Case-Based Evidence and Local Custom

Abstract

How do institutional arrangements and social capital work, and do cases on the ground corroborate what has been conceptualized? Some case-based evidence of MSMEs in different regions provide clues to that question. The role of trust and local solution to achieve a particular goal, including fostering environmental-friendly activities, is highlighted. The evidence also helps permeate the practical and moral thinking of the issues related to MSME operations influenced by local customs and customary laws.

Conversation

• A: “Small businesses must follow government policy to SHARE responsibility in the community.”

• B: “Treating them as equal partners and HEAR their views would have worked better for the community.”

• A: “Small businesses are too WEAK to find a solution to their problems.”

• B: “Given proper environment, they could WAKE up to the challenge and come up with a solution of their own.”

• A: “When land conflict associated with customary law arises, it is difficult to deal with indigenous communities as their VOICES RANT ON.”

• B: “There is nothing better than listening to them and putting ourselves in their shoes in order to resolve the conflict through honest CONVERSATION.”

Thus far, we have shown the analysis of how interactions of policies, institution, and social capital affect MSME performance. The survey discussed in the preceding chapter is intended to validate the framework developed in Chap. 3. Yet, the actual relationship between policy making, institution, and MSME performance is admittedly more complex than what is conceptualized through the scientific approach. The spillover is various and, to some extent, unforeseeable. To the extent the application of scientific approach demonstrated through the survey is our generalization endeavor of using data and people perceptions as a piece of evidence, it is only natural to ask: “how do institutional arrangements and social capital actually work to affect small businesses operations?” More specifically, “do cases on the ground corroborate what has been conceptualized?”.

Enter the case-based evidence

This is what this chapter is intended to discuss. It basically presents some examples of cases throughout different regions in Indonesia. Like any case studies, case-based evidence is often regarded too soft a piece of proof for scientific inquiry. It has a lack of generalizing power and provides only limited justification to scientific hypotheses. Yet, as an epistemic strategy in social science, case-based evidence can help permeate practical and moral thinking. Presented below, the apparent simplicity of historical narratives and life experience of micro and small enterprises (MSEs) are revealing and instructive. The role of trust, social bonding, compatibility of local values, norms, and the power of local solutions come to the fore. Hence, these examples complement what has been discussed in the preceding chapters.

The Section ‘Example of Cases’ is drawing the case-based examples of MSE situations from different regions. The narratives consist of ‘stories lived and told’ involving real characters (albeit with abbreviated names), dispute resolutions and challenges within the existing institutional arrangement. They also reflect the prevailing social capital. The Section ‘Customary Law and Social Capital’ discusses the effect of local customs and customary law on MSE operations by using selected examples from MSEs operating in communities that uphold indigenous customs. Insofar around 1000 ethnic groups exist across Indonesia’s 17,000 islands, where 50–70 million people are considered members of indigenous communities (masyarakat adat), it is essential to explore the extent to which customs (adat) and customary laws (hukum adat) affect MSEs operations.

Example of Cases

Inflation Control Through Trust and Local Norms: Rice Farmers in Manggarai Barat, East Nusa Tenggara

In an attempt to control inflation and keep the rice price stable, in 1968 the Indonesian government established a special agency called Bulog. The agency was tasked to manage the nation-wide set of local agency and warehouses at the district level (Dologs). During a surplus season, they are expected to buy rice from farmers’ cooperative and private traders in order to avoid prices falling below the floor level. During a dry season, they are tasked to ensure that rice prices do not exceed the pre-determined ceiling level. This is done by unloading and selling rice in the market. The policy was intended to protect farmers when price is low and shelter consumers when price is high. Obviously, the effectiveness of it depends on the supply of rice that Dologs have in their storage. The problem is, since the offered price is lower than the market price, farmers are not motivated to sell rice to Dologs, and this can constrain their operation, hampering the efforts to keep the inflation low (rice price has the largest weight in the consumer price index). More seriously, it can disrupt peoples’ access to affordable basic food, especially in regions that often experienced fluctuations in rice production.

