Attaining Outreach with Sustainability: A Case Study of a Private Microfinance Institution in Indonesia

This paper analyzes the performance of Bank Shinta Daya, a private rural bank in Java, in terms of:

• Outreach to the poor and non-poor;
• Financial viability and sustainability;
• Resource mobilization;
• Sound (best) microfinance practices.

It concludes:

• The group-lending method covers its costs and greatly increase the bank's outreach to the poor as a new market segment, but initially adds little to the bank's overall profitability;
• Privately owned village banks can have a considerable outreach at the local level without being subsidized;
• Financial services to the poor by private banks can be profitable and self-sustaining;
• The main emphasis of any further attempt at poverty alleviation must concentrate on institution building by the poor;
• Only financially viable institutions can sustainably reach the poor in significant numbers.

The paper presents recommended policies for the government and donors. 

[Based on author's abstract]