Microfinance Programme Sustainability Analysis Using a Complex System Approach

Microfinance Programme Sustainability Analysis Using a Complex System Approach | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Microfinance Programme Sustainability Analysis Using a Complex System Approach Indra Gunawan, Nur Chasanah This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-4284259/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This study aims to analyse the sustainability of a microfinance programme project in Indonesia via a complex systems approach by using a case study and applied thematic analysis. Data are collected by document review, observation, interviews and focus group discussions. The results reveal some issues that arise as a result of closure of the programme and the actions taken to cope with those issues that led to sustainability of the microfinance institution. The issues are related to project governance, accountability, capital and profitability, competition and empowerment. The analysis shows that the move towards a sustainable project presents characteristics of a complex system, including interconnectedness, adaptation, feedback, self-organisation, and emergence (IAFSE). These findings have implications for microfinance sustainability management and microfinance programme design. Furthermore, a model of sustainable microfinance projects and a framework to sustain microfinance programme (institutions) using a complex system approach are proposed. microfinance programme sustainability analysis complex system approach Figures Figure 1 1. Introduction Development projects such as microfinance programmes are considered an effective tool to overcome human development issues such as poverty. They can ensure long-term benefits through access to financial services that enable the poor to build assets, increase productivity, earn an income and achieve food security (Thapa 2006 ). However, sustainable development projects that involve microfinance are rare (Dieckmann 2007 ) and only 23% of Microfinance Institutions (MFIs) operate without donations (D’Espallier 2013). Even when an initial implementation is successful, such projects do not necessarily continue as originally implemented (Stirman et al. 2012 ). It may be difficult for an MFI to operate and achieve sustainability in remote rural areas (Thapa 2006 ). Traditionally, various types of explicit or implicit subsidies have sustained rural financial institutions (Yaron 1994 ). Further, development projects are complex (Golini & Landoni 2014 ; Ramalingam et al. 2008 ; Sarriot & Kouletio 2015 ) and context plays a crucial role (Ika & Donelly 2017). Interventions that take into account complex adaptive system characteristics may hold promise for more successful practice change (Suter et al. 2011 ) and may achieve sustainable outcomes (Sarriot & Kouletio 2015 ). However, most interest in understanding the sustainability of interventions is independent of the context in which the interventions are delivered (Chambers et al. 2013 ). Further, the literature examining the extent, nature or impact of adaptations to programmes or interventions once implemented is very limited (Stirman et al. 2012 ). An MFI is a system that operates in a dynamic environment of evolving heterogeneous rational agents who interact with each other and with their environment (Bourhime & Tkiouat 2016 ). This presents complex system properties including interaction, emergence and reactivity. Sustainability of MFIs can have organisational, financial and managerial aspects, although financial sustainability has been most studied in the mainstream literature (Thapa 2006 ). Studies of microfinance sustainability emphasise an institutionalist paradigm that focuses on financial sustainability (Brau & Woller 2004 ) according to financial ratios. Economic aspects of microfinance have dominated the contributions of the microfinance literature to sustainability (García-Pérez et al. 2017 ). Given the dynamic nature of the complex systems into which innovations are introduced, mutual adaptation between the intervention and the organisation/system, or interactions among stakeholders in various roles within the system is required to sustain a project (Stirman et al. 2012 ). Therefore, there is a crucial role for complexity theory in understanding the transition towards sustainable development (Loorbach & Rotmans 2006 ). This study analyses sustainability of the microfinance programme (the Revolving Loan Fund/RLF project) in Central Java Province using a complex system approach. The paper is structured in six sections. The first is an introduction that describes the background and importance of the study. The second is a literature review that is used as the theoretical framework for this study. The third section outlines the methodology of the research. The fourth presents the results of the study, including identification of issues arising following project closure and analysis results regarding sustainability of the project. The fifth section discusses the implications of the research findings and the last section concludes the paper. 2. Literature review 2.1 Development project sustainability and microfinance sustainability IDPs are public development programmes or projects that are typically funded by donor institutions to address social and economic needs in developing countries (Ahsan & Gunawan 2010 ). They can be ‘hard’ or ‘soft’ projects (Youker 2003 ). However, they are generally never purely hard projects because of their goals and stakeholder roles (Golini & Landoni 2014 ). Golini and Landoni ( 2014 ) identify five common characteristics of development projects: lack of defined beneficiaries; excessive numbers of stakeholders; resource insufficiency; difficulty of project management application; intangible project outputs; and complex and difficult environments. Sustainable development is defined by the Brundtland Commission of the United Nations in 1987 as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’. In the context of programme intervention, sustainability is defined as what happens after initial implementation (Stirman et al. 2012 ). Many international agencies and economists see project sustainability as the capacity of a project to continue to deliver its designated benefits over a long period of time (Bamberger & Cheema 1990 ). Scheirer ( 2005 ) considers that sustainability can be measured in three respects: the continuation of programme activities; outcomes or benefits; and maintenance of community capacity. Moore et al. ( 2017 ) lists five key elements of sustainability of development interventions: (1) a determined period of time, (2) continuous delivery of a programme, implementation strategy and/or clinical intervention, (3) sustaining of individual change, (4) evolution or adaptation of the programme and individual behaviour, and (5) continuous production of benefits. Microfinance is defined as the provision of financial services to poor people, as well as the self-employed (Ledgerwood 1998 ). The main types of rural financial institution are institutional innovators, credit projects, credit unions, village banks, member-based institutions, solidarity credit groups and linkage types (Zeller 2006). A credit project is usually linked to, or part of, a larger (integrated) rural development programme. Many development projects establish RLFs through community-based financial organisations and expect that the funds will be repaid by the initial borrowers and recycled to other borrowers (Ritchie 2007 ). Microfinance sustainability can refer to several levels including individual, group and institutional, and can relate to financial, managerial and organisational aspects (Thapa 2006 ). MFI sustainability is defined as the ability of an MFI to cover all of its costs (Ritchi 2007) including expenditure from its revenues and to earn a profit and run without subsidies or donations from donor agencies or governments (Mahapatra & Dutta 2016 ). The RLF project in Central Java Province, Indonesia, is a microfinance programme that was launched in 2007 and ended in 2015. However, the project continues to operate after its closure. The project was part of a national poverty alleviation programme, a Community driven development (CDD) project for rural areas managed by the central government. The project was financed by State Budget, the Regional Budget, and other donors. The microfinance programme (the RLF project) was implemented by Activity Management Units (AMUs), which then became MFIs at the sub-district level. There were more than 450 MFIs across Central Java Province, most of which have survived since project closure. The original AMUs (when the project implementation) were managed by a management committee responsible for daily activities and a board committee representing the community. Therefore, the AMUs were responsible to, obliged to report to, and supervised by, the government. 2.2 Project Sustainability by Using Complex System: A Theoretical Framework A complex system is defined as ‘an ensemble of many elements which are interacting in a disordered way, resulting in robust organisation and memory’ (Ladyman et al. 2013 ). It can be described as having interdependent and interconnected elements and dimensions, feedback processes and emergence (Ramalingam 2008). The complexity of a project is measured by its interdependency and differentiation (Baccarini 1996 ). The humanitarian aid community is an open, complex and adaptive system (Seybolt 2009 ) involving multiple organisations, issues, relationships and motivations (Wu 2016 ). The complexity of a development project is determined by interrelated aspects, namely the nature of the intervention, stakeholders and institutions, causality and change, and the embeddedness and nature of the system (Raimondo et al. 2015 ). IDPs have diverse stakeholders (Diallo & Thuillier 2004 ). Their environment is unique and surrounded by economic, social, political, legal, cultural and geographic separation among actors (Hermano et al. 2013 ; Ika & Donnelly 2017 ). Additionally, the project demonstrates the characteristics of a complex system including nonlinearity, connectedness, self-adaptation/self-organisation and emergence (Wu 2016 ). Sustainability from a system perspective is ‘the ability of systems to persist, adapt, transform or transition in the face of constantly changing conditions’ (Williams et al. 2017 ), which results from dynamic and long-term maintenance of the system’s identity amid constant change (Gallopin 2003). A sustainable complex system is ‘one that is adaptive and self- organising, with its components free to coevolve in response to changes in each other and, as a whole, changing in response to external conditions’ (Innes & Booher 1999 ). Further, organisational sustainability happens within a complex system (Metcalf & Benn 2013 ). The sustainability of a system is determined by availability of resources, flexibility/adaptability, homeostasis, response capacity, self-reliance, empowerment (Gallopin 2003), adaptability, resilience/repair and evolvability (Mobus 2017 ). Moving towards sustainability can represent a significant form of organisational change, whether it is designed by leaders of the organisation or circumstances that allow, push or prevent organisations to move from one state to another (Greenwood et al. 2015 ). While the organisational change approach emphasises leaders’ roles, the institutional change approach stresses contextual circumstances (Greenwood et al. 2015 ). Change towards sustainability in dynamic and complex human–ecological systems is an endless process of transformation (Kemp et al. 2015). Sustainability is a socially instituted process of adaptive change that can integrate with a transition management concept (Kemp et al. 2005 ). Transition management is a governance concept developed for managing sustainability transitions (de Gooyert et al. 2016 ). Sustainability transition is a multidimensional, long-term and fundamental transformation process towards a system’s shift to more sustainable production and consumption (Makard et al. 2012). This is an area of high complexity due to the many and varied interests and actors involved in transformation processes (Makard et al. 2012). Espinosa and Porter ( 2011 ) detail six complexity principles in complex systems that define the dynamic operations responsible for the ability to adapt in unpredictable and nonlinear ways. These are nonlinear feedback, self-organisation, emergence, edge of chaos, co-evolution and path dependence. Williams et al. ( 2017 ) considers that the core theoretical concepts of complexity theory to understand sustainability involve IAFSE. The interconnectedness concept is associated with the connection of components within the system and the link between social, economic and ecological systems. Feedback is related to nonlinear dynamics and the emergence of complex behaviours over time that result from feedback mechanisms used for decision making. Adaptive capacity/resilience refers to the capability of agents to learn from their experience and act accordingly to ensure the survival of the system. Self-organisation is the ability of a system to develop its own structure and behave spontaneously in the face of change, to lead the system to sustainability. Emergence is related to lower-level interactions that result from new higher-level structures and patterns that lead to the system‘s sustainability. Since a microfinance programme and its sustainability are complex, a complex system approach is appropriate to understand the change and transition of the project towards becoming a sustainable project. 