CHAPTER IINTRODUCTION
1.1 Background ResearchThe development of national economy and the changing strategic environment facing the business world, including cooperatives and small and medium enterprises is very fast and dynamic. Cooperatives as a business entity should always be directed and encouraged to participate significantly improves the income and welfare of its members to be able to overcome economic inequality and social inequality, so it is more capable of acting as a forum for people's economic activities.One of the potential for government attention and need to be developed are small and medium business sector. This condition requires that every entrepreneur both small and medium businesses make an effort to stabilize or improve their business existence. One of the problems generally become an obstacle is the problem of small and medium capitalization. Capital problems faced include aspects of capital, business financing problems, the problem of capital accumulation, as well as how to utilize the facilities for the implementation of its business.Cooperatives in this case a role in helping the problems faced by small and medium enterprises through loans or capital to assist small and medium business sector. With the participation of cooperatives of small and medium enterprises in the provision of credit, the small and medium enterprises can alleviate the problem of capital and to increase its business with good quality and quality so that small and medium enterprises can help economic growth.According to the Cooperatives Act No.25 of 1992 Article 1: "Cooperation is a business entity consisting of a cooperative or a legal entity with bases its activities based on the principle of cooperative movement as well as the people's economy is based on the principle of kinship."One business unit is to provide a credit cooperative savings and loan. Giving credit is a cooperative effort of the most basic, the cooperative will need to provide an assessment of the customers who apply for credit loans and feel confident that customers are able to repay loans that have been received.Security issues on loans is a problem that must be considered by the cooperatives, because of the risks that arise in the lending system. This problem can be avoided by the existence of an adequate internal control in the field of credit. In other words we need a sound internal control system to support the effectiveness of lending. With the implementation of adequate internal controls in the areas of credit, meant to demonstrate prudence in the cooperative body.To be able to act as a formidable business entity and independent, through the efforts of their credit cooperatives should be able to improve the effectiveness of credit delivery system and do their best to reduce the risk of credit failure. When examined more deeply, especially credit failures caused by weak internal controls.Based on the description that has been described above, the author interested in conducting research with the title: "Role in Supporting the Effectiveness of Internal Control System for Lending to Small and Medium Enterprises".
1.2 Identification of ProblemsBased on the description above background, the author identification problem in this research are as follows:1. Are internal controls implemented by the cooperatives have been effective2. Does the system of small and medium enterprise credit cooperatives have been effective in3. How role in supporting the effectiveness of internal control systems of small and medium enterprise credit1.3 Research ObjectivesThe purpose of this study is to dig or search for data and information relating to the role of the internal control system effectiveness in supporting the provision of loans to small and medium enterprises.In accordance with the problems already noted, the purpose of this study is to:1. Knowing the effectiveness of internal control is applied to the cooperative2. Knowing the effectiveness of the system of granting loans to small and medium enterprises in the cooperative3. Knowing role in supporting the effectiveness of internal control system of lending small and medium enterprises
1.4 Research PurposeThe results presented in this paper is expected to provide the use of terms:1. Usability for Development StudiesThis research is expected to add insight or knowledge in the field of internal controls, particularly regarding the effectiveness of credit delivery system.2. Operational Functionalitya. For AuthorsThis study may provide an opportunity to broaden thinking to expand knowledge, both in theory and practice. In theory means to gain an understanding and appreciation gained during college. In practice, it is expected to increase knowledge and application in corporate activities, especially cooperative. In addition, this research is useful as an ingredient which is the writing of one of the requirements to pursue a Bachelor trial Strata-1 (S-1) Program of Accounting Studies at the Faculty of Economics, University Widyatama.
b. For CompaniesThis research is expected to give donations or information for the progress of the cooperative.c. For Other PartiesThis research can be used as a material useful information and input as required.
1.5 Framework for ThinkingControl is a management function which perform an analysis of all company activities. This function is very important because it produces a useful considerations and suggestions for planning the next. The existence of control in the company, it is expected that all activities can be run in accordance with the provisions previously set. Therefore, internal control is needed as a tool that can assist employers in controlling credit activities which will greatly affect the achievement of company objectives.Understanding the internal control according to The Committee of Sponsoring Organizations (COSO), quoted by Bodnar and Hopwood (2001:182) are as follows:"Internal control is a process-effected by an entity's board of directors, management, and other personal-Designed to Provide reasonable assurance Regarding achievement of objectives in the Following categories:a. Reliability of financial reportingb. Effectiveness and efficiency of operation, andc. Compliance with applicable laws and Regulations. "So internal control is a process that can be affected management and staff in providing a decent one certainty about the achievements obtained objectively in its application of the financial statements are to be believed, the implementation of efficiency and effectiveness in its operating costs and the implementation of regulations and applicable law to be obeyed by all parties.
