PT Ukabima Case Study

Drawing on the evolution of the financial sector in Indonesia, this paper explores the growth of PT Usaha Karya Bina Mandiri (Ukabima). The authors state that microfinance has flourished in Indonesia because of the following reasons:

• Indigenous innovation;
• Unambiguous government and regulatory support;
• Strong development agenda at both public and private sector levels.

The paper finds that Ukabima supports a network of 44 Bank Perkreditan Rakyat (BPR), which are people's village banks, located primarily in Java's and Bali's rural and peri-urban districts. Ukabima's support consists of:

• Financial and technical assistance;
• Training;
• Management of risks related to agricultural credit lending.

Drawing on the lessons from Ukabima's experience, the authors make the following recommendations for donors:

• Promote sustainable BPRs;
• Create a niche to stay ahead of competition;
• Partner with institutions which are sensitive to client needs;
• Plan for the unique risks associated with lending to clients engaged in agricultural-based enterprises or activities.