3. Methodology This qualitative research is based on a case study. A qualitative research approach is important for understanding phenomena around promoting sustainability (Stirman et al. 2012 ). It is also appropriate for providing context-specific descriptions of organisational behaviour, which is nonlinear, historical and longitudinal (Svyantek & Brown 2000 ). Moreover, a case study can be used for ‘disciplined-configurative’ or ‘interpretative’ research where a researcher uses a theoretical foundation to investigate or interpret a case (Kaarbo & Beasley 1999 ). Data collection involving document review, observations, interviews and FGDs was conducted from October 2019 to December 2020 in Central Java Province, Indonesia. The interviews and observations were preliminary data collection tools employed to understand the project and the operation of AMUs. The interviews involved eight respondents who were considered to understand the project, including AMU management committee members, AMU board committee members, local government officials and AMU association leaders. Observations were conducted in two MFIs. Further, three Focus Group Discussions (FGDs) attended by a total of 73 participants were conducted: two at the district level (two districts) and one at the province level. The FGDs were attended by leaders of AMUs across the province, involving 52 MFI leaders from 27 districts. Data are analysed using NVivo in two stages: identification of contextual circumstances and transition analysis. The first stage aimed to identify issues within the project by analysing institutional-level changes (Greenwood et al. 2015 ). This approach highlights the contextual circumstances that push, enable or prevent organisations moving from one state to another. In this study context, identification of contextual circumstances involves identifying issues that arise as a consequence of the project closure, which potentially challenge the sustainability of the project. The circumstances issues that likely pushed the MFIs to move from one state (dependent microfinance institution that relies on fundings/subsidies from the government) to another state (independent microfinance that could finance itself) are identified. Furthermore, the second stage aimed to analyse the transition towards a sustainable (surviving) project. It involved analysing the actions taken to address issues and linking these actions to sustainability of the project. The core theoretical concepts of IAFSE proposed by Williams et al. ( 2017 ) are adopted at this stage. NVivo software was used to identify issues within the project as a consequence of project closure, the actions taken to deal with them and the core theoretical concepts of complexity for sustainability. Results of the data analysis are presented in the following section. 4. Results 4.1 Identification of the contextual circumstances Some issues and their effect to the sustainability of MFIs are explained below: 4.1.1 Governance Since project closure, the project has become independent of the government and has no hierarchical organisational relationship with either the central or local government. No single body is formally governing the project at the district or province level. AMUs at the sub-district level are independent in the running of their activities according to agreement from the community in the sub-district. To cope with this, an AMU association has been formally established to coordinate AMUs at province and district levels, and AMUs created coordination activities/function with the local government. Membership of the association is voluntary and every AMU acts independently. The association is a place for AMUs to share their mission, interests and information, and conduct mutual activities such as training, seminars, workshops and knowledge sharing. Sharing a mission with other AMUs may strengthen motivation and improve knowledge and skills to help in dealing with issues faced in the community. The association also functions as the representative of the AMU in the region in negotiations with other parties. 4.1.2 Accountability Termination of the project has changed accountability mechanisms. Since the project ended, there is no obligation of AMUs to provide reports to any level of government, and the government provides no technical guidance or facilitators to assist the daily management of AMUs. There is also less surveillance from the government. To deal with these changes, AMUs have made agreements with their local government and the association to provide regular reports. Each AMU deals with its own daily challenges by employing local values and wisdom in its dealings with the community and enacting its organisational rules based on the community agreement. To increase accountability, AMUs use accounting software and independently hire external consultants or advisers, or external auditors. 4.1.3 Capital and Profitability During the project implementation phase, the government was providing grants for new clients as well as additional capital. These grants led AMUs to focus less on generating revenue. Project closure meant these grants were stopped and AMUs must run their business profitably. To cope with these changes, AMUs have developed a new business model to ensure more profitable business. AMUs now pay more attention to generating revenue without ignoring their social mission. While maintaining the social values of the project is important, since the project is an empowerment project owned by the community, earning a profit is vital to keep the business going. Therefore, AMUs have changed their business model from one providing a purely microcredit service to a hybrid business, by diversifying their business. They have begun to open new businesses such as grocery stores, and constructing and renting buildings; and have become goods and service providers and third party investors. To increase their capital, AMUs cooperate with other parties (including other AMUs), and to reduce any losses, AMUs have begun to apply self-insurance to their clients. 4.1.4 Competition When in the project implementation phase, the government provided grants for microcredit and borrowers were recommended by village leaders based on grants allocated by the government; hence, there was little attention paid to the quality of borrowers. Moreover, no other institutions were providing microcredit like AMUs did. Therefore, AMU management did not pay any attention to competition. Since the project closure, AMUs no longer receive the grants and must ensure they can recruit qualified borrowers. Some financial institutions providing a similar credit mechanism (group-based microcredit) also have sprung up, which increases competition. To cope with this situation, AMUs have tightened the verification process without burdening borrowers with new requirements. AMUs have also employed marketing strategies such as providing rewards, subsidies for transportation costs and financial support for health issues. To improve service quality to increase client loyalty, AMUs have increased the credit limit. In addition, AMUs have reduced the required group size from five to three borrowers; cooperated with community members to recruit new clients; and held social activities to remind the community that AMUs exist and to attract them. 4.1.5 Empowerment Grants to conduct empowerment activities, such as capacity building for the community and management/board committee members of the AMUs, were provided during project implementation. However, when the project closed, the grants stopped, and these activities ceased. To address this change, AMUs have cooperated with villagers to conduct empowerment activities such as training and workshops for the community. Further, AMUs have facilitated the establishment of borrower associations, which are a place for borrowers to learn about the organisation and share knowledge. In addition, capacity building for management/board committee members of the AMUs is conducted by providing scholarships and cooperation with the AMU association and local government to provide trainings/workshops. 4.2 Transition analysis toward sustainable project The phenomena described above represent the attributes of a complex system, such as interconnectedness, feedback, adaptive capability and self-organisation, and emergence, which are linked to the sustainability of the AMUs (MFIs). The detailed analysis is as follows. 4.2.1 Interconnections Relationships among the elements in a complex system are very important for building connections and achieving desired goals. In this case, connections were built to address changes that would enhance sustainability of the project. Connections are made between AMUs, their stakeholders and other parties to achieve sustainability of the project. These connections were built though sharing understanding, coordination and cooperation to develop similar views and agreement related to the sustainability of AMUs. Connections were also made with the government, other AMUs and AMU associations, and the community to build more support and share information, improve knowledge and strengthen the AMUs’ position in the community. Through these connections, issues between AMUs and other parties could be resolved, and cooperation, agreement and support could be obtained that could lead to the continuous operation of AMUs. 4.2.2 Adaptive Capacity Adaptation is essential to embrace change and build resilience, to ensure the survival of a project after its completion. AMUs’ learning about the change of the project ownership and governance has made rules’ establishment and adjustment within AMUs. Some AMUs registered their legal formal organisational form. Procedures within AMUs have been improved. Further, lack of accountability and control have forced AMUs to employ accounting software, and hire external consultants or advisers, or external auditors. The termination of government grants/subsidies caused AMUs to develop a new business model for more profitable business without discarding the project’s values (social goals). Competition has driven AMUs to apply new marketing strategies. Those moves have helped protect AMUs’ assets, provided AMUs with control over their business, added revenue and reduced costs for the AMUs, all of which support the continuous transition of AMUs towards becoming sustainable projects. 4.2.3 Feedback Effective feedback mechanisms are crucial for a system as nonlinear dynamic behaviour over time that can inform decision making and enhances sustainability. Listening to customers may identify their needs and desires and improve their loyalty. Seeking to understand the community needs and competition may provide information to improve service quality. All feedback is foundational for decision making to make adjustments that address current and future potential issues. In this way, AMUs can survive and continue their operations. 4.2.4 Self-organisation and Emergence Developing their own structure and spontaneous behaviour without being guided from the top down to create emergent properties is important for AMUs in the project sustainability process. The formal establishment of AMU associations after the project ended was not ordered by the government but arose from an idea by AMU leaders. Therefore, instead of being coordinated by the government, AMUs in the province are now coordinated by associations in response to the closure of the project. Further, to survive, each AMU deals with its own issues by relying on local values and wisdom without direction from a top-down facilitator—the government. They also choose their own organisational structure based on their organisational form. Further, the existence of AMUs and AMU associations in the province is a result of self-organised actions towards becoming a sustainable project when the system (project) was forced out of equilibrium (project closure). 