liability company) which provides working
capital to low-income households. As a venture capital company, MBK
operates on a pre-agreed profit-sharing basis, without collateral,
and is not allowed to raise savings from its clients. MBK has
developed a partnership with Netherlands based Cordaid (a
development organization) and Hivos (The Humanist Institute for
Cooperation with Developing Countries), as well as Unitus, The
Dignity Fund, and Micro-Credit Enterprises.

3. (U) MBK focuses on the bottom 25 percent of low income
households, by providing small working capital for additional
income-generating activities (up to Rp. 500,000 or $60 in the first
cycle) to be repaid in small installments over a period of up to one
year. Its client portfolio currently includes more than 40,000
people (all women), approximately 75 percent of whom are poor. As of
July 2007, MBK's outstanding portfolio reached Rp 18 billion ($2
million) with an average working capital of Rp 389,000 ($35) per
client. MBK now has 25 branches with about 200 employees.

4. (SBU) Embassy has no indication that MBK or its stakeholders have
ties to terrorism, money laundering, corruption, or violations of
law. MIXMarket, the global information exchange for the
microfinance industry - organized by the World Bank's Consultative
Group to Assist the Poor (CGAP) - granted Ganesha (MBK's
predecessor) five diamonds in September 2005 for its transparent
procedures and reporting. A number of co-founders of Ganesha
(including Shafiq Dhanani, Elizabeth Sweeting, Benny Kosinda) have
previously worked as consultants for the World Bank, ADB, IFC, GTZ,
and FAO. Many of these individuals are still involved with MBK,
both as members of the board of commissioners and as part of the
management team.

5. (U) For further information, please refer to www.mbk-ventura.com,
www.mixmarket.org, www.cgap.org, and www.worldbank.org.


6. (U) BACKGROUND: As recorded in the World Bank's Economic and
Social Update, Indonesia's poverty dropped in 2007, to 16.6 percent,
or 37 million people, from 17.8 percent in 2006. It shows, however,
that a large proportion of the population remains vulnerable with
many households tightly clustered around the poverty line.
Unemployment rate is still high at 9.8 percent. Despite the macro
stability, the growth alone is not generating enough job creation.
The availability of working capital, provided by microfinance
programs, is key in fighting these issues.


HUME

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