The definition suggests that internal control objectives are:1. Reliability of financial statements2. Improving the efficiency and effectiveness of enterprise operations3. Encouraging obeyed the laws and regulations established by managementThe main purpose of internal control in credit is to direct lending activities in order to reduce the occurrence of the failure of credit and reduce the occurrence of bad debts. Credit has a relatively high risk of congestion at the time of granting credit, the credit risk of congestion at maturity can be reduced by running effective internal control.According to the Encyclopedia of the public, cited by Rachmat Firdaus (2004:2) definition of credit as follows:"Credit is the financial system untuk allows the transfer of capital from owner to expect users to make a profit, credit is granted based on the beliefs of people who give to the borrower's ability and honesty. "
The notion of credit under the Banking Act No.10 of 1998 Main:"Credit is the provision of money or bills can be equivalent, under contracts lending between banks by another party that requires the borrower to repay the debt after a certain period of time with interest."
So credit is the transfer of funds to borrowers to take advantage of services provided to the borrower, based on the belief of both parties and approved by the lending and borrowing of debt or loans after a certain period even with the amount of interest that have been defined or agreed upon.Because of the risky lending, the cooperative must be active in choosing clients, namely the assessment of the principles inlending, which according to Kashmir (2003:91) consists of:
1. Character / NatureCharacter is the nature or character of someone in this case the prospective borrowers.2. Capacity / CapabilityCapacity is the ability of prospective clients in repaying loans associated with its ability to manage the business and its ability to find profit. So in the end will look its ability to repay loans disbursed.3. Capital / CapitalCapital is the financing sources of customer-owned enterprises to be financed by the bank.4. Collateral / GuaranteeCollateral is a prospective customer guarantees provided both physical and nonphysical.5. Condition of Economic / Economic ConditionsIn assessing the credit should also be assessed the economic conditions now and for the future according to their respective sectors.
Effectiveness is a measure of the success of an activity or program that is associated with the specified purpose. The effectiveness of credit delivery system means creating a sound credit granting system and regularly so that minimize the risk faced by companies on loans disalurkannya.The previous empirical studies that support the research to be conducted authors include:Mida Siti Hamida (2003), conducts research using a case study from the Division of Atelir PT Telekomunikasi Indonesia Tbk. Based on his research showed that through the implementation of effective internal controls contributes to the effectiveness of the payment of salaries.Lydia Ariessanta Wibowo (2004), conducted a case study on PT. Paramita Beautiful Asian Bandung. His research stated that the implementation of adequate internal control over merchandise inventory will be able to support the effectiveness of the management of merchandise inventory.May Swan Marina (2004), conducted a case study on PT. Sinar Prima heralds Bandung. Results showed that adequate internal controls contribute significantly to the effectiveness of wage and salary.Bondan Djatnika (2004), conduct research with case study method on CV. Business Partners Eternal Bandung. Provided the results of research that the internal control of credit sales play a positive role in supporting efforts to increase corporate revenue.Hiro Tugiman (2000), conducted a study of 102 SOEs / D. The results show quantitatively the influence of internal controls in the achievement of organizational performance. Effect of internal control on firm performance showed the greatest rate when compared with the influence of top managers, internal auditors, production managers, and financial managers.Research to be conducted authors use the same independent variables with previous research, namely the internal penegendalian. But the substance of research that would do very different writers with previous research. These differences, among others, the study authors:1. The substance of the research focuses on the role of the internal control system effectiveness in supporting small business lending and middle-2. The research uses case study method in savings and credit cooperativesBased on the above description, the authors propose the following hypothesis:"Adequate internal control would play a role in supporting the effectiveness of credit delivery system to small and medium enterprises."
1.6 Research MethodologyThe method used in this research is analytical descriptive method with approach of case studies. Data obtained from the study, processed and then analyzed and interpreted using existing theories.
1.6.1 Operationalization of VariablesIn accordance with the title of this study, the tests carried out on:1. Independent Variable (X)Independent Variable is a variable whose existence is notinfluenced by other variables, these independent variables are factorscauses that will affect other variables.In this research, which serves as the independent variable is the role of internal control. Internal control according to Mulyadi (2002:180) are:"Internal control is a process that is run by a board of commissioners, management and other personnel of entities that are designed to provide reasonable assurance regarding the achievement of the three categories the following objectives: (a) reliability of financial reporting, (b) effectiveness and efficiency of operations and (c) compliance against laws and regulations. "
Studied aspects of the role of internal control is a component of internal control and internal control objectives.2. Dependent Variable (Y)The dependent variable is the dependent variable whose existence is something that is influenced by independent variables. The effectiveness of credit delivery system to small and medium enterprises are identified as the dependent variable.Credit system that effectively measured through the level of balance credit system implementation with the implementation of indicators of effective credit delivery system.
1.6.2 Data Collection TechniquesData collection techniques are as follows:1. Field Research (Field Research)Conducted to obtain primary data by conducting:a. Interview, by holding question and answer with the appropriate authorities to obtain an overview of the company and the problems associated with lending system.b. Questionnaire, namely by providing a list of questions that are expected to be answered to facilitate data collection and time efficiency.c. Observations, carried out by observation of the credit granting system.2. Research Library (Library Research)Conducted to obtain data by researching and studying the literature,scientific papers, and other literature sources related to the problems examined to obtain basic theory.
1.7 Location and Time ResearchLocation of the research conducted at Cooperative Savings and Loan Artha Jaya Sentosa Jakarta, which is located at Jalan Pondok Kelapa Blok D No. IX. 21 East Jakarta.As for the research carried out starting from March 2006 until the completion of this thesis.
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