5. Discussion 5.1 Implication for microfinance sustainability management This study reveals that a complex systems approach can be applied to analyse project sustainability. It explains how the project continues to perform after its implementation phase and provides an analysis of how to achieve this. The findings show that the process towards becoming a sustainable project is dynamic and has sustainable complex system attributes such IAFSE. These have implications for microfinance sustainability management and microfinance programme design. First, the results have implication for the importance of stakeholder management in project sustainability. Interconnectedness links parties that enable the project to move towards becoming sustainable. This may involve a mutual agreement to reduce barriers and strengthen support. To achieve sustainability, managers of complex systems need to understand interconnections (Williams et al. 2017 ). Effective connection requires effective stakeholder management. Stakeholder theory can contribute to sustainability through anchoring sustainability in the stakeholder mindset, and creating mutual sustainability interests and approaches (Hörisch et al. 2014 ). A sustainable project is influenced by external stakeholders through communication, complaints and legal actions, partnerships and capacity building, and direct action (Cvijović et al. 2021 ). Silvius and Schipper ( 2019 ) integrate project stakeholder management and sustainable development by proposing a tool to plan stakeholder engagement activities with consideration of sustainable development. The second major implication of the findings is that there is a need for effective leadership. Seeking feedback from the environment and using it to improve decision making is important for achieving project sustainability. Information from stakeholders and the environment is useful for learning and decision making, making adjustments for addressing opposition and disagreements, and seeking mutual agreement and suggestions. Feedback offers sanctioned conversations across boundaries to increase learning in a sustainable complex system (Espinosa & Porter 2011 ). Feedback from the external environment can be responded to through adaptation or transformation, and has both direct and indirect effects on organisations (Williams et al. 2017 ). Adaptation is essential to embrace change and build resilience to ensure the survival of a project after implementation phase ends. Changes in the organisational form of AMUs, control mechanisms, marketing strategies and the business model demonstrate the adaptive capacity of AMUs that might enhance their sustainability, and show that institutional-level changes towards sustainability occur. These changes emphasise contextual circumstances that push, enable or prevent organisations moving from one state to another (Greenwood et al. 2015 ). The adaptive capacity of a system is demonstrated when actors in the system can maintain the system’s basic structure and manage resilience (Williams et al. 2017 ). Effective agent learning from their experiences and actions towards successful adaptation ensure survival of the system (Williams et al. 2017 ). Feedback and adaptive behaviours indicate the need for effective leadership to manage continuous changes. Leaders of organisations are important in the change process towards sustainability; they can either orchestrate or interpret and shape the change (Greenwood et al. 2015 ). Unit members will be able to quickly implement and refine new processes if the leader provides resources and direction (Caldwell et al. 2008 ). There is a positive relationship between sustainable leadership and sustainability performance (Burawat 2019 ). Third, the results have implications for the importance of the governance system, especially a network-based governance system. Self-organisation and emergence are demonstrated by the actions of AMUs: for example, consideration of local values when dealing with issues; the organisational form of AMUs; and the formal organisational establishment of AMU associations that are not directed from the top down (i.e. by government). Such actions have been taken to help AMUs survive after project termination. Changes to the organisational form and establishment of associations imply the need for two types of system governance: system governance within AMUs to manage their daily activities; and higher-level system governance. The higher-level governing body must replace the function of government in coordinating AMUs after project closure, and tends towards network-based governance. This is because each AMU is independent of the association. Network-based governance promotes strong learning capacity and adaptability in multilevel governance systems and is able to utilise changes in social, political and ecological contexts (Duit & Galaz 2008 ). 5.2 Implication for the design of microfinance programme Other than the above implications for microfinance management, the findings have implications for the design of microfinance programmes. Since complex adaptive systems have strong tendencies to learn, adapt and self-organise (Rouse 2008 ), flexibility should be considered in a programme’s design. The design should allow the system (programme) to redesign itself. Programmes that can be modified over time are likely to persist longer (Scheirer 2005 ). It is crucial for planning of a governing body for the programme/projects that consists of sub-projects/branches. This governing body will coordinate the project after the project closure. Accountability and control mechanisms that can be sustained after project closure are also important to prevent potential fraud. Another important design aspect is preparing and equipping the community with knowledge and skills as a basic skills to manage running the project after the project ends. This is critical as a sustainable project requires learning capacity and creativity. Hence, recruiting people who are dedicated and willing to learn is also important. Moreover, designing a programme that empowers and engages the community during implementation is important to create a sense of belonging to the project. This will be useful at the end of the project as it will be owned by the community as a public asset. With reference to these findings, a model of sustainable microfinance projects (Fig. 1 ) and a framework to sustain microfinance projects (institutions) (Table 1 ) using a complex system approach are proposed. A development project or programme is an open system that interacts with the environment. The environment is dynamic and changes in ways that might influence the project. The closure of a project produces change and causes issues that can hamper the continuous operation of the project after closure. To cope with environmental changes and to survive, the project should have the capacity to respond to changes effectively. Effective responses might be achieved by managing the project as a complex system to enable progress towards becoming a sustainable project. This involves characteristics of a complex system including IAFSE. Each component should be able to connect and interact with other elements in the system, especially its stakeholders and the environment. It should listen to and embrace the stakeholders and the environment to proceed and produce feedback for effective decision making. It should also be able to learn and adapt to make adjustments and create new ideas to address environmental changes. Further, the capacity to develop its own structure and behave spontaneously without being guided from the top down, which leads to emergent properties, is essential for survival of the project. Additionally, a system governance (SG) that tends towards network-based governance is required to provide more space for adaptation, self-organisation and emergence. Therefore, effective stakeholder (ST) management, leadership and governance system are important to support the transition towards sustainability of the project. The framework involves 4 steps, namely engagement, participation, application, and control and evaluation. Engagement aims to tie with and attract the community, share information and build understanding about the sustainability of the project. Further participation of the community in the project. This step aims to listen to the community and identify their needs. Applying what is found in the participation step and involving the community in the project’s activities are conducted in the application stage. Finally, control and evaluation step are conducted to provide accountability, evaluate the actions and get feedback. Table 1 Framework to sustain microfinance projects by using complex system approach Step Objective Main core theoretical concepts of complexity theory Recommendation action Expected effects to project sustainability Engagement • to share information • to share and build understanding Interconnectedness Conduct activities to engage with the project’s (MFI’s) stakeholders: • Campaign • Visit • Talk • Community realise the existence of MFI • Community understand the MFI’s mission • Community understand that they are subject of the project Through the understanding, it increases communication with the community, raises awareness and gain their support to the existence of the project (MFI) Participation • to listen the community’s aspiration • to identify the community’s needs • to find new ideas Interconnectedness, self-organi sation Conduct activities to explore the community needs • Discussion • Meeting • Worshop • Community understands their needs to the project (MFI) • Community expresses their needs • Community conveys their ideas to realize their needs These increase the community ownership to the project Application • to apply what is found in the participation stage • to involve the community to the MFI Adaptive capacity, self-organisation and emergence Conduct activities to realize the community needs: • Conduct organisational changes and adjustment and/or transformation • Involve the community in the organisational (MFI) activities (such as planning, indirect monitoring) • Empower the community • Improve the current performance of the organisation (MFI) These fulfil the community needs and realise the benefits. Control and evaluation • to provide accountability • to evaluate the action • to listen feedback Self-organisation and emergence, feedback • Provide transparent and open access accountability report • Hire public assurance (such as external auditor, public accountant/consultant) • Provide feedback mechanisms • Ensure that organisation (the project/MFI) address the community needs • Improve future performance 5.3 Limitation of the study This study has limitations that inform future research. The participant sample in this study was dominated by leaders of AMUs (MFIs); the involvement of more AMU stakeholders would improve robustness of the findings. The study applies to a specific case (one province); hence, conducting the research with a wider scope in the future is important. Using more comprehensive characteristics of a complex system to the analysis would provide more comprehensive analysis and information about project sustainability. Providing a detailed analysis of the relationships and dynamic interactions among AMU stakeholders would also be informative. Therefore, investigating the role of stakeholder and leadership theory in project sustainability is imperative. Finally, this study focuses on post-implementation; future studies should examine the implementation processes that might influence sustainability of the project, to provide a more comprehensive understanding of the phenomenon. 6. Conclusion The demand for long-term effective IDPs and the complexity of such projects led to the need for a comprehensive approach to increasing their sustainability. This study reveals that a complex system approach can be applied to understand the sustainability of microfinance projects. Analysis of changes that have occurred and transitions within the project enhances understanding of project sustainability. It identifies the problems raised after project termination and how to deal with them so that the project can continue to perform after the implementation phase; and presents core concepts of complexity theory to understand the transition towards becoming a sustainable project. In the microfinance project case study here, issues caused by the closure of the project include problems related to project governance, accountability, business model, competition and empowerment. Actions taken to cope with these issues included establishing an AMU association and agreement with local government; implementing organisational rules; employing accounting software; hiring external consultants or advisers or external auditors; developing a new business model; increasing capital; applying self-insurance; tightening up the verification process; running marketing strategies; cooperating with villagers and the AMU association to conduct empowerment activities; and facilitating establishment of a borrower association. Further, the analysis showed that the move towards becoming a sustainable project presents characteristics of a complex system including IAFSE. The findings have implications for microfinance sustainability management and microfinance programme design. First, they demonstrate the importance of effective stakeholder management, leadership and a network-based governance system. Second, they recommend including flexibility in programme design; planning a governing body; introducing accountability and control mechanisms after project completion; equipping the community with knowledge and skills; and recruiting the right people. Declarations Ethical Approval This research has received ethics approval no H-2019-147 from The University of Adelaide. Funding Not applicable. References Ahsan, K & Gunawan, I 2010, 'Analysis of cost and schedule performance of international development projects', International Journal of Project Management, vol. 28, no. 1, pp. 68-78. Baccarini, D., 1996. The concept of project complexity—a review. International journal of project management, 14(4), pp.201-204. Bamberger, M. and Cheema, S., 1990. Case studies of project sustainability: implication for policy and operations from Asian experience. In EDI Seminar Series (Banco Mundial) (No. GTZ-781). Banco Mundial, Washington, DC (EUA). Bourhime, S. and Tkiouat, M., 2016. 