PNPM Mandiri Revolving Loan Fund (RLF) - PNPM Support Facility

c. Implementation Support for RLF MIS: This activity will also start upon completion of the RLF
assessment. The Project will develop a robust data recording and information system that captures
transactional data of the groups and UPKs to help improve the efficiency and effectiveness of RLF
operations and ensure that RLF data fed into PNPM’s MIS is reliable. This is a critical activity, as the
ongoing RLF assessments suggest that RLF data is unreliable. Accurate and transparent data will
improve governance and increase opportunities for bank linkages. Implementation is expected to
start in July 2011 and to be completed by the end of 2012.
9. Component 2. Bank Linkages. Activities under this component will support the establishment
of actual linkages between RLFs and the commercial financial sector, building on the activities conducted
under Component 1 and based on a “graduating institution” concept. RLFs whose performance is rated as
“excellent” and “good” under component 1, will receive support to develop relationships with banks as
soon as they can be registered as a suitable legal entity. For other RLFs, alternative and/or gradual linkage
options will be explored. Ways to accelerate linkages between PNPM RLFs borrowers themselves will
also be explored. The feasibility and cost of creating commercial bank linkages including an effective
incentive scheme (e.g. providing loan funds for on-lending to RLFs) will be finally determined after the
ongoing assessment of the financial soundness of the RLFs and further dialogue with commercial banks.
Funding is being requested to start preparations and launch the following activities:
a) Revision of Current Standard Operating Procedures: The activity will assist GoI in reviewing,
updating and upgrading current SOPs for PNPM RLFs to ensure that RLFs accounting follows
international best practice and support RLF borrowers with good track records in accessing to formal
financial services. The on-going needs assessment conducted by M-Cril includes a review of SOPs. It
findings will be utilized by the Project team to provide technical assistance to GoI for the revision of
SOPs.
b) Product Design: This activity will support the upgrading of RLFs as a financial product (e.g.
adjustment of loan size and repayment schedule) to respond to the needs expressed by borrowers and
RLFs staff during the aforementioned assessments and explore the feasibility of developing new
products (e.g. micro-insurance, savings etc.). Upgraded product design (e.g. aligning RLF ceiling
with the government’s partial guarantee program - KUR) will support the graduation of RLFs and
their linkages with commercial institutions.
10. Component 3. Monitoring and Supervision System: A project logical framework was
developed as part of start-up activities to support Project monitoring and evaluation (M&E). The Project
involves inherent challenges as over 3,000 RLFs, with high variance as regards capacity and incentives
(especially between rural and urban UPKs), will need to be supervised and monitored on an ongoing basis.
Ensuring that appropriate monitoring and supervision systems based on internationally accepted performance
indicators and standards are put in place is therefore important.
a) Design of Impact Assessments: In collaboration with the PSF M&E team, the Project team will
design a mixed-methods evaluation to assess the Project impacts on borrowers’ welfare (inc.
sustainability of their businesses) and access to financial services.
11. Component 4. Policy and Strategy: The aforementioned activities under Component 1 to 3 will
provide a solid foundation for the development of a long-term strategy to phase out the Government’s
direct support to the RLFs and establish sustainable RLF operations. The Project team will provide
technical assistance to GoI in the form of policy briefings and discussion notes summarizing the findings
of ongoing and planned assessments and laying-out options for consideration by decision-makers.
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