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Research indicates social capital an asset
The government must begin acknowledging social capital as an important asset of micro- and small enterprises in its policy-making, a researcher said Thursday
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The government must begin acknowledging social capital as an important asset of micro- and small enterprises in its policy-making, a researcher said Thursday.
"The government should recognize social capital as a potential asset in micro- and small enterprises," said Djainal Abidin Simanjuntak, a researcher at the Demographic Institute at the University of Indonesia's School of Economics and Business.
He was speaking on the sidelines of his sociology doctoral dissertation presentation at the school.
The dissertation, in which Djainal studied micro-enterprises in Pulo Gadung, East Jakarta, found social capital supported the effectiveness of financial capital, thus potentially increasing margins for micro-enterprises.
Social capital, including communal solidarity, trust and mutual cooperation, are often ignored because of their intangible nature, Djainal said.
Beginning as bonds between relatives and friends of micro- and small entrepreneurs, social capital develops into business relationships with associates and employees, he said.
"It is true social capital is not the only determining factor in improving micro-businesses. But money as capital cannot stand alone either," he insisted.
Of the 600 entrepreneurs in the area, Djainal surveyed 150, mostly street vendors, as well as those dealing in furniture, garment, leather and metal -- all with assets worth less than Rp 1 billion.
"Small enterprises usually encounter difficulties in getting loans because government policy requires them to put up collateral in the form of land, buildings or motor vehicles," he said.
In his dissertation, Djainal highlighted the urgency of revising a 1998 law on banking requiring small businesses to provide collateral when applying for loans.
He recommended the establishment of a social capital certification body, consisting of banks, entrepreneurs, NGOs, intellectuals and government officials.
"This body would provide certification on the social capital aspect of micro-businesses, which could then be used as collateral for loans," he said, adding applicants would have to undergo training and evaluation to obtain the certificates.
"It would be a process, much like getting a graduation certificate.
"We have to start recognizing social capital as an asset because my findings from the Pulo Gadung study indicate social capital contributes a great deal to increasing business profits and thus social welfare."
However, Djainal said the limited test group and particular location meant his dissertation could not be generalized to other small enterprises areas.
"I regard this dissertation as a preliminary study," he said.
Professor Robert M.Z. Lawang of the university's School of Social and Political Sciences, supervised the dissertation. He said social capital was dynamic by nature, because it dealt with relationships between people.
"I agree social capital needs to be supported by government policy, which should protect the people," he said.
"Social capital should also act as a foundation for communal trust in our society, which is different from mutual trust that can be bought with money. We are lacking communal trust."