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The dynamic sustainability framework: addressing the paradox of sustainment amid ongoing change. Implementation Science, 8(1), pp.1-11. Cvijović, J., Obradović, V. and Todorović, M., 2021. Stakeholder Management and Project Sustainability—A Throw of the Dice. Sustainability, 13(17), p.9513. de Gooyert, V., Rouwette, E., van Kranenburg, H., Freeman, E. and van Breen, H., 2016. Sustainability transition dynamics: Towards overcoming policy resistance. Technological Forecasting and Social Change , 111 , pp.135-145. Diallo, A & Thuillier, D 2004, 'The success dimensions of international development projects: The perceptions of African project coordinators', International Journal of Project Management , vol. 22, no. 1, pp. 19-31. D’Espallier, B., Hudon, M. and Szafarz, A., 2013. Unsubsidized microfinance institutions. Economics letters, 120(2), pp.174-176. Dieckmann, R 2007, Microfinance: an Emerging Investment Opportunity, Deutsche Bank, Frankfurt Duit, A. and Galaz, V., 2008. Governance and complexity—emerging issues for governance theory. Governance, 21(3), pp.311-335. Espinosa, Á. and Porter, T., 2011. Sustainability, complexity and learning: insights from complex systems approaches. The Learning Organization. Vol. 18 No. 1, 2011 pp. 54-72 Gallopín, G. C. (2003). A systems approach to sustainability and sustainable development (Vol. 64). United Nations Publications. García-Pérez, I., Muñoz-Torres, M.J. and Fernández-Izquierdo, M.Á., 2017. Microfinance literature: A sustainability level perspective survey. Journal of Cleaner Production, 142, pp.3382-3395. Golini, R. and Landoni, P., 2014. International development projects by non-governmental organizations: an evaluation of the need for specific project management and appraisal tools. Impact Assessment and Project Appraisal, 32(2), pp.121-135. Greenwood, R., Jennings, P.D. and Hinings, B., 2015. Sustainability and organizational change: An institutional perspective. Leading sustainable change: An organizational perspective, pp.323-355. Hermano, V, López-Paredes, A, Martín-Cruz, N & Pajares, J 2013, 'How to manage international development (ID) projects successfully. Is the PMD Pro1 Guide going to the right direction?', International Journal of Project Management , vol. 31, no. 1, pp. 22-30. Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in sustainability management: Links, similarities, dissimilarities, and a conceptual framework. Organization & Environment, 27(4), pp.328-346. Ika, LA & Donnelly, J 2017, 'Success conditions for international development capacity building projects', International Journal of Project Management, vol. 35, no. 1, pp. 44-63. Innes, J.E. and Booher, D.E., 1999. Metropolitan development as a complex system: A new approach to sustainability. Economic Development Quarterly, 13(2), pp.141-156. Kaarbo, J. and Beasley, R.K., 1999. A practical guide to the comparative case study method in political psychology. Political psychology, 20(2), pp.369-391. Kemp, R., Parto, S., & Gibson, R. B. (2005). Governance for sustainable development: moving from theory to practice. International journal of sustainable development, 8(1-2), 12-30. Ladyman, J., Lambert, J. and Wiesner, K., 2013. What is a complex system?. European Journal for Philosophy of Science, 3(1), pp.33-67. Ledgerwood, J., 1998. Microfinance handbook: An institutional and financial perspective. World Bank Publications. Loorbach, D.; Rotmans, J. Managing Transitions for Sustainable Development. In Understanding Industrial Transformation; Olsthoorn, X., Wieczorek, A.J., Eds.; Springer: Berlin, Germany, 2006; Volume 44, pp. 187–206. Mahapatra, M.S. and Dutta, S., 2016. Determinants of sustainability of microfinance sector in India. Journal of Rural Development, 35(3), pp.507-522. Markard, J., Raven, R. and Truffer, B., 2012. Sustainability transitions: An emerging field of research and its prospects. Research policy , 41 (6), pp.955-967. Metcalf, L. and Benn, S., 2013. Leadership for sustainability: An evolution of leadership ability. Journal of business ethics, 112(3), pp.369-384. Mobus, G., 2017. A framework for understanding and achieving sustainability of complex systems. Systems Research and Behavioral Science, 34(5), pp.544-552. Moore, J.E., Mascarenhas, A., Bain, J. and Straus, S.E., 2017. Developing a comprehensive definition of sustainability. Implementation Science, 12(1), pp.1-8. Raimondo, ER, Vaessen, JL & Bamberger, JM 2015, Dealing With Complexity in Development Evaluation , SAGE Publications, Thousand Oaks. Ramalingam, B., Jones, H., Reba, T. and Young, J., 2008. Exploring the science of complexity: Ideas and implications for development and humanitarian efforts (Vol. 285). London: Overseas Development Institute. Ritchie, A., 2007. Community based financial organizations; A solution to access in remote rural remote areas (No. 34). ARD Discussion paper. The World Bank. Washington Rouse, W.B., 2008. Health care as a complex adaptive system: implications for design and management. Bridge-Washington-National Academy of Engineering-, 38(1), p.17. Sarriot, E. and Kouletio, M 2015, Community health systems as complex adaptive systems: ontology and praxis lessons from an urban health experience with demonstrated sustainability, Systemic Practice and Action Research, vol. 28, no. 3, pp.255-272. Scheirer, M.A., 2005. Is sustainability possible? A review and commentary on empirical studies of program sustainability. American Journal of Evaluation, 26(3), pp.320-347. Scott, A. et al 2018, Sustainability of collaborative networks in higher education research projects: why complexity? Why now?, Public Management Review, vol. 20, no. 7, pp.1068–1087. Seybolt, T.B., 2009. Harmonizing the humanitarian aid network: Adaptive change in a complex system. International Studies Quarterly, 53(4), pp.1027-1050. Silvius, G. and Schipper, R., 2019. Planning project stakeholder engagement from a sustainable development perspective. Administrative Sciences, 9(2), p.46. Stirman, S.W., Kimberly, J., Cook, N., Calloway, A., Castro, F. and Charns, M., 2012. The sustainability of new programs and innovations: a review of the empirical literature and recommendations for future research. Implementation science , 7 (1), pp.1-19. Suter, E., Deutschlander, S. and Lait, J., 2011. Using a complex systems perspective to achieve sustainable health care practice change. Journal of Research in Interprofessional Practice and Education, 2(1). Svyantek, D. J., & Brown, L. L. (2000). A complex-systems approach to organizations. Current Directions in Psychological Science, 9(2), 69-74. Thapa, G., 2006. Sustainability and governance of microfinance institutions: recent experiences and some lessons for Southeast Asia. Asian Journal of Agriculture and Development, 3(1362-2016-107617), pp.17-38. Williams, A., Kennedy, S., Philipp, F. and Whiteman, G., 2017. Systems thinking: A review of sustainability management research. Journal of Cleaner Production, 148, pp.866-881. Wu, B., 2016. International development aid: A complex system. Global dynamics: Approaches from complexity science, pp.231-256. Yaron, J., 1994. What makes rural finance institutions successful?. The World Bank Research Observer, 9(1), pp.49-70. Youker. (2003). The nature of international development projects', in PMI Conference, Baltimore. MD Zeller M. A comparative review of major types of rural microfinance institutions in developing countries. Agricultural Finance Review 2006:195-213. Additional Declarations No competing interests reported. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-4284259","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":295683777,"identity":"a6ce35bd-8e4b-4910-a251-522a04ff05d8","order_by":0,"name":"Indra Gunawan","email":"data:image/png;base64,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","orcid":"","institution":"University of Adelaide","correspondingAuthor":true,"prefix":"","firstName":"Indra","middleName":"","lastName":"Gunawan","suffix":""},{"id":295683778,"identity":"de5579e9-1eaa-409f-8c57-0392d1914222","order_by":1,"name":"Nur Chasanah","email":"","orcid":"","institution":"University of Adelaide","correspondingAuthor":false,"prefix":"","firstName":"Nur","middleName":"","lastName":"Chasanah","suffix":""}],"badges":[],"createdAt":"2024-04-17 23:59:19","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-4284259/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-4284259/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":55766879,"identity":"d3ceca69-081c-4f83-a7d9-ca2887310383","added_by":"auto","created_at":"2024-05-02 20:13:07","extension":"png","order_by":1,"title":"Figure 1","display":"","copyAsset":false,"role":"figure","size":150434,"visible":true,"origin":"","legend":"\u003cp\u003eModel of sustainable microfinance programme by using complex system approach\u003c/p\u003e","description":"","filename":"floatimage1.png","url":"https://assets-eu.researchsquare.com/files/rs-4284259/v1/91430b10a838e389651a1779.png"},{"id":55798614,"identity":"adc20dcf-7ed3-4881-a2b4-c5fd00cef1dc","added_by":"auto","created_at":"2024-05-03 11:55:07","extension":"pdf","order_by":0,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":589059,"visible":true,"origin":"","legend":"","description":"","filename":"manuscript.pdf","url":"https://assets-eu.researchsquare.com/files/rs-4284259/v1/c63d6dec-d30b-4ebb-9be8-4654b9440f04.pdf"},{"id":55766880,"identity":"8ab418e0-175e-4f45-802c-73464c09fd59","added_by":"auto","created_at":"2024-05-02 20:13:07","extension":"docx","order_by":1,"title":"","display":"","copyAsset":false,"role":"supplement","size":457438,"visible":true,"origin":"","legend":"","description":"","filename":"Appendix.docx","url":"https://assets-eu.researchsquare.com/files/rs-4284259/v1/6fbce98c50abaf59b6857b7d.docx"}],"financialInterests":"No competing interests reported.","formattedTitle":"Microfinance Programme Sustainability Analysis Using a Complex System Approach","fulltext":[{"header":"1. Introduction","content":"\u003cp\u003eDevelopment projects such as microfinance programmes are considered an effective tool to overcome human development issues such as poverty. They can ensure long-term benefits through access to financial services that enable the poor to build assets, increase productivity, earn an income and achieve food security (Thapa \u003cspan citationid=\"CR47\" class=\"CitationRef\"\u003e2006\u003c/span\u003e). However, sustainable development projects that involve microfinance are rare (Dieckmann \u003cspan citationid=\"CR14\" class=\"CitationRef\"\u003e2007\u003c/span\u003e) and only 23% of Microfinance Institutions (MFIs) operate without donations (D\u0026rsquo;Espallier 2013). Even when an initial implementation is successful, such projects do not necessarily continue as originally implemented (Stirman et al. \u003cspan citationid=\"CR44\" class=\"CitationRef\"\u003e2012\u003c/span\u003e). It may be difficult for an MFI to operate and achieve sustainability in remote rural areas (Thapa \u003cspan citationid=\"CR47\" class=\"CitationRef\"\u003e2006\u003c/span\u003e). Traditionally, various types of explicit or implicit subsidies have sustained rural financial institutions (Yaron \u003cspan citationid=\"CR50\" class=\"CitationRef\"\u003e1994\u003c/span\u003e).