A case in point is in Manggarai Barat district, East Nusa Tenggara. Given that the policy requiring farmers to sell rice to Dologs often failed to meet the target, an individual hired by BI (let’s just call him Mr. Y) with a long history and knowledge about local culture came up with an innovative idea. Having understood well the characters of local farmers, he used an approach that he labeled ‘a community-based program of inflation control’ (gerakan inflasi berbasis masyarakat). At first, he made some personal contacts and established close communications with the rice farmers who were members of MSE clusters in such a way that they gradually developed trust towards him. This was done by treating the farmers as equal partners rather than as rice sellers. This trust building—an important component of social capital—was critical in ensuring that any proposed solution would be accepted by the MSE members. From the subsequent discussions, it was found that farmers actually had surplus and capacity to sell some of the rice to Dologs, albeit with a consequence of receiving lower margin, even after considering various risks of harvest failure (due to drought, flood, pest, or other diseases). It became clear that a lack of communication and mutual trust was the key factor that caused the past efforts failed.

It was at this stage that the awareness and understanding of local culture play a critical role. Realizing the importance of telling stories for the local people to speak up and reveal their frank opinions, Mr. Y used precisely such an approach and steered the narratives towards engaging them to show their social responsibility by helping others. He also understood that timing was important. Therefore, he tried to execute the plan during the Muslim fasting month (Ramadhan period), when the spirit of giving and sharing is usually high. Indeed, religion can be an important source of social capital in some communities, as it provides a framework for morality and serves as the general principles of behavior. In essence, what Mr. Y tried to do was to match the community’s norms and social capital with the inflation policy.

Having done all the right things, however, the real challenge was in the implementation. Since Bulog and Dologs are parts of the government apparatus, administrative bureaucracy in dealing with them is at times challenging. To overcome this perennial problem, members of MSE themselves initiated a solution, i.e., organize a meeting with all the relevant stakeholders, including the local government, in order to get supports and approvals from them. Long story short, the farmers finally sold some of the rice to Dologs, supporting Dologs’ operation to keep the local inflation low. A combination of Mr. Y’s approach to acknowledge local wisdom and to adopt local peoples’ own-initiative helped make the inflation control policy more effective. From the regional development perspective, price stability is one of the conditions for improving peoples’ standard of living, and lower local inflation also contributes to lower national inflation.

Transporting rice in Manggarai Barat, East Nusa Tenggara

Meeting Challenges with Trust and Own Solution: Breadfruit Business in Manokwari, Papua, and Coffee Business in Aceh

Breadfruit is one of the superior local products in Papua. Although not a major staple, it is an important supplementary crop for food security and variation in diets. Long recognized for its potential to alleviate hunger in tropical climates, this underutilized Oceanic staple crop is widespread in Papua, grown readily in lowland alluvial plains and fans below altitudes of 1500 m (with rainfall above 1500 mm annually).¹

In Manokwari, West Papua, a working group led by a woman entrepreneur, Mrs. IP, formed an MSE specializing in breadfruit chips (keripik sukun) by mixing it with locally grown taro leaves. Employing 15 women, the group was part of a church’s woman organization or ‘persekutuan wanita gereja.’ They produced the breadfruit chip in a workshop located in a site provided by the church pastor with whom they had a good relation. BI supported the training components (for processing, marketing, and book-keeping), and provided subsidy for equipment and to cover the costs of packaging (which is all done in Jawa). The MSE performed well, able to sell their products not only within the region but also outside the region, and it served as a source of income for local women.

But things changed dramatically when their relationship with the newly appointed pastor went sour. They were told that they could no longer use the workshop site. The well-known Papua creed, tak kenal maka tak sayang (“don't know thus don't like” or “out of sight, out of mind”) explains why such an unfortunate situation can arise. Upon the initiative of the group leader, along with the newly recruited women some members decided to form a new group/cluster. BI supported the group by providing a production house. Receiving trust from the existing and new members, the leader and other initiators found no obstacles in recruiting members for the new cluster.

