Bloomberg Businessweek (North America)
Poor Indonesians change trash for cash, and find a way to save
▶ ▶ Indonesia’s “trash banks” provide cash and basic savings accounts for the poor ▶ ▶ “They just need to bring in more rubbish, which, after all, is everywhere”
It’s clear from the dirt floor, the battered green sofa, and the common-use comb hanging from a string next to the door that this is no ordinary bank. Customers in this poor corner of eastern Indonesia can borrow cash— and pay back in trash.
“The program originated from the people, it is managed by the people, and the rewards are for the people,” says bank manager Suryana, who wears a black headscarf. She lives with her family above the Mutiara Trash Bank in the fast-growing city of Makassar on the island of Sulawesi. “From an economic point of view, this gets results,” says Suryana, who like many Indonesians goes by only one name.
In Indonesia, trash banking has emerged as a way of reducing pressure on ever- growing landfill sites, while allowing some of the country’s poorest citizens access to basic savings and credit. Residents bring recyclable trash such as plastic bottles, paper, and packaging to the collection points, known as banks, where the rubbish is weighed and given a monetary value. As at a regular bank, customers are able to open accounts, make deposits of trash— converted to its cash value—and periodically withdraw funds.
In Makassar, the city government commits to purchasing the rubbish at set prices displayed at the bank, ensuring price stability for those bringing in trash. It then sells it to waste merchants who ship it to plastic and paper mills on the main island of Java.
Customers, most of whom are women collecting trash part time, typically save tiny amounts in their accounts, around 2,000 rupiah to 3,000 rupiah (15¢ to 22¢) a week, although those who spend more time collecting rubbish can save much more. The banks also allow them to borrow money, most often to buy rice toward the end of the week as families await paychecks from employers.
Borrowers pay
back reliably. “So long as the people are still living here, they will pay,” says Suryana, who has learned bookkeeping and management skills for her role at the bank. “They just need to bring in more rubbish, which, after all, is everywhere.”
The scale of the trash problem facing Makassar is clear from a trip to the landfill on the edge of town. Each day the city of 2.5 million produces 800 tons of rubbish, most of it ending up at the five-story-high pile, which sprawls over an area the size of two soccer fields. Scavengers, many of them children, work alongside cows foraging for food. About 70 percent of Indonesia’s trash is dumped in open landfills, according to the Ministry of Environment and Forestry.
Mutiara is one of more than 200 trash banks in Makassar. Indonesia as a whole last year had 2,800 trash banks operating in 129 cities, with 175,000 account holders, according to the Environment Ministry. The banks can do more than pay out cash. Mutiara Trash Bank has paid local students to help younger kids with their homework. Elsewhere in the country, account holders can exchange rubbish directly for rice or phone cards, or use it to pay their electricity bills.
For customers such as Sitinah, who runs a small shop just down the alley from the bank, it’s the closest thing they have to a financial institution. “Before, I never seemed to have any money,” she says after withdrawing 50,000 rupiah to buy a wok she plans to use in a home catering business. “Now I can dip into these savings when I need to.”
The city administration sends trucks to collect the waste from the Mutiara Trash Bank several times a week and brings it to a Central Trash Bank, where it’s sorted for sale. “It’s a simple idea and a good one,” says Ary Budianto, a businessman who buys several tons of trash from the central bank each month. “By intervening in the market, the city ensures collectors get a stable price. The quality here is good, and they don’t cheat you at the weigh-in.”
For trash banking to succeed, government support is vital, says Sanjay Gupta, a waste management specialist at Skat Consulting in Switzerland, who’s studied the projects in Indonesia and elsewhere. The banks “need land and structures,” he says. “You can’t run them in the open.” While Indonesia has the largest network of trash banks, says Gupta, similar practices are carried out in African countries including Ghana and South Africa, in the Indian cities of Pune and Bengaluru, and in Manila and Bogotá.
The authorities in Makassar are supported by a local nongovernmental organization that receives funding from Unilever Indonesia and is headed by Saharuddin Ridwan, a former TV journalist. “We must all take responsibility for rubbish,” says Ridwan.
The bottom line Indonesia’s 2,800 trash banks offer their 175,000 mostly poor account holders a way to build up small amounts of cash.