\u003c/p\u003e \u003cp\u003eFurther, development projects are complex (Golini \u0026amp; Landoni \u003cspan citationid=\"CR19\" class=\"CitationRef\"\u003e2014\u003c/span\u003e; Ramalingam et al. \u003cspan citationid=\"CR36\" class=\"CitationRef\"\u003e2008\u003c/span\u003e; Sarriot \u0026amp; Kouletio \u003cspan citationid=\"CR39\" class=\"CitationRef\"\u003e2015\u003c/span\u003e) and context plays a crucial role (Ika \u0026amp; Donelly 2017). Interventions that take into account complex adaptive system characteristics may hold promise for more successful practice change (Suter et al. \u003cspan citationid=\"CR45\" class=\"CitationRef\"\u003e2011\u003c/span\u003e) and may achieve sustainable outcomes (Sarriot \u0026amp; Kouletio \u003cspan citationid=\"CR39\" class=\"CitationRef\"\u003e2015\u003c/span\u003e). However, most interest in understanding the sustainability of interventions is independent of the context in which the interventions are delivered (Chambers et al. \u003cspan citationid=\"CR9\" class=\"CitationRef\"\u003e2013\u003c/span\u003e). Further, the literature examining the extent, nature or impact of adaptations to programmes or interventions once implemented is very limited (Stirman et al. \u003cspan citationid=\"CR44\" class=\"CitationRef\"\u003e2012\u003c/span\u003e).\u003c/p\u003e \u003cp\u003eAn MFI is a system that operates in a dynamic environment of evolving heterogeneous rational agents who interact with each other and with their environment (Bourhime \u0026amp; Tkiouat \u003cspan citationid=\"CR4\" class=\"CitationRef\"\u003e2016\u003c/span\u003e). This presents complex system properties including interaction, emergence and reactivity. Sustainability of MFIs can have organisational, financial and managerial aspects, although financial sustainability has been most studied in the mainstream literature (Thapa \u003cspan citationid=\"CR47\" class=\"CitationRef\"\u003e2006\u003c/span\u003e). Studies of microfinance sustainability emphasise an institutionalist paradigm that focuses on financial sustainability (Brau \u0026amp; Woller \u003cspan citationid=\"CR5\" class=\"CitationRef\"\u003e2004\u003c/span\u003e) according to financial ratios. Economic aspects of microfinance have dominated the contributions of the microfinance literature to sustainability (Garc\u0026iacute;a-P\u0026eacute;rez et al. \u003cspan citationid=\"CR18\" class=\"CitationRef\"\u003e2017\u003c/span\u003e). Given the dynamic nature of the complex systems into which innovations are introduced, mutual adaptation between the intervention and the organisation/system, or interactions among stakeholders in various roles within the system is required to sustain a project (Stirman et al. \u003cspan citationid=\"CR44\" class=\"CitationRef\"\u003e2012\u003c/span\u003e). Therefore, there is a crucial role for complexity theory in understanding the transition towards sustainable development (Loorbach \u0026amp; Rotmans \u003cspan citationid=\"CR29\" class=\"CitationRef\"\u003e2006\u003c/span\u003e). This study analyses sustainability of the microfinance programme (the Revolving Loan Fund/RLF project) in Central Java Province using a complex system approach.\u003c/p\u003e \u003cp\u003eThe paper is structured in six sections. The first is an introduction that describes the background and importance of the study. The second is a literature review that is used as the theoretical framework for this study. The third section outlines the methodology of the research. The fourth presents the results of the study, including identification of issues arising following project closure and analysis results regarding sustainability of the project. The fifth section discusses the implications of the research findings and the last section concludes the paper.\u003c/p\u003e"},{"header":"2. Literature review","content":"\u003cdiv id=\"Sec3\" class=\"Section2\"\u003e \u003ch2\u003e2.1 Development project sustainability and microfinance sustainability\u003c/h2\u003e \u003cp\u003eIDPs are public development programmes or projects that are typically funded by donor institutions to address social and economic needs in developing countries (Ahsan \u0026amp; Gunawan \u003cspan citationid=\"CR1\" class=\"CitationRef\"\u003e2010\u003c/span\u003e). They can be \u0026lsquo;hard\u0026rsquo; or \u0026lsquo;soft\u0026rsquo; projects (Youker \u003cspan citationid=\"CR51\" class=\"CitationRef\"\u003e2003\u003c/span\u003e). However, they are generally never purely hard projects because of their goals and stakeholder roles (Golini \u0026amp; Landoni \u003cspan citationid=\"CR19\" class=\"CitationRef\"\u003e2014\u003c/span\u003e). Golini and Landoni (\u003cspan citationid=\"CR19\" class=\"CitationRef\"\u003e2014\u003c/span\u003e) identify five common characteristics of development projects: lack of defined beneficiaries; excessive numbers of stakeholders; resource insufficiency; difficulty of project management application; intangible project outputs; and complex and difficult environments.\u003c/p\u003e \u003cp\u003eSustainable development is defined by the Brundtland Commission of the United Nations in 1987 as \u0026lsquo;development that meets the needs of the present without compromising the ability of future generations to meet their own needs\u0026rsquo;. In the context of programme intervention, sustainability is defined as what happens after initial implementation (Stirman et al. \u003cspan citationid=\"CR44\" class=\"CitationRef\"\u003e2012\u003c/span\u003e). Many international agencies and economists see project sustainability as the capacity of a project to continue to deliver its designated benefits over a long period of time (Bamberger \u0026amp; Cheema \u003cspan citationid=\"CR3\" class=\"CitationRef\"\u003e1990\u003c/span\u003e). Scheirer (\u003cspan citationid=\"CR40\" class=\"CitationRef\"\u003e2005\u003c/span\u003e) considers that sustainability can be measured in three respects: the continuation of programme activities; outcomes or benefits; and maintenance of community capacity. Moore et al. (\u003cspan citationid=\"CR34\" class=\"CitationRef\"\u003e2017\u003c/span\u003e) lists five key elements of sustainability of development interventions: (1) a determined period of time, (2) continuous delivery of a programme, implementation strategy and/or clinical intervention, (3) sustaining of individual change, (4) evolution or adaptation of the programme and individual behaviour, and (5) continuous production of benefits.\u003c/p\u003e \u003cp\u003eMicrofinance is defined as the provision of financial services to poor people, as well as the self-employed (Ledgerwood \u003cspan citationid=\"CR28\" class=\"CitationRef\"\u003e1998\u003c/span\u003e). The main types of rural financial institution are institutional innovators, credit projects, credit unions, village banks, member-based institutions, solidarity credit groups and linkage types (Zeller 2006). A credit project is usually linked to, or part of, a larger (integrated) rural development programme. Many development projects establish RLFs through community-based financial organisations and expect that the funds will be repaid by the initial borrowers and recycled to other borrowers (Ritchie \u003cspan citationid=\"CR37\" class=\"CitationRef\"\u003e2007\u003c/span\u003e). Microfinance sustainability can refer to several levels including individual, group and institutional, and can relate to financial, managerial and organisational aspects (Thapa \u003cspan citationid=\"CR47\" class=\"CitationRef\"\u003e2006\u003c/span\u003e). MFI sustainability is defined as the ability of an MFI to cover all of its costs (Ritchi 2007) including expenditure from its revenues and to earn a profit and run without subsidies or donations from donor agencies or governments (Mahapatra \u0026amp; Dutta \u003cspan citationid=\"CR30\" class=\"CitationRef\"\u003e2016\u003c/span\u003e).\u003c/p\u003e \u003cp\u003eThe RLF project in Central Java Province, Indonesia, is a microfinance programme that was launched in 2007 and ended in 2015. However, the project continues to operate after its closure. The project was part of a national poverty alleviation programme, a Community driven development (CDD) project for rural areas managed by the central government. The project was financed by State Budget, the Regional Budget, and other donors. The microfinance programme (the RLF project) was implemented by Activity Management Units (AMUs), which then became MFIs at the sub-district level. There were more than 450 MFIs across Central Java Province, most of which have survived since project closure. The original AMUs (when the project implementation) were managed by a management committee responsible for daily activities and a board committee representing the community. Therefore, the AMUs were responsible to, obliged to report to, and supervised by, the government.\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec4\" class=\"Section2\"\u003e \u003ch2\u003e2.2 Project Sustainability by Using Complex System: A Theoretical Framework\u003c/h2\u003e \u003cp\u003eA complex system is defined as \u0026lsquo;an ensemble of many elements which are interacting in a disordered way, resulting in robust organisation and memory\u0026rsquo; (Ladyman et al. \u003cspan citationid=\"CR27\" class=\"CitationRef\"\u003e2013\u003c/span\u003e). It can be described as having interdependent and interconnected elements and dimensions, feedback processes and emergence (Ramalingam 2008). The complexity of a project is measured by its interdependency and differentiation (Baccarini \u003cspan citationid=\"CR2\" class=\"CitationRef\"\u003e1996\u003c/span\u003e). The humanitarian aid community is an open, complex and adaptive system (Seybolt \u003cspan citationid=\"CR42\" class=\"CitationRef\"\u003e2009\u003c/span\u003e) involving multiple organisations, issues, relationships and motivations (Wu \u003cspan citationid=\"CR49\" class=\"CitationRef\"\u003e2016\u003c/span\u003e). The complexity of a development project is determined by interrelated aspects, namely the nature of the intervention, stakeholders and institutions, causality and change, and the embeddedness and nature of the system (Raimondo et al. \u003cspan citationid=\"CR35\" class=\"CitationRef\"\u003e2015\u003c/span\u003e). IDPs have diverse stakeholders (Diallo \u0026amp; Thuillier \u003cspan citationid=\"CR12\" class=\"CitationRef\"\u003e2004\u003c/span\u003e). Their environment is unique and surrounded by economic, social, political, legal, cultural and geographic separation among actors (Hermano et al. \u003cspan citationid=\"CR21\" class=\"CitationRef\"\u003e2013\u003c/span\u003e; Ika \u0026amp; Donnelly \u003cspan citationid=\"CR23\" class=\"CitationRef\"\u003e2017\u003c/span\u003e). Additionally, the project demonstrates the characteristics of a complex system including nonlinearity, connectedness, self-adaptation/self-organisation and emergence (Wu \u003cspan citationid=\"CR49\" class=\"CitationRef\"\u003e2016\u003c/span\u003e).\u003c/p\u003e \u003cp\u003eSustainability from a system perspective is \u0026lsquo;the ability of systems to persist, adapt, transform or transition in the face of constantly changing conditions\u0026rsquo; (Williams et al. \u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2017\u003c/span\u003e), which results from dynamic and long-term maintenance of the system\u0026rsquo;s identity amid constant change (Gallopin 2003). A sustainable complex system is \u0026lsquo;one that is adaptive and self- organising, with its components free to coevolve in response to changes in each other and, as a whole, changing in response to external conditions\u0026rsquo; (Innes \u0026amp; Booher \u003cspan citationid=\"CR24\" class=\"CitationRef\"\u003e1999\u003c/span\u003e). Further, organisational sustainability happens within a complex system (Metcalf \u0026amp; Benn \u003cspan citationid=\"CR32\" class=\"CitationRef\"\u003e2013\u003c/span\u003e). The sustainability of a system is determined by availability of resources, flexibility/adaptability, homeostasis, response capacity, self-reliance, empowerment (Gallopin 2003), adaptability, resilience/repair and evolvability (Mobus \u003cspan citationid=\"CR33\" class=\"CitationRef\"\u003e2017\u003c/span\u003e). Moving towards sustainability can represent a significant form of organisational change, whether it is designed by leaders of the organisation or circumstances that allow, push or prevent organisations to move from one state to another (Greenwood et al. \u003cspan citationid=\"CR20\" class=\"CitationRef\"\u003e2015\u003c/span\u003e). While the organisational change approach emphasises leaders\u0026rsquo; roles, the institutional change approach stresses contextual circumstances (Greenwood et al. \u003cspan citationid=\"CR20\" class=\"CitationRef\"\u003e2015\u003c/span\u003e). Change towards sustainability in dynamic and complex human\u0026ndash;ecological systems is an endless process of transformation (Kemp et al. 2015).