Yet, the group failed to find a synergy, and productivity was below the capacity. One of the main reasons for low productivity was too few workers attended the workshop in the production house (high absentee rate). A lack of skill among new members was another factor, although they gradually solved this problem through training supported by BI. But it was the low attendance that soon became the most serious obstacle, especially when they received a large order from inside and outside the region. Many of the women had to stay home to attend children and family’s need. In some cases, they did not get the permission from their husband to leave home. Clearly, this was a case of MSE failing to perform well not because of classical problems such as a lack of financing, high input costs, difficulty in marketing, or inadequate technology. Instead, it was a time-management issue.

After a long series of discussions, the MSE members themselves came up with a solution. They decided to adopt a pre-scheduled working time system, where members have the option to come to work only during certain pre-scheduled hours/days per week, and payments are made according to the time they spent in the production house. With such a relatively simple solution, absenteeism fell, productivity improved, and the production house became fully utilized.

This case demonstrates that, given the prevailing local norms, i.e., family custom and local creed, when the MSE had to face an unexpected challenge they themselves could find the solution. The external party, in this case BI, only helped by facilitating the process to ensure that the system would work. It is also important to note that the establishment of the new cluster was made possible due to the trust towards the leader and among members.

In some cases, however, an own solution also emerged out of frustration. Together with other MSEs in Aceh, a relatively successful small coffee business run by Mr B had been trying to convince the local authority to help facilitate with a packaging machine. The reason was simple, many MSEs could not compete because there was no good packaging facility available in the region. Most of them had to send their products to Jawa, or they had to buy the materials from Jawa for the packaging. As a result, the additional and high transport costs made their products less competitive. Only after many attempts were made that a packaging machine was finally purchased by the local authority. It turned out, however, the machine was unsuitable for the kind of packaging required by most MSEs. The authority purchased a wrong machine without consulting with the MSEs. Out of frustration, Mr. B solved his problem by selling the products directly through various stores after packaging in Jawa, and subsequently made a plan to relocate the main part of his business to Jawa and manufacture the products there (at the time of this writing, the plan is temporarily postponed due to the Covid-19 pandemic). This is only one of so many examples demonstrating how the incompatibility of policy with real conditions/problems faced by MSEs made the well-intended policy ineffective, if not wasteful, and how the MSEs had to manage to find the solution by their own. At the end, the power of agglomeration forces in attracting activities to move to the developed region (Jawa) proved its strength.

Women entrepreneurs promoting their breadfruit chips in Manokwari, Papua

Quality control of the coffee made by a local SME in Aceh

Replication Through Trust, Local Solution, and Policy Announcement: Cattle Growers in Kupang, East Nusa Tenggara

Among farming communities throughout Indonesia, welfare progress is often measured by indicators such as how many agricultural produce they plant, harvest, and sell, or how many animals and livestock they own/raised for their meat, fibre, milk, eggs, or other products. Efforts to help MSEs in such communities used this as an entry point. In a cattle-growing community, government programs often took the form of giving calves or cattle. In many cases, the program failed because it overlooked the importance of feeding capacity as a precondition. Either the productivity deteriorated due to low quality of cattle and other products, or they ceased the cattle-growing business altogether by selling the cattle. Only in cases where an integrated approach was used or made by the government as a precondition for receiving assistance that the productivity could improve.

Two important issues are notable. First is on sustainability. One of the method’s most important features of circular economy is the integrated production of animal and crop where nutrients from agriculture produce are recycled from animal feed to animal proteins to manure to soils and back to animal feed. The circular nature of the process is featured by nutrients added to the farm when animals, feed and fertilizer are used/purchased, offsetting nutrients leaving the farm (as meat and milk). The key is how to exploit the interaction. The second important issue is with regards to replicability. Past experience has shown that replication of even a good practice is not an easy task, since it involves changing people’s mindset.

Through the skill and ability of its leader, Mr. DA, a cattle growing cluster in Kupang, East Nusa Tenggara, implemented a circular economy and tried to persuade other cattle growers to replicate it. After trying several approaches to no avail, an initiative came up from the cluster members themselves. They decided to conduct sales and cattle trading inside the farm and invite general public to attend. Expecting to have an impact, the result turned out quite impressive: some farmers in and outside Kupang were motivated to go into cattle growing business by replicating/adopting the circular economy method. This example once again shows that local communities themselves, not outside experts, are capable of finding an innovative solution.

