ABSTRACT
Indonesia is a diverse country with a myriad of informal finanical arrangements that defy simple categorization. The country includes a number of isolated and sparsely populated outer islands where the money economy has only begun to penetrate rural areas. The Kredit Investasi Kecil provides investment loans for small businesses, while the Kredit Modal Kerja Permanen provides loans to these firms for operating expenses. In 1983 the government began deregulating the financial sector by removing interest rate ceilings and by phasing out the lines of credit provided by the central bank. Informal lending permeates every conceivable sector of both the urban and rural economy and is as much a supply-securing as a purchase-promoting device. Individuals in Indonesia can choose from a range of financial services provided by banks and hybrid financial institutions in the formal sector, and through an array of informal financial relationships in the informal sector.