\u003c/p\u003e \u003cp\u003eSustainability is a socially instituted process of adaptive change that can integrate with a transition management concept (Kemp et al. \u003cspan citationid=\"CR26\" class=\"CitationRef\"\u003e2005\u003c/span\u003e). Transition management is a governance concept developed for managing sustainability transitions (de Gooyert et al. \u003cspan citationid=\"CR11\" class=\"CitationRef\"\u003e2016\u003c/span\u003e). Sustainability transition is a multidimensional, long-term and fundamental transformation process towards a system\u0026rsquo;s shift to more sustainable production and consumption (Makard et al. 2012). This is an area of high complexity due to the many and varied interests and actors involved in transformation processes (Makard et al. 2012). Espinosa and Porter (\u003cspan citationid=\"CR16\" class=\"CitationRef\"\u003e2011\u003c/span\u003e) detail six complexity principles in complex systems that define the dynamic operations responsible for the ability to adapt in unpredictable and nonlinear ways. These are nonlinear feedback, self-organisation, emergence, edge of chaos, co-evolution and path dependence. Williams et al. (\u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2017\u003c/span\u003e) considers that the core theoretical concepts of complexity theory to understand sustainability involve IAFSE. The interconnectedness concept is associated with the connection of components within the system and the link between social, economic and ecological systems. Feedback is related to nonlinear dynamics and the emergence of complex behaviours over time that result from feedback mechanisms used for decision making. Adaptive capacity/resilience refers to the capability of agents to learn from their experience and act accordingly to ensure the survival of the system. Self-organisation is the ability of a system to develop its own structure and behave spontaneously in the face of change, to lead the system to sustainability. Emergence is related to lower-level interactions that result from new higher-level structures and patterns that lead to the system\u0026lsquo;s sustainability. Since a microfinance programme and its sustainability are complex, a complex system approach is appropriate to understand the change and transition of the project towards becoming a sustainable project.\u003c/p\u003e \u003c/div\u003e"},{"header":"3. Methodology","content":"\u003cp\u003eThis qualitative research is based on a case study. A qualitative research approach is important for understanding phenomena around promoting sustainability (Stirman et al. \u003cspan citationid=\"CR44\" class=\"CitationRef\"\u003e2012\u003c/span\u003e). It is also appropriate for providing context-specific descriptions of organisational behaviour, which is nonlinear, historical and longitudinal (Svyantek \u0026amp; Brown \u003cspan citationid=\"CR46\" class=\"CitationRef\"\u003e2000\u003c/span\u003e). Moreover, a case study can be used for \u0026lsquo;disciplined-configurative\u0026rsquo; or \u0026lsquo;interpretative\u0026rsquo; research where a researcher uses a theoretical foundation to investigate or interpret a case (Kaarbo \u0026amp; Beasley \u003cspan citationid=\"CR25\" class=\"CitationRef\"\u003e1999\u003c/span\u003e).\u003c/p\u003e \u003cp\u003eData collection involving document review, observations, interviews and FGDs was conducted from October 2019 to December 2020 in Central Java Province, Indonesia. The interviews and observations were preliminary data collection tools employed to understand the project and the operation of AMUs. The interviews involved eight respondents who were considered to understand the project, including AMU management committee members, AMU board committee members, local government officials and AMU association leaders. Observations were conducted in two MFIs. Further, three Focus Group Discussions (FGDs) attended by a total of 73 participants were conducted: two at the district level (two districts) and one at the province level. The FGDs were attended by leaders of AMUs across the province, involving 52 MFI leaders from 27 districts.\u003c/p\u003e \u003cp\u003eData are analysed using NVivo in two stages: identification of contextual circumstances and transition analysis. The first stage aimed to identify issues within the project by analysing institutional-level changes (Greenwood et al. \u003cspan citationid=\"CR20\" class=\"CitationRef\"\u003e2015\u003c/span\u003e). This approach highlights the contextual circumstances that push, enable or prevent organisations moving from one state to another. In this study context, identification of contextual circumstances involves identifying issues that arise as a consequence of the project closure, which potentially challenge the sustainability of the project. The circumstances issues that likely pushed the MFIs to move from one state (dependent microfinance institution that relies on fundings/subsidies from the government) to another state (independent microfinance that could finance itself) are identified. Furthermore, the second stage aimed to analyse the transition towards a sustainable (surviving) project. It involved analysing the actions taken to address issues and linking these actions to sustainability of the project. The core theoretical concepts of IAFSE proposed by Williams et al. (\u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2017\u003c/span\u003e) are adopted at this stage. NVivo software was used to identify issues within the project as a consequence of project closure, the actions taken to deal with them and the core theoretical concepts of complexity for sustainability. Results of the data analysis are presented in the following section.\u003c/p\u003e"},{"header":"4. Results","content":"\u003cdiv id=\"Sec7\" class=\"Section2\"\u003e \u003ch2\u003e4.1 Identification of the contextual circumstances\u003c/h2\u003e \u003cp\u003eSome issues and their effect to the sustainability of MFIs are explained below:\u003c/p\u003e \u003cdiv id=\"Sec8\" class=\"Section3\"\u003e \u003ch2\u003e4.1.1 Governance\u003c/h2\u003e \u003cp\u003eSince project closure, the project has become independent of the government and has no hierarchical organisational relationship with either the central or local government. No single body is formally governing the project at the district or province level. AMUs at the sub-district level are independent in the running of their activities according to agreement from the community in the sub-district. To cope with this, an AMU association has been formally established to coordinate AMUs at province and district levels, and AMUs created coordination activities/function with the local government. Membership of the association is voluntary and every AMU acts independently. The association is a place for AMUs to share their mission, interests and information, and conduct mutual activities such as training, seminars, workshops and knowledge sharing. Sharing a mission with other AMUs may strengthen motivation and improve knowledge and skills to help in dealing with issues faced in the community. The association also functions as the representative of the AMU in the region in negotiations with other parties.\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec9\" class=\"Section3\"\u003e \u003ch2\u003e4.1.2 Accountability\u003c/h2\u003e \u003cp\u003eTermination of the project has changed accountability mechanisms. Since the project ended, there is no obligation of AMUs to provide reports to any level of government, and the government provides no technical guidance or facilitators to assist the daily management of AMUs. There is also less surveillance from the government. To deal with these changes, AMUs have made agreements with their local government and the association to provide regular reports. Each AMU deals with its own daily challenges by employing local values and wisdom in its dealings with the community and enacting its organisational rules based on the community agreement. To increase accountability, AMUs use accounting software and independently hire external consultants or advisers, or external auditors.\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec10\" class=\"Section3\"\u003e \u003ch2\u003e4.1.3 Capital and Profitability\u003c/h2\u003e \u003cp\u003eDuring the project implementation phase, the government was providing grants for new clients as well as additional capital. These grants led AMUs to focus less on generating revenue. Project closure meant these grants were stopped and AMUs must run their business profitably. To cope with these changes, AMUs have developed a new business model to ensure more profitable business. AMUs now pay more attention to generating revenue without ignoring their social mission. While maintaining the social values of the project is important, since the project is an empowerment project owned by the community, earning a profit is vital to keep the business going. Therefore, AMUs have changed their business model from one providing a purely microcredit service to a hybrid business, by diversifying their business. They have begun to open new businesses such as grocery stores, and constructing and renting buildings; and have become goods and service providers and third party investors. To increase their capital, AMUs cooperate with other parties (including other AMUs), and to reduce any losses, AMUs have begun to apply self-insurance to their clients.\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec11\" class=\"Section3\"\u003e \u003ch2\u003e4.1.4 Competition\u003c/h2\u003e \u003cp\u003eWhen in the project implementation phase, the government provided grants for microcredit and borrowers were recommended by village leaders based on grants allocated by the government; hence, there was little attention paid to the quality of borrowers. Moreover, no other institutions were providing microcredit like AMUs did. Therefore, AMU management did not pay any attention to competition. Since the project closure, AMUs no longer receive the grants and must ensure they can recruit qualified borrowers. Some financial institutions providing a similar credit mechanism (group-based microcredit) also have sprung up, which increases competition. To cope with this situation, AMUs have tightened the verification process without burdening borrowers with new requirements. AMUs have also employed marketing strategies such as providing rewards, subsidies for transportation costs and financial support for health issues. To improve service quality to increase client loyalty, AMUs have increased the credit limit. In addition, AMUs have reduced the required group size from five to three borrowers; cooperated with community members to recruit new clients; and held social activities to remind the community that AMUs exist and to attract them.\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec12\" class=\"Section3\"\u003e \u003ch2\u003e4.1.5 Empowerment\u003c/h2\u003e \u003cp\u003eGrants to conduct empowerment activities, such as capacity building for the community and management/board committee members of the AMUs, were provided during project implementation. However, when the project closed, the grants stopped, and these activities ceased. To address this change, AMUs have cooperated with villagers to conduct empowerment activities such as training and workshops for the community. Further, AMUs have facilitated the establishment of borrower associations, which are a place for borrowers to learn about the organisation and share knowledge. In addition, capacity building for management/board committee members of the AMUs is conducted by providing scholarships and cooperation with the AMU association and local government to provide trainings/workshops.\u003c/p\u003e \u003c/div\u003e \u003c/div\u003e \u003cdiv id=\"Sec13\" class=\"Section2\"\u003e \u003ch2\u003e4.2 Transition analysis toward sustainable project\u003c/h2\u003e \u003cp\u003eThe phenomena described above represent the attributes of a complex system, such as interconnectedness, feedback, adaptive capability and self-organisation, and emergence, which are linked to the sustainability of the AMUs (MFIs). The detailed analysis is as follows.\u003c/p\u003e \u003cdiv id=\"Sec14\" class=\"Section3\"\u003e \u003ch2\u003e4.2.1 Interconnections\u003c/h2\u003e \u003cp\u003eRelationships among the elements in a complex system are very important for building connections and achieving desired goals. In this case, connections were built to address changes that would enhance sustainability of the project. Connections are made between AMUs, their stakeholders and other parties to achieve sustainability of the project. These connections were built though sharing understanding, coordination and cooperation to develop similar views and agreement related to the sustainability of AMUs. Connections were also made with the government, other AMUs and AMU associations, and the community to build more support and share information, improve knowledge and strengthen the AMUs\u0026rsquo; position in the community. Through these connections, issues between AMUs and other parties could be resolved, and cooperation, agreement and support could be obtained that could lead to the continuous operation of AMUs.