Bank Rakyat Indonesia: Twenty Years of Large-scale Microfinance

This paper examines the success of the "Unit system of Bank Rakyat Indonesia (BRI)" in providing microfinance. The paper states that:

• The BRI Units provide services to almost 30 million small savers and 3.1 million small borrowers in Indonesia;
• They have followed a profitable, sustainable approach to microfinance on a large scale;
• They use locally-mobilized savings and do not depend upon subsidies and funds from government or donors;
• The commercially-based provision of credit and savings services has had a powerful positive impact on the lives of millions of poor and low-income households;
• The collapse of the Indonesian banking system in 1998, did not affect the BRI-Unit systems profitability, loan repayment rates or deposit volumes.

The paper then identifies the factors that have driven the reform and implementation of the BRI Unit system:

• Effective leadership, strong commitment, and political support during the initial reform stage and throughout the development process;
• The institutional design of the BRI Unit that combined standardization and flexibility;
• Stable macroeconomic conditions and a series of financial sector reforms that helped the Unit system develop and prosper.

The paper concludes by deriving the following lessons from the success of the BRI Unit system:

• Reforming a State-owned bank and utilizing existing infrastructure is possible within a short period of time;
• Expanding micro-banking services and re-investment of profits ensure sustainability.