The way to advocate a new thing also matters. Providing a concrete evidence that the new method will give the biggest benefit to the locals around the farm can be effective. This has been shown by the organic horticulture farm owned by Mr. GS (also in Kupang). His persistence to make the farm thrives and educate farmers inside and outside the region about organic farming has been working well, for which he won the 2018 ‘Young Agripreneur Ambassador’ award.

Similarly, the way a new policy is announced can make a different impact. For example, in regions where communities are relatively poor and not too accustomed with the concept of cluster, announcing 50 ha minimum land required for cattle growing without informing the possibility of doing it through a cluster tends to receive a cold shoulder. None of the local farmers can afford to meet the set limit individually, and not all of them have a full understanding about why 50 ha is required. The risk is therefore real that the well-intended policy can be dead on arrival. Clearly, a policy becomes ineffective if it is announced without understanding the local conditions and constraints.²

Cattle grower in East Nusa Tenggara

Circular Economy, Policy Asymmetry, and Vicious Circle Problem: Rice Farm Cluster in Ngawi, East Jawa, and Banana Chip Producer in Banten, West Jawa

For a country that produces food waste of up to 300 kg/person annually (2016 data), and the amount of organic waste in the capital city Jakarta is second highest in the world (3233 m³, mostly from the agri-food industry), Indonesia can gain enormous benefits from applying a circular economy farming. Converting the waste into economic value and lowering the greenhouse gas emissions from food waste are among the key benefits. Yet, these potential benefits failed to persuade a large number of farmers to shift to a more sustainable farming. The lure of short-term profits, the asymmetry of policy measures, and a lack of information are all acting as hindrances.

Led by Mr. A, a community of rice farmers in Ngawi, East Jawa, formed a cluster to adopt a circular economy method.³ Their products are organic, as no chemical and toxic residue applied to the soil and plants, and the process produces zero wastes where one-third of the waste is used for cattle feed and two-third for fertilizer. In addition to implementing an environmentally sound method, the productivity of the farm is around 6 tonnes per hectare, higher than the national average and greater than the productivity of government-mandated rice clusters that did not apply a circular economy method.

Numerous obstacles, however, continue to stand in the way of their desire to grow and make progress. The application of the method also fails to spread to other farmers despite various efforts made by the leaders and members of the cluster. The total rice production based on an environmentally sound method throughout the region continues to be low. This has created a vicious circle. The fact that the production is low causes a stigma against promoting it, especially that rice is considered important not only economically but also politically (for food security). Indeed, government supports to the cluster and generally to any efforts to shift towards sustainable farming have been limited. In addition, the development of major infrastructure has resulted in dwindling area of fertile land especially in Jawa, and the provision of subsidy for chemical fertilizer creates an unfair price competition to the circular economy farms. The government assistance to provide irrigation machine to rice clusters in the area also creates a negative effect. Allocating only one unit machine in a cluster with a relatively large number of farmers causes frequent disputes among members—hence the weakening of social capital–over who has the right to use the machine. The design of the policy clearly overlooks the local conditions and reality on the ground.

Efforts to spread the concept of circular economy were also tried by the cluster members through enhancing the skill and knowledge on practical application of circular economy. They distribute the waste to, and share inputs with, other farmers, to strengthen the social bonding. Yet, the progress has been rather disappointing. Given the fact that the whole process of circular economy involves a rather long supply chain, any efforts to spread the method requires an expanded network of collaboration with all stakeholders, including with consumers and public at large.

