This Asian Bank Lets You Borrow Cash and Pay in Trash

Trash Banks in Indonesia's Cities Boost Savings

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 here, in a poor corner of eastern Indonesia, borrow cash — and pay back trash.

“The program originated from the people, it is managed by the people, and the rewards are for the people,” said bank manager Suryana, who wears a black jilbab headscarf and 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.”

It’s an idea that’s about as far as can be from the technological developments disrupting banking elsewhere. Not just neighborhoods in Indonesia, but elsewhere across emerging Asia and Africa, locales are embracing “trash banking” as a way of reducing pressure on ever-growing landfill sites and allowing some of their poorest citizens access to savings and credit.

The scale of the problem facing Makassar and other Asian cities is clear from a trip to the landfill on the edge of town. Each day the city of 2.5 million people produces 800 tons of rubbish, most of which ends up at the five-story high tip, which sprawls over the area the size of two soccer pitches. Scavengers, many of them children, work alongside cows foraging for food.

A garbage disposal area in Makassar, Indonesia's South Sulawesi province. Photographer: Dimas Ardian/Bloomberg
A garbage disposal area in Makassar, Indonesia's South Sulawesi province. Photographer: Dimas Ardian/Bloomberg

Against this backdrop, trash banking is taking off. 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. Like a regular bank, customers are able to open accounts, make deposits — of trash, converted to its rupiah value — and periodically withdraw funds.

The city government commits to purchasing the rubbish at set prices displayed at the bank, ensuring price stability for those bringing trash in. It then sells it on to waste merchants who ship it to plastic and paper mills on the main island of Java.

At other trash banks in the country, account holders can exchange their rubbish directly for rice, phone cards or paying their electricity bills. At the Mutiara Trash Bank, several account holders had signed up for a homework program, whereby local students help younger kids with their homework and are paid directly from the garbage bank.

Customers in Makassar, most of whom are women collecting trash part time, typically save tiny amounts: around 2,000 rupiah to 3,000 rupiah (15 cents to 23 cents) a week, although others who more dedicatedly collect rubbish save much more. Many also borrow money, most often to buy rice, toward the end of the week when they’re awaiting their husband’s paycheck.

No Defaults

“No one has defaulted yet,” said Suryana, a gutsy, poorly educated 43-year-old who has had to learn bookkeeping and management skills for her role at the bank. “So long as the people are still living here, they will pay. They just need to bring in more rubbish, which after all is everywhere.”

Suryana, right, hands cash to waste bank member Sitinah. Photographer: Dimas Ardian/Bloomberg
Suryana, right, hands cash to waste bank member Sitinah. Photographer: Dimas Ardian/Bloomberg

For customers like Sitinah, who runs a small shop selling daily necessities, drinks and cigarettes a short way down the alley from the bank, it’s the closest they have come to a lending institution in their life.

“Before I never seemed to have any money," she said after withdrawing 50,000 rupiah to buy a wok that she planned 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 is sorted for sale.

Stable Price

“It’s a simple idea and a good one,” said 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.”

Indonesia produces 64 million tons of trash a year, of which 70 percent is dumped in open landfills, according to Indonesia’s Ministry of Environment and Forestry.

Cardboard sorting at the waste bank, where rubbish is weighed and given a monetary value. Photographer: Dimas Ardian/Bloomberg
Cardboard sorting at the waste bank, where rubbish is weighed and given a monetary value. Photographer: Dimas Ardian/Bloomberg

Mutiara is one of more than 200 trash banks in Makassar, which has emerged as a model for other cities, according to the city’s mayor. 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.

For trash banking to succeed, government support is vital, said Sanjay K. Gupta, a waste management specialist at Skat Consulting Ltd. in Switzerland, who has studied the projects.  While Indonesia has the largest network of trash banks, he said, other similar practices are carried out in African countries including Ghana and South Africa, in India's cities of Pune and Bengaluru, and in Manila, Bogota and Brazil.

“People are not interested in selling waste, but they don’t want to dump it, so this is a good way forward,” he said. “But you can’t run them without municipal support. They need land and structures. You can’t run them in the open.”

The local authorities in Makassar are supported by a local non-governmental organization that receives funding from PT Unilever Indonesia and is headed by Saharuddin Ridwan, a former television journalist who covered the religious wars in eastern Indonesia in the past decade.

“We must all take responsibility for rubbish,” said Ridwan.

-- Reporting by Chris Brummitt

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