Prakarsa Panjinegara¹, Farah Aida Ahmad Nadzri^2♣ and Sharifah Norzehan Syed Yusuf<sup>2

1</sup>University of Lampung, Indonesia
²Accounting Research Institute (HICoE), Universiti Teknologi MARA, Malaysia

ABSTRACT

This study explored the intricacies of the Kredit Usaha Rakyat (KUR) program in Indonesia, a government-guaranteed microfinance scheme designed to promote economic growth and empower Micro, Small and Medium Enterprises (MSME) to reduce poverty and promote women empowerment. The KUR program has faced the free-rider issue and misconceptions due to its perceived nature as direct government aid without requisite obligations. This study found five main challenges that may impede the effectiveness of the KUR program based on the qualitative research conducted through interview with 15 less successful women microentrepreneurs under this program. The challenges involved unsuitable financing schemes, insufficient management training for recipients, diversion of microfinancing for personal use, insufficient allocation of fund, and lack of savings. This study demonstrated how these challenges hadnegatively impacted the business performance of the participants interviewed, demonstrating cases of “latent failure” as suggested by the free-rider theory, where some participants keptborrowing and repaying loans despite underperformance. The findings emphasized the importance of having a detailed understanding the operations of the KUR program and implementing specific actions to improve its efficiency and enhance its impact of promoting sustainable economic growth and empowerment of women microentrepreneurs in Indonesia.

Keywords: Women Microentrepreneurs, Government-Guaranteed Microfinance Scheme, Free-Rider, Management Challenges, Kredit Usaha Rakyat.

^♣Corresponding Author: Farah Aida Ahmad Nadzri; Accounting Research Institute, Level 12 Menara SAAS, Universiti Teknologi MARA Shah Alam, Selangor 40450, Malaysia; Email: This email address is being protected from spambots. You need JavaScript enabled to view it.