Growth and Resilience of Savings-based Microfinance Institutions: The Case of the Microbanking Units of Bank Rakyat Indonesia
This paper describes how the Microbanking Units (MBUs) of Bank Rakyat Indonesia (BRI) have weathered various crises such as the Asian Financial Crisis, the meltdown of BRI in 1998 and the ongoing global financial crisis.
MBUs were created in 1969, under conditions of abundant oil revenues. When oil prices fell in 1982, the government decided to restructure MBUs around the core principles of autonomy, self-reliance, profitability and outreach. They started generating profits and surplus liquidity within a few years. When the Asian financial crisis hit and the Indonesian banking sector collapsed, the MBUs proved resilient with continued deposit collection, profits and repayments.
The MBUs have remained unaffected by the ongoing global crisis as well. Management and governance teams of the BRI have learnt lessons in risk management and resilience from them. Reasons for the MBUs' resilience include:
- Safe deposits with positive real returns through the years;
- Easy access to repeat loans at market rates of interest;
- Powerful incentives to clients and staff.