While breaking a fixed mindset and adopting alternative policies that embrace new development paradigm take time and effort, convincing farmers who has been using traditional method for years and feel that their products can be threatened (cannibalized) by the new method is equally challenging. It requires a cultural approach and the trust from other farmers.⁴

A rather contrasting situation is experienced by a traditional banana chip maker in Banten, West Jawa. Run by Mrs. AS, a mother of two children, the business is typical of rural small business facing a vicious circle problem. She encounters a combination of challenges. Culturally, she prefers not to borrow money, although given the circumstances the only way to continue the business and support the family is to get an additional capital. On the other hand, she also knows that getting loan is difficult due to limited collateral and she does not have the necessary license (known as P-IRT). All these put her in a dilemmatic situation. It is her strong sense of survival to gain self-realization and the desire to send her children to a higher education program that finally forced her to take a bank loan, albeit only of a small amount.

But a series of obstacles continue to block her business progress, ranging from a lack of proper equipment to raise production capacity and improve the quality, limited market and low purchasing power, to a lack of knowledge for using different means of sales including using internet-based e-commerce. The money from the loan was far from adequate to overcome these obstacles and to keep the business afloat, especially during the pandemic. In such a situation, concerns over environmental considerations are off the table. Instead, she had to do cost cutting by using cheap plastic for packaging. With no government support, no steady income, while refusing to default loan, at the end she had to forgo her desire to send the children to school.

It is hard to imagine what solution is available for her when the response to the original problem (the need for capital to expand business) creates new problems of loan repayment and forgone children education, which aggravate the original problem. She had tried all kinds of initiatives to break the vicious circle, but to no avail. This is clearly a case where policy intervention and external assistance are required.

Preparing for transporting products of the community of rice farmers in Ngawi, East Jawa

Drying process in the traditional banana chip makers in Banten, West Jawa

Customary Law and Social Capital

People invest in social capital within their communities by building a network. So do members of MSEs when they form a cluster. They invest in social capital to enable and strengthen collective actions, and to resolve any potential conflicts. In a community with deep-rooted and long history of customs and tradition, as in the case of many indigenous ethnic groups throughout Indonesia that still hold indigenous customs and follow customary law, disputes are settled without invoking the court that relies on local/state law.

A number of studies exploring the link between laws, customs, and social capital reveal that business operations in communities with high levels of social capital tend to comply with a variety of simple legal mandates (Ramseyer, 2015). Obeying traffic rules, participating in neighborhood safety, and paying monthly due for specific needs are few examples of simple legal mandates. Such businesses and communities are less likely to breach or default on their promises. They also tend not to sue when a dispute ensues, and in the case of MSE borrowing money, the creditors less often petition courts for enforcement orders. Debtors in high social capital communities also less often file in court for bankruptcy protection. On the other hand, members of communities and business operations with low levels of social capital are more likely to default on their contracts, and to litigate and petition a court.

For any business activities, large, medium, small and micro alike, rules and laws are very important as they are closely tied to the customs and tradition that prevail in a community. They do not exist in a vacuum. In assigning punishment for the basis for obedience, laws require the support of custom in order to be compatible with the need of communities. On the other hand, customs that are required to produce social accord need the support of rules and laws for members of the community to observe the practice without hurting the interest of others. The question is, when disputes arise in a community that holds strong customs and customary laws, which one to abide to, the state law or the customary law?

The type of court where disputes are heard has a profound influence on the approach to proving or ascertaining customary law. In many situations, if a case is unresolved, they bring it to a higher forum, e.g., from hamlet to village level. If it is still unresolved, they may take it to an even higher level where local/state law is applied. In case it becomes apparent that customary law should be used, however, there is a possibility that the judicial officers in higher level court are either not familiar with the customary law’s provisions (in which case a special statutory provision may be made), or they unilaterally impose sanctions that violate customary law. Either way, it could give rise to disharmonious relationship or even conflict, which is obviously unfavorable for social activities or any business to operate.

To avoid such a scenario, some regions decided to formally incorporate key components of the customary law into local/state law. Rejang Lebong district in Bengkulu province is an example. The MSEs we interviewed in that district did not find serious problems related to this matter because local government had issued a regulation (PERDA No 4, 2017) to acknowledge and protect the indigenous communities and their customary law where trial was developed based on the spirit to achieve agreement and trust, and to be conducted in a transparent way (open to public). Even the execution is determined by the agreement of the parties involved. When the decision has been made, the conflicting parties forgive each other, and the execution is done in a ritual session through a joint prayer.