\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec15\" class=\"Section3\"\u003e \u003ch2\u003e4.2.2 Adaptive Capacity\u003c/h2\u003e \u003cp\u003eAdaptation is essential to embrace change and build resilience, to ensure the survival of a project after its completion. AMUs\u0026rsquo; learning about the change of the project ownership and governance has made rules\u0026rsquo; establishment and adjustment within AMUs. Some AMUs registered their legal formal organisational form. Procedures within AMUs have been improved. Further, lack of accountability and control have forced AMUs to employ accounting software, and hire external consultants or advisers, or external auditors. The termination of government grants/subsidies caused AMUs to develop a new business model for more profitable business without discarding the project\u0026rsquo;s values (social goals). Competition has driven AMUs to apply new marketing strategies. Those moves have helped protect AMUs\u0026rsquo; assets, provided AMUs with control over their business, added revenue and reduced costs for the AMUs, all of which support the continuous transition of AMUs towards becoming sustainable projects.\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec16\" class=\"Section3\"\u003e \u003ch2\u003e4.2.3 Feedback\u003c/h2\u003e \u003cp\u003eEffective feedback mechanisms are crucial for a system as nonlinear dynamic behaviour over time that can inform decision making and enhances sustainability. Listening to customers may identify their needs and desires and improve their loyalty. Seeking to understand the community needs and competition may provide information to improve service quality. All feedback is foundational for decision making to make adjustments that address current and future potential issues. In this way, AMUs can survive and continue their operations.\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec17\" class=\"Section3\"\u003e \u003ch2\u003e4.2.4 Self-organisation and Emergence\u003c/h2\u003e \u003cp\u003eDeveloping their own structure and spontaneous behaviour without being guided from the top down to create emergent properties is important for AMUs in the project sustainability process. The formal establishment of AMU associations after the project ended was not ordered by the government but arose from an idea by AMU leaders. Therefore, instead of being coordinated by the government, AMUs in the province are now coordinated by associations in response to the closure of the project. Further, to survive, each AMU deals with its own issues by relying on local values and wisdom without direction from a top-down facilitator\u0026mdash;the government. They also choose their own organisational structure based on their organisational form. Further, the existence of AMUs and AMU associations in the province is a result of self-organised actions towards becoming a sustainable project when the system (project) was forced out of equilibrium (project closure).\u003c/p\u003e \u003c/div\u003e \u003c/div\u003e"},{"header":"5. Discussion","content":"\u003cdiv id=\"Sec19\" class=\"Section2\"\u003e \u003ch2\u003e5.1 Implication for microfinance sustainability management\u003c/h2\u003e \u003cp\u003eThis study reveals that a complex systems approach can be applied to analyse project sustainability. It explains how the project continues to perform after its implementation phase and provides an analysis of how to achieve this. The findings show that the process towards becoming a sustainable project is dynamic and has sustainable complex system attributes such IAFSE. These have implications for microfinance sustainability management and microfinance programme design. First, the results have implication for the importance of stakeholder management in project sustainability. Interconnectedness links parties that enable the project to move towards becoming sustainable. This may involve a mutual agreement to reduce barriers and strengthen support. To achieve sustainability, managers of complex systems need to understand interconnections (Williams et al. \u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2017\u003c/span\u003e). Effective connection requires effective stakeholder management. Stakeholder theory can contribute to sustainability through anchoring sustainability in the stakeholder mindset, and creating mutual sustainability interests and approaches (H\u0026ouml;risch et al. \u003cspan citationid=\"CR22\" class=\"CitationRef\"\u003e2014\u003c/span\u003e). A sustainable project is influenced by external stakeholders through communication, complaints and legal actions, partnerships and capacity building, and direct action (Cvijović et al. \u003cspan citationid=\"CR10\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Silvius and Schipper (\u003cspan citationid=\"CR43\" class=\"CitationRef\"\u003e2019\u003c/span\u003e) integrate project stakeholder management and sustainable development by proposing a tool to plan stakeholder engagement activities with consideration of sustainable development.\u003c/p\u003e \u003cp\u003eThe second major implication of the findings is that there is a need for effective leadership. Seeking feedback from the environment and using it to improve decision making is important for achieving project sustainability. Information from stakeholders and the environment is useful for learning and decision making, making adjustments for addressing opposition and disagreements, and seeking mutual agreement and suggestions. Feedback offers sanctioned conversations across boundaries to increase learning in a sustainable complex system (Espinosa \u0026amp; Porter \u003cspan citationid=\"CR16\" class=\"CitationRef\"\u003e2011\u003c/span\u003e). Feedback from the external environment can be responded to through adaptation or transformation, and has both direct and indirect effects on organisations (Williams et al. \u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2017\u003c/span\u003e). Adaptation is essential to embrace change and build resilience to ensure the survival of a project after implementation phase ends. Changes in the organisational form of AMUs, control mechanisms, marketing strategies and the business model demonstrate the adaptive capacity of AMUs that might enhance their sustainability, and show that institutional-level changes towards sustainability occur. These changes emphasise contextual circumstances that push, enable or prevent organisations moving from one state to another (Greenwood et al. \u003cspan citationid=\"CR20\" class=\"CitationRef\"\u003e2015\u003c/span\u003e). The adaptive capacity of a system is demonstrated when actors in the system can maintain the system\u0026rsquo;s basic structure and manage resilience (Williams et al. \u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2017\u003c/span\u003e). Effective agent learning from their experiences and actions towards successful adaptation ensure survival of the system (Williams et al. \u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2017\u003c/span\u003e). Feedback and adaptive behaviours indicate the need for effective leadership to manage continuous changes. Leaders of organisations are important in the change process towards sustainability; they can either orchestrate or interpret and shape the change (Greenwood et al. \u003cspan citationid=\"CR20\" class=\"CitationRef\"\u003e2015\u003c/span\u003e). Unit members will be able to quickly implement and refine new processes if the leader provides resources and direction (Caldwell et al. \u003cspan citationid=\"CR8\" class=\"CitationRef\"\u003e2008\u003c/span\u003e). There is a positive relationship between sustainable leadership and sustainability performance (Burawat \u003cspan citationid=\"CR6\" class=\"CitationRef\"\u003e2019\u003c/span\u003e).\u003c/p\u003e \u003cp\u003eThird, the results have implications for the importance of the governance system, especially a network-based governance system. Self-organisation and emergence are demonstrated by the actions of AMUs: for example, consideration of local values when dealing with issues; the organisational form of AMUs; and the formal organisational establishment of AMU associations that are not directed from the top down (i.e. by government). Such actions have been taken to help AMUs survive after project termination. Changes to the organisational form and establishment of associations imply the need for two types of system governance: system governance within AMUs to manage their daily activities; and higher-level system governance. The higher-level governing body must replace the function of government in coordinating AMUs after project closure, and tends towards network-based governance. This is because each AMU is independent of the association. Network-based governance promotes strong learning capacity and adaptability in multilevel governance systems and is able to utilise changes in social, political and ecological contexts (Duit \u0026amp; Galaz \u003cspan citationid=\"CR15\" class=\"CitationRef\"\u003e2008\u003c/span\u003e).\u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec20\" class=\"Section2\"\u003e \u003ch2\u003e5.2 Implication for the design of microfinance programme\u003c/h2\u003e \u003cp\u003eOther than the above implications for microfinance management, the findings have implications for the design of microfinance programmes. Since complex adaptive systems have strong tendencies to learn, adapt and self-organise (Rouse \u003cspan citationid=\"CR38\" class=\"CitationRef\"\u003e2008\u003c/span\u003e), flexibility should be considered in a programme\u0026rsquo;s design. The design should allow the system (programme) to redesign itself. Programmes that can be modified over time are likely to persist longer (Scheirer \u003cspan citationid=\"CR40\" class=\"CitationRef\"\u003e2005\u003c/span\u003e). It is crucial for planning of a governing body for the programme/projects that consists of sub-projects/branches. This governing body will coordinate the project after the project closure. Accountability and control mechanisms that can be sustained after project closure are also important to prevent potential fraud. Another important design aspect is preparing and equipping the community with knowledge and skills as a basic skills to manage running the project after the project ends. This is critical as a sustainable project requires learning capacity and creativity. Hence, recruiting people who are dedicated and willing to learn is also important. Moreover, designing a programme that empowers and engages the community during implementation is important to create a sense of belonging to the project. This will be useful at the end of the project as it will be owned by the community as a public asset.\u003c/p\u003e \u003cp\u003eWith reference to these findings, a model of sustainable microfinance projects (Fig.\u0026nbsp;\u003cspan refid=\"Fig1\" class=\"InternalRef\"\u003e1\u003c/span\u003e) and a framework to sustain microfinance projects (institutions) (Table\u0026nbsp;\u003cspan refid=\"Tab1\" class=\"InternalRef\"\u003e1\u003c/span\u003e) using a complex system approach are proposed.\u003c/p\u003e \u003cp\u003e \u003c/p\u003e \u003cp\u003eA development project or programme is an open system that interacts with the environment. The environment is dynamic and changes in ways that might influence the project. The closure of a project produces change and causes issues that can hamper the continuous operation of the project after closure. To cope with environmental changes and to survive, the project should have the capacity to respond to changes effectively. Effective responses might be achieved by managing the project as a complex system to enable progress towards becoming a sustainable project. This involves characteristics of a complex system including IAFSE. Each component should be able to connect and interact with other elements in the system, especially its stakeholders and the environment. It should listen to and embrace the stakeholders and the environment to proceed and produce feedback for effective decision making. It should also be able to learn and adapt to make adjustments and create new ideas to address environmental changes. Further, the capacity to develop its own structure and behave spontaneously without being guided from the top down, which leads to emergent properties, is essential for survival of the project. Additionally, a system governance (SG) that tends towards network-based governance is required to provide more space for adaptation, self-organisation and emergence. Therefore, effective stakeholder (ST) management, leadership and governance system are important to support the transition towards sustainability of the project.\u003c/p\u003e \u003cp\u003eThe framework involves 4 steps, namely engagement, participation, application, and control and evaluation. Engagement aims to tie with and attract the community, share information and build understanding about the sustainability of the project. Further participation of the community in the project. This step aims to listen to the community and identify their needs. Applying what is found in the participation step and involving the community in the project\u0026rsquo;s activities are conducted in the application stage. Finally, control and evaluation step are conducted to provide accountability, evaluate the actions and get feedback.