ABSTRACT
At the end of the twentieth century, Indonesia became famous for microfinance (Patten and Rosengard 1991; Robinson 2002). The unit desa (village units) system of the Bank Rakyat Indonesia (BRI, Indonesian People's Bank) was the largest financially self-sufficient microbanking system in the world, reaching a quarter of all households in the fourth most populous of all nations (Robinson 2001: 47). Starting in 1984, BRI had succeeded in transforming a rural banking system dominated by state-subsidized agricultural credit, with high arrears and substantial losses, into a profitable microfinance business. The reformed operation featured a graduated loan ladder (with repayment of very small loans securing access to progressively larger ones); a bonus system rewarding timely repayment; commercial interest rates; a flexible microsaving scheme allowing small deposits and rapid withdrawals; and a system of performance-based remuneration for branch managerial staff.