Another clause in PERDA No. 4 that is highly relevant for MSE operations especially in the farm-based activities is on land rights. The regulation explicitly recognizes custom-derived land rights (ulayat) of the indigenous communities, consistent with what is stipulated in Rejang’s customary law.⁵ The rights, known as ‘taneak tanaiadalah,’ is a traditional type of land tenure that reflects communal rights based on community's custom or tradition. For two decades since the promulgation of Law No. 5/1979, the indigenous communities lost their customary rights and controls over their land and other assets. Following the decentralization policy in early 2000s, particularly after the issuance of Law No. 22/1999 on regional government (later renewed by Law No. 32/2004), local governments had the opportunity to restore the rights of indigenous communities. Since then, many district governments saw themselves confronted with claims related to such rights. The response, however, varied. Some, including Rejang Lebong, opted to formally integrate customary law with local law, while others did not.

What matters, however, is the implementation. Even in regions where two types of law are integrated, when a choice has to be made the enforcement tends to side with local/state law. Consequently, MSE activities relying on land-use and related resources have to face uncertainty. Such cases often arise when big plantation or mining activities take the land area that is part of the traditionally owned territories of indigenous peoples. Mining, forest and land use management is always tightly close to local custom and law. For indigenous peoples, land is the main source of traditional means of subsistence, and for those running small commercial activities it is the only supporting asset they had. More often than not, disputes over land ended up being resolved by undermining the customary law. The indigenous peoples’ rights are respected only to the extent that the state law has formally recognized such rights (normally done by the issuance of formal title).

Yet, the indigenous customs and tradition are generally more favorable from the environmental impact perspective. The case in Kalimantan is a notable example. For generations, Dayak tribes have lived in harmony with nature and used the forest in a sustainable way. Having intimate connection to nature, they have developed a farming system that prevents forests from being destroyed by following the guidance in customary laws before opening forest lands for farming. They plant diverse rather than single crop, and grow tall trees as forest canopies in order to secure plant and wildlife habitat and to cycle necessary nutrients.

Similarly in Rejang Lebong, where forest covers about 75 percent of the entire area, and most members in 65 villages abutting Sumatera’s Kerinci Seblat National Park are farmers.⁶ After the government established a national park which also covered the indigenous community land without consulting them in 1999, local farmers changed their polyculture farming to monoculture type (e.g., coffee). Only in recent years the indigenous Rejang rediscovered their heritage by relearning polycultural agriculture practiced by their ancestors. Multiple crops are now grown interspersing coffee bushes with other plants such as kabau and jengkol bean trees (traditionally used in curries and chili sauce), allowing farmers to make money year-round instead of one-time shot during the coffee harvest.⁷ By rediscovering the old tradition, local communities gain not only from higher earnings but also from reduced damages caused by the environmental destruction.

For some MSEs not operating in farm activities, however, they may find the relevance of customary law in contemporary context more limited. Even when the business requires inputs from farm products (e.g., processing), the perceptions towards indigenous customs including the effect of customary law on their operations are no longer strong. This often occurs in communities where the relevance of customary law in contemporary contexts has been increasingly questioned. Younger generation, members of communities who had interactions with outside world, and those with formal education, are usually more inclined to accept new norms and customs. They tend to raise new ideas, and stage criticisms of local customs as they view them impractical.⁸

Most MSEs who are busy and more concerned with their day-to-day activities also feel that indigenous customs have only little effects on their business operations. This is evidenced from the results of our additional survey using a questionnaire designed specifically to include the role of customary law. Respondents in Rejang Lebong believe that other factors are more important to consider than concerns over the effect of local customs or customary law. An MSE producing palm sugar, led by Mr. SA, expresses their opinion that following the state law is affecting their business more than abiding to the customary law especially when the non-monetary benefits are considered. A business-oriented cluster is most preferred for them. On the other hand, an MSE operating in coffee production, led by Mr. S, perceives that state and customary laws are both contributing positively to their business operation. In terms of cluster type, after considering the benefits and the costs, they prefer to have a government-mandated cluster. Insofar the two types of law in Rejang Lebong have been integrated, abiding to state law and joining a government-mandated cluster are not in contradiction with following the customary law.