\u003c/p\u003e \u003cp\u003e \u003cdiv class=\"gridtable\"\u003e\u003ctable float=\"Yes\" id=\"Tab1\" border=\"1\"\u003e \u003ccaption language=\"En\"\u003e \u003cdiv class=\"CaptionNumber\"\u003eTable 1\u003c/div\u003e \u003cdiv class=\"CaptionContent\"\u003e \u003cp\u003eFramework to sustain microfinance projects by using complex system approach\u003c/p\u003e \u003c/div\u003e \u003c/caption\u003e \u003ccolgroup cols=\"5\"\u003e \u003cdiv align=\"left\" class=\"colspec\" colname=\"c1\" colnum=\"1\"\u003e\u003c/div\u003e \u003cdiv align=\"left\" class=\"colspec\" colname=\"c2\" colnum=\"2\"\u003e\u003c/div\u003e \u003cdiv align=\"left\" class=\"colspec\" colname=\"c3\" colnum=\"3\"\u003e\u003c/div\u003e \u003cdiv align=\"left\" class=\"colspec\" colname=\"c4\" colnum=\"4\"\u003e\u003c/div\u003e \u003cdiv align=\"left\" class=\"colspec\" colname=\"c5\" colnum=\"5\"\u003e\u003c/div\u003e \u003cthead\u003e \u003ctr\u003e \u003cth align=\"left\" colname=\"c1\"\u003e \u003cp\u003eStep\u003c/p\u003e \u003c/th\u003e \u003cth align=\"left\" colname=\"c2\"\u003e \u003cp\u003eObjective\u003c/p\u003e \u003c/th\u003e \u003cth align=\"left\" colname=\"c3\"\u003e \u003cp\u003eMain core theoretical concepts of complexity theory\u003c/p\u003e \u003c/th\u003e \u003cth align=\"left\" colname=\"c4\"\u003e \u003cp\u003eRecommendation action\u003c/p\u003e \u003c/th\u003e \u003cth align=\"left\" colname=\"c5\"\u003e \u003cp\u003eExpected effects to project sustainability\u003c/p\u003e \u003c/th\u003e \u003c/tr\u003e \u003c/thead\u003e \u003ctbody\u003e \u003ctr\u003e \u003ctd align=\"left\" colname=\"c1\"\u003e \u003cp\u003eEngagement\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c2\"\u003e \u003cp\u003e\u0026bull; to share information\u003c/p\u003e \u003cp\u003e\u0026bull; to share and build understanding\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c3\"\u003e \u003cp\u003eInterconnectedness\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c4\"\u003e \u003cp\u003eConduct activities to engage with the project\u0026rsquo;s (MFI\u0026rsquo;s) stakeholders:\u003c/p\u003e \u003cp\u003e\u0026bull; Campaign\u003c/p\u003e \u003cp\u003e\u0026bull; Visit\u003c/p\u003e \u003cp\u003e\u0026bull; Talk\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c5\"\u003e \u003cp\u003e\u0026bull; Community realise the existence of MFI\u003c/p\u003e \u003cp\u003e\u0026bull; Community understand the MFI\u0026rsquo;s mission\u003c/p\u003e \u003cp\u003e\u0026bull; Community understand that they are subject of the project\u003c/p\u003e \u003cp\u003eThrough the understanding, it increases communication with the community, raises awareness and gain their support to the existence of the project (MFI)\u003c/p\u003e \u003c/td\u003e \u003c/tr\u003e \u003ctr\u003e \u003ctd align=\"left\" colname=\"c1\"\u003e \u003cp\u003eParticipation\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c2\"\u003e \u003cp\u003e\u0026bull; to listen the community\u0026rsquo;s aspiration\u003c/p\u003e \u003cp\u003e\u0026bull; to identify the community\u0026rsquo;s needs\u003c/p\u003e \u003cp\u003e\u0026bull; to find new ideas\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c3\"\u003e \u003cp\u003eInterconnectedness, self-organi\u003c/p\u003e \u003cp\u003esation\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c4\"\u003e \u003cp\u003eConduct activities to explore the community needs\u003c/p\u003e \u003cp\u003e\u0026bull; Discussion\u003c/p\u003e \u003cp\u003e\u0026bull; Meeting\u003c/p\u003e \u003cp\u003e\u0026bull; Worshop\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c5\"\u003e \u003cp\u003e\u0026bull; Community understands their needs to the project (MFI)\u003c/p\u003e \u003cp\u003e\u0026bull; Community expresses their needs\u003c/p\u003e \u003cp\u003e\u0026bull; Community conveys their ideas to realize their needs\u003c/p\u003e \u003cp\u003eThese increase the community ownership to the project\u003c/p\u003e \u003c/td\u003e \u003c/tr\u003e \u003ctr\u003e \u003ctd align=\"left\" colname=\"c1\"\u003e \u003cp\u003eApplication\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c2\"\u003e \u003cp\u003e\u0026bull; to apply what is found in the participation stage\u003c/p\u003e \u003cp\u003e\u0026bull; to involve the community to the MFI\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c3\"\u003e \u003cp\u003eAdaptive capacity, self-organisation and emergence\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c4\"\u003e \u003cp\u003eConduct activities to realize the community needs:\u003c/p\u003e \u003cp\u003e\u0026bull; Conduct organisational changes and adjustment and/or transformation\u003c/p\u003e \u003cp\u003e\u0026bull; Involve the community in the organisational (MFI) activities (such as planning, indirect monitoring)\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c5\"\u003e \u003cp\u003e\u0026bull; Empower the community\u003c/p\u003e \u003cp\u003e\u0026bull; Improve the current performance of the organisation (MFI)\u003c/p\u003e \u003cp\u003eThese fulfil the community needs and realise the benefits.\u003c/p\u003e \u003c/td\u003e \u003c/tr\u003e \u003ctr\u003e \u003ctd align=\"left\" colname=\"c1\"\u003e \u003cp\u003eControl and evaluation\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c2\"\u003e \u003cp\u003e\u0026bull; to provide accountability\u003c/p\u003e \u003cp\u003e\u0026bull; to evaluate the action\u003c/p\u003e \u003cp\u003e\u0026bull; to listen feedback\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c3\"\u003e \u003cp\u003eSelf-organisation and emergence, feedback\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c4\"\u003e \u003cp\u003e\u0026bull; Provide transparent and open access accountability report\u003c/p\u003e \u003cp\u003e\u0026bull; Hire public assurance (such as external auditor, public accountant/consultant)\u003c/p\u003e \u003cp\u003e\u0026bull; Provide feedback mechanisms\u003c/p\u003e \u003c/td\u003e \u003ctd align=\"left\" colname=\"c5\"\u003e \u003cp\u003e\u0026bull; Ensure that organisation (the project/MFI) address the community needs\u003c/p\u003e \u003cp\u003e\u0026bull; Improve future performance\u003c/p\u003e \u003c/td\u003e \u003c/tr\u003e \u003c/tbody\u003e \u003c/colgroup\u003e \u003c/table\u003e\u003c/div\u003e \u003c/p\u003e \u003c/div\u003e \u003cdiv id=\"Sec21\" class=\"Section2\"\u003e \u003ch2\u003e5.3 Limitation of the study\u003c/h2\u003e \u003cp\u003eThis study has limitations that inform future research. The participant sample in this study was dominated by leaders of AMUs (MFIs); the involvement of more AMU stakeholders would improve robustness of the findings. The study applies to a specific case (one province); hence, conducting the research with a wider scope in the future is important. Using more comprehensive characteristics of a complex system to the analysis would provide more comprehensive analysis and information about project sustainability. Providing a detailed analysis of the relationships and dynamic interactions among AMU stakeholders would also be informative. Therefore, investigating the role of stakeholder and leadership theory in project sustainability is imperative. Finally, this study focuses on post-implementation; future studies should examine the implementation processes that might influence sustainability of the project, to provide a more comprehensive understanding of the phenomenon.\u003c/p\u003e \u003c/div\u003e"},{"header":"6. Conclusion","content":"\u003cp\u003eThe demand for long-term effective IDPs and the complexity of such projects led to the need for a comprehensive approach to increasing their sustainability. This study reveals that a complex system approach can be applied to understand the sustainability of microfinance projects. Analysis of changes that have occurred and transitions within the project enhances understanding of project sustainability. It identifies the problems raised after project termination and how to deal with them so that the project can continue to perform after the implementation phase; and presents core concepts of complexity theory to understand the transition towards becoming a sustainable project.\u003c/p\u003e \u003cp\u003eIn the microfinance project case study here, issues caused by the closure of the project include problems related to project governance, accountability, business model, competition and empowerment. Actions taken to cope with these issues included establishing an AMU association and agreement with local government; implementing organisational rules; employing accounting software; hiring external consultants or advisers or external auditors; developing a new business model; increasing capital; applying self-insurance; tightening up the verification process; running marketing strategies; cooperating with villagers and the AMU association to conduct empowerment activities; and facilitating establishment of a borrower association. Further, the analysis showed that the move towards becoming a sustainable project presents characteristics of a complex system including IAFSE. The findings have implications for microfinance sustainability management and microfinance programme design. First, they demonstrate the importance of effective stakeholder management, leadership and a network-based governance system. Second, they recommend including flexibility in programme design; planning a governing body; introducing accountability and control mechanisms after project completion; equipping the community with knowledge and skills; and recruiting the right people.\u003c/p\u003e"},{"header":"Declarations","content":"\u003cp\u003eEthical Approval\u0026nbsp;\u003c/p\u003e\n\u003cp\u003eThis research has received ethics approval no H-2019-147 from The University of Adelaide.\u003c/p\u003e\n\u003cp\u003e\u0026nbsp;Funding\u003c/p\u003e\n\u003cp\u003eNot applicable.\u003c/p\u003e"},{"header":"References","content":"\u003col\u003e\n \u003cli\u003eAhsan, K \u0026amp; Gunawan, I 2010, \u0026apos;Analysis of cost and schedule performance of international development projects\u0026apos;, International Journal of Project Management, vol. 28, no. 1, pp. 68-78.\u003c/li\u003e\n \u003cli\u003eBaccarini, D., 1996. The concept of project complexity\u0026mdash;a review. 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A comparative review of major types of rural microfinance institutions in developing countries. Agricultural Finance Review 2006:195-213.\u003c/li\u003e\n\u003c/ol\u003e"}],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":true,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":false,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":false,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"microfinance programme, sustainability analysis, complex system approach","lastPublishedDoi":"10.21203/rs.3.rs-4284259/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-4284259/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis study aims to analyse the sustainability of a microfinance programme project in Indonesia via a complex systems approach by using a case study and applied thematic analysis. Data are collected by document review, observation, interviews and focus group discussions. The results reveal some issues that arise as a result of closure of the programme and the actions taken to cope with those issues that led to sustainability of the microfinance institution. The issues are related to project governance, accountability, capital and profitability, competition and empowerment. The analysis shows that the move towards a sustainable project presents characteristics of a complex system, including interconnectedness, adaptation, feedback, self-organisation, and emergence (IAFSE). These findings have implications for microfinance sustainability management and microfinance programme design. Furthermore, a model of sustainable microfinance projects and a framework to sustain microfinance programme (institutions) using a complex system approach are proposed.\u003c/p\u003e","manuscriptTitle":"Microfinance Programme Sustainability Analysis Using a Complex System Approach","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2024-05-02 20:13:02","doi":"10.21203/rs.3.rs-4284259/v1","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true}}],"origin":"","ownerIdentity":"a15928bc-bca1-4dbb-8527-35711a39853d","owner":[],"postedDate":"May 2nd, 2024","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"posted","subjectAreas":[],"tags":[],"updatedAt":"2024-05-03T11:46:52+00:00","versionOfRecord":[],"versionCreatedAt":"2024-05-02 20:13:02","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-4284259","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-4284259","identity":"rs-4284259","version":["v1"]},"buildId":"8U1c8b4HqxoKbykW_rLl7","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}