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WHY THE BANK RAKYAT INDONESIA HAS THE WORLD’S LARGEST
SUSTAINABLE MICROBANKING SYSTEM
And what commercial microfinance means for development
by
Marguerite S. Robinson
Paper presented at BRI’s
International Seminar on BRI’s Microbanking System
Bank Rakyat Indonesia
Bali, Indonesia
1 December 2004 [Updated April 2005]
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III. WHAT WENT WRONG AT BRI’S UNITS FROM 1970 TO 1983?
The units were established, beginning in 1970, as part of the government’s BIMAS
program for rice intensification.3 The main role of the units was to channel subsidized
credit to rice farmers (later they also provided government-subsidized loans to finance
other agricultural activities as well). In a nutshell, the massive rice intensification
program succeeded; its credit component failed. What went wrong at the units? The
answer is that a lot went wrong.
· Loan terms and ceilings were set by the government.
· Government regulations stipulated that borrowers pay a subsidized 12% interest
on credit, while the units were required to pay 15% on savings. This is an
approach that comes with a guarantee of failure!
· Borrowers were selected largely by government committees.
· But BRI was responsible for loan collection—a bad combination!
· In practice, the below-market loans went mainly to rural elites, and in the process,
encouraged corruption and politicization.
· Units were treated as branch windows, and the performance of the units was
aggregated with that of their supervising branch. Thus the performance records of
individual units were not reported separately, and little was known about them.
· Unit staff were poorly trained, unmotivated, and not well supervised.
· Unit managers had limited authority and little accountability.
· There were exceptions, but unit staff generally had poor knowledge of – and very
little interest in – the microfinance market.
· The units were highly inefficient.
· They had minuscule savings. This was hardly surprising as every deposit meant a
loss for BRI!
· The units had high loan defaults.
· The system had large and continuing losses.
· There were 3,600 units—0 were profitable.
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Aku tahu paling kurang ada satu lagi perusahaan yang di'tekan' seperti ini oleh pemerintah, Pertamina. Apa yang ada di pikiran mereka saat itu, ketika sedang melakukan hal ini? Apa yang dipikirkan oleh mereka ketika tulisan ini disertakan di tahun 2004?
"Everybody else was doing it?"
WHY THE BANK RAKYAT INDONESIA HAS THE WORLD’S LARGEST
SUSTAINABLE MICROBANKING SYSTEM
And what commercial microfinance means for development
by
Marguerite S. Robinson
Paper presented at BRI’s
International Seminar on BRI’s Microbanking System
Bank Rakyat Indonesia
Bali, Indonesia
1 December 2004 [Updated April 2005]
<>
III. WHAT WENT WRONG AT BRI’S UNITS FROM 1970 TO 1983?
The units were established, beginning in 1970, as part of the government’s BIMAS
program for rice intensification.3 The main role of the units was to channel subsidized
credit to rice farmers (later they also provided government-subsidized loans to finance
other agricultural activities as well). In a nutshell, the massive rice intensification
program succeeded; its credit component failed. What went wrong at the units? The
answer is that a lot went wrong.
· Loan terms and ceilings were set by the government.
· Government regulations stipulated that borrowers pay a subsidized 12% interest
on credit, while the units were required to pay 15% on savings. This is an
approach that comes with a guarantee of failure!
· Borrowers were selected largely by government committees.
· But BRI was responsible for loan collection—a bad combination!
· In practice, the below-market loans went mainly to rural elites, and in the process,
encouraged corruption and politicization.
· Units were treated as branch windows, and the performance of the units was
aggregated with that of their supervising branch. Thus the performance records of
individual units were not reported separately, and little was known about them.
· Unit staff were poorly trained, unmotivated, and not well supervised.
· Unit managers had limited authority and little accountability.
· There were exceptions, but unit staff generally had poor knowledge of – and very
little interest in – the microfinance market.
· The units were highly inefficient.
· They had minuscule savings. This was hardly surprising as every deposit meant a
loss for BRI!
· The units had high loan defaults.
· The system had large and continuing losses.
· There were 3,600 units—0 were profitable.
</>
Aku tahu paling kurang ada satu lagi perusahaan yang di'tekan' seperti ini oleh pemerintah, Pertamina. Apa yang ada di pikiran mereka saat itu, ketika sedang melakukan hal ini? Apa yang dipikirkan oleh mereka ketika tulisan ini disertakan di tahun 2004?
"Everybody else was doing it?"
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