A small coffee producer in Rejang Lebong, Bengkulu, who sees the importance of both the customary and the state laws in his business operations

A small palm sugar producer in Rejang Lebong, Bengkulu, who are not too affected by the customary law

A similar finding is revealed from our survey in Umi Jaya village, in Sintang district of West Kalimantan. Organized and led by Ms. AA, Ms P, and Ms. S, members of a cluster specializing in traditional woven fabric and cloth are of the opinion that following the state and customary laws is most beneficial to their operations. Despite the fact that members of Dayak community where the MSE operates continue to hold their traditional customs and tradition, the effect of customary law on their operation is rather limited. They use the Dayak motifs for their cloth, and they employ local women from the Dayak community. Interestingly, from the cost questionnaire they generally perceive that it would be costly (ranked second costliest) to just strictly abide to customary law. After combining the benefits and the costs, their preferred cluster is one that is strictly for business, not the government mandated type.

The above result is not surprising. MSEs producing woven cloth in this area represent a typical small business operation plagued by classical problems. Their location is remote, far from major urban centers, the infrastructure is poor with limited access to outside information (let alone technology), and the workers’ level of education is low. When trying to work on some administrative matters, they have to struggle with bureaucratic hurdles that cost them time and money. Ironically, they usually experience this when trying to participate in a government’s offered program. It is difficult to expect their business to grow in such circumstances. While the product of this MSE represents a genuine local value of Dayak customs and tradition, hence unique and rare, their business is paradoxically stagnant. As sales are limited, and the price is unreasonably low despite the fact that we found their products are sold in the international market by a third party at a much higher price, workers are unable to secure steady income. This category of MSEs needs a magic wand that can help to expand the market network of their products.

A woman weaving in a cluster of Dayak woven fabric makers, Umi Jaya village, Sintang, West Kalimantan. They strictly use the Dayak motif for their products and employ women members from the Dayak community

Protecting indigenous local customs in a system with formalized rules, regulations, and legal systems can also be incompatible in a different way: i.e., the latter is not supporting the former. Take the case of MSEs operating in culture-related activities. To the extent culture and cultural heritage are important components of social capital, preserving them cannot be separated from securing the social capital. Indeed, preserving cultural heritage has myriad impacts on social capital. For one thing, it provides space of encounters for social integration and inclusion. But it can also function as a source of identity and local pride, from which members of community may cooperate and engage in collective actions.

An example is the artisan-weaving group pioneered and led by a local woman (Ms. AH) in Nita village of Sikka Regency in Flores island-East Nusa Tenggara. Run all by women, the self-managed group wanted to protect the ancient organic art of ikat weaving, which is a valuable heirloom and part of the region’s cultural identity. It exemplifies the rich cultural heritages of the community. In addition to keeping the ancient motifs rich of philosophical values, they also adopt the ancient technique and all materials they use are natural, e.g., the natural colors for dyeing are made from tea barks, leaves, fruits and roots. While the activities provide income for the local women, the emphasis of their work has been on the social, cultural, and philosophical value to preserve the local heritage. Hence, what they produce cannot be considered as a handicraft; the weavers are not craftswomen or handicraft workers, instead they are called seniwati (women artist). This may explain why they hardly receive any assistance from local government, as the official policy and assistance outside farm activities are traditionally reserved for MSEs producing handicraft.

Yet, protecting cultural heritage, which is exactly what this cooperation has been trying to do, is an important part of securing social capital. This kind of work by small cooperation or enterprises produces multiple advantages beyond just economic benefits. They deserve attention and assistance beyond those mandated by the customary and commercial laws for MSEs. At the very least, the products of small enterprises of this type need to be protected by the intellectual property law (HAKI or Hak Kekayaan Intelektual).

A woman leader of a self-run artisan-weaving group in the village of Nita, Flores, East Nusa Tenggara, who emphasizes the need to protect the local cultural heritage