This study will investigate how the patron-client relationship persists under the growth of rural financial institutions (RFI). The growth of RFIs should increase the role of financial inclusion and replace the banking practice between the client and the patron (Morduch 1999). However, in Bugis-Makassar, South Sulawesi, the patron-client relationship exists even though RFIs are prevalent (rural bank, cooperatives, rotated savings, and possible money lenders). The client can borrow from the patron and repay the debt without any kind of work for the patron, but the costs of this borrowing could be massive. As the relationship persists, the transactions between the patron and client could grow in many forms, and as these transactions become a regularity, the client may become dependent on the patron. To examine the problem, we will survey three villages in Bugis-Makassar, South Sulawesi. Each of these villages contains both a high percentage of patron-client relationships and is surrounded by rural financial institutions. Specifically, we will describe factors that support the existence of the patron-client relationship such as social demographics and social capital, and why they still exist when the financial needs of the cashless can be met by modern financial institutions. We will conduct a case study with a combination of methods including unstructured interviewing and direct observation.
Tiar Shantiuli, Salami Said
About the Researcher(s)
Tiar Mutiara Shantiuli is a researcher for the Center for Economic and Public Policy Studies, UGM (Universitas Gadjah Mada) where she is also a doctoral student at the Tourism Study Program of the Faculty of Graduate Studies. She studied accounting at the Swinburne University of Melbourne during her undergraduate program and management at Swadaya Jakarta. She was also granted a Magister in Science in management from the graduate program of the Faculty of Economics and Business at UGM.
Salmah Said is a researcher and lecturer in the Management Department at the State Islamic University (UIN) Alauddin in Makassar, Indonesia where she is also a doctoral student. Her Master’s degree was obtained from the Department of Finance at the University of Melbourne. Salmah combines research interests in management finance, Islamic economics, and governance in her studies. Her research includes: “The View of Muslim Scholars on Sharia-based Capital Market,” “Local Authority Finance and Accounting for Local Government in Indonesia: A Comparison Between Pre and Post Local Autonomy,” “Analysis of the Implication of Share Ownership and Financial Decision of the Company,” “Derivatives and Islamic Scholars’ Viewpoints,” and “Factors Affecting Price Earning Ratio of Jakarta Islamic Index Companies listed on Jakarta Stock Exchange.”
Synopsis of Research Results
1. Read about the research results in their final report: Banking with the patron: a case study of patron-client relations in Makassar.
2. Read their blog post.