Rural development issue: A case study in Banyuwangi District, East Java Province

Rural people, as well as the farmers, deal with capital access for their business activities. Formal credit offered by the banks is not easily accessed by rural people due to rigid administrative procedures and collateral requirements. This paper aims to analyze rural people's access to formal credit offered by a Credit Union (CU) acting as the credit cooperative in Banyuwangi District, East Java. The study was conducted in 2020 in Banyuwangi District. Primary and secondary data collected were analyzed using a descriptive approach. Each debtor has to become a member of CU prior to borrowing credit with some requirements, e.g. paying principle and regular contributions, sufficient saving value as collateral, and willingness to pay an interest rate determined for a certain period depending on credit types. Types of business financed by CU are farm business, fresh fruit marketing, cow fattening, groceries, among others. Most of the rural businesses financed by CU were able to pay the credit on time. Each business feasibility was assessed carefully by the CU management prior to credit approval and responded quickly. CU members also get the advantage through receiving shared-profit distributed annually. The CU copes with limited capital as the members' demand for credit increases. The CU also has to compete with the relatively lower interest rate of the official subsidized credit, i.e. KUR (People's Business Credit), for its credit expansion. The government needs to encourage CU to grow in rural areas for rural people's credit access through policy facilitation.