Community Financial Institutions in Bali: Some Empirical Findings

This paper reports some findings from several field visits and case studies conducted between 1991 and 1993 about Lembaga Perkreditan Desa (LPD) in Bali. LPDs are "Village Credit Institutions", which have been promoted by the provincial government as community-owned and self-managed financial institutions since 1984.

The LPDs have certain advantages over financial self-help groups, such as:

• Since LPDs cover a larger area of operation, they are able to develop a larger customer base and higher financial capacity;
• LPDs offer interest earning savings schemes which do not exist in many self-help groups;
• Since LPDs are also embedded in the local community, they are an appropriate alternative for group members whose financial needs are not met by their groups;
• LPDs are better prepared to become professional because their financial operations are institutionally separated from their customers and they enjoy technical assistance from the regional government and development bank.

The paper concludes that savings mobilization has a crucial role to both financial self-help groups and LPDs in sustaining:

• The service capacity of local financial institutions;
• The viability of their institutional development.