Unfavorable business climate hampers CSR

A company's concern over the community around its location, usually manifested in its Corporate Social Responsibility (CSR) program, is often hampered by a business climate and local cultures that are not conducive to maximum implementation of this scheme. As a result, the financial aid and facilities that a company extends to a local community through its CSR program fail to produce optimum benefits and the condition of the local community remains virtually unchanged even after a CSR program has been implemented.

This unfavorable situation can be found, for example, in Ngadimulyo village, Sukorejo district, Pasuruan regency, East Java. Economically, the community here has not experienced any significant change despite various forms of assistance received from PT HM Sampoerna Tbk through its CSR program called "Bina Warga Sampoerna" (Development of Locals by Sampoerna). Sampoerna has channeled loans totaling millions of rupiah but the repayment of the loans has not run smoothly. "If the repayment of the loans extended under this program ran smoothly, more aid may be channeled to more people," said Mrs. Ita, a member of the management of Pokja Sampoerna (Sampoerna's working group).

PT HM Sampoerna Tbk kicked off its CSR program with the establishment of Sampoerna Foundation on March 1, 2001. This foundation, the brainchild of Putera Sampoerna, the president commissioner of PT HM Sampoerna Tbk, aims to improve the education sector in Indonesia, and provide greater access for further studies to students with excellent academic achievements. Besides Sampoerna Foundation, HM Sampoerna also carries out a number of partnership programs, such as a partnership program in tobacco or cigarette production and a program under which locals are empowered and developed. The Bina Warga Program is based on social, economic and educational activities undertaken in residential areas around the location of Sampoerna's factory.

For the activities of Sampoerna Foundation, HM Sampoerna allocates 2 percent of the company's net profit every year. Meanwhile, for its partnership program in tobacco, HM Sampoerna involves some 2,000 locals in growing tobacco on a plot of land measuring 4,820 hectares. Under this partnership program, locals are taught how to grow and look after tobacco plants. This program has produced outstanding results: every year their tobacco harvest reaches 10,500 tons.

In its partnership program in cigarette production, HM Sampoerna runs 32 production units in Central Java, East Java, Yogyakarta and West Java. This partnership program, which can employ some 51,000 people, involves about nine cooperatives, three Islamic boarding schools and 20 small and medium enterprises.

In Ngadimulyo village, which is located near Sampoerna's factory in Pasuruan, the Bina Warga Sampoerna program was kicked off in mid 2004. Under this scheme, PT HM Sampoerna allocates funds to be channeled as aid to small and medium enterprises (SMEs), particularly for the production of tempeh. The funds are managed by Pokja Sampoerna and are channeled to community members belonging to community groups. In Ngadimulyo there are 53 community groups, which mostly make tempeh.

Muji and Tamimah, both traditional tempeh producers and members of a community group, enjoy this aid extended under the Bina Warga Sampoerna program. They have received loans since the beginning of the program. "It's not much. I usually borrow Rp 500,000 to start my tempeh production," Tamimah told The Jakarta Post.

She said she spent the money on purchasing soybeans for her tempeh.

Every day, Muji and Tamimah process 80 kilos of soybeans. They rinse the soybeans and then boil them in a large container. Afterwards they mixed the boiled soybeans with yeast and set the mixture aside for three days. "On the third day, we have tempeh. My husband sells our tempeh at Palang market, Sukorejo," Tamimah said. The water in which the soybeans are boiled is later mixed with feed for their cattle. Their gross income from selling tempeh can reach Rp 350,000 a day.

Thanks to their income selling tempeh, Muji and Tamimah can send their three children to school. Two of them go to a state university in Surabaya. "Thank God, all this is the fruit of our small-scale business," said Tamimah, who is now developing her business of selling cows for slaughter.

However, not all community group members are as successful as Muji and Tamimah. According to data compiled by Pokja Sampoerna in Ngadimulyo village, the majority of borrowers fail to repay their loans in full. Some do not even make the first installment. They usually argue that their business has yet to be successful. "As the price of soybeans fluctuates, tempeh makers cannot develop their business. As a result, their loans don't get paid off," said Musta'in, coordinator of Pokja Sampoerna in Ngadimulyo village.

What makes matters worse is the hot mudflow in Porong, Sidoarjo, which has had an adverse impact on the local market. Locals usually selling tempeh at Porong market have to find another market. "Before this hot mud disaster, I could sell 100 kilos of tempeh at Porong market every day, but now to sell just 25 kilos of tempeh a day is really difficult," Musta'in said, without any enthusiasm.

To cope with this unfavorable condition, Pokja Sampoerna has modified its strategy in the channeling of aid. Instead of extending loans, it provides aid in the form of soybeans. However, a new problem has arisen. "Tempeh makers prefer to purchase soybeans on credit. Pokja Sampoerna, however, makes available soybeans on a cash and carry basis," said Musta'in. And now a new strategy has been devised. Pokja Sampoerna has established the Sampoerna Entrepreneurship Training Center (PPKS), which is open to locals interested in areas like horticulture, landscape design, cattle breeding, waste treatment, food processing, motorcycle repair and fisheries to improve their skills and qualifications. The result? Just wait and see.