Micro Banking in Indonesia Over the Period of Monetary Crisis

This paper attempts to describe the performance levels of the average BPR (Bank Perkreditan Rakyat) at the pre-crisis period (June 1996), at the end-of-crisis period (June 1999) and at the post-crisis period (December 1999).

The paper highlights that the average, small-sized BPR remained profitable over the period of economic crisis for two reasons:

• They operated solely in the Rupiah economy, unlike the national commercial banks;
• They applied prudent lending policies, unlike a number of national commercial banks.

The author describes the major trends observed in BPRs during the period June 1996 to December 1999 in terms of:

• Total assets and funds: Some contraction over the period of monetary crisis because inflation rates were in the two digits;
• Loans outstanding and accounts: The reduction in lending activity remained limited in comparison to the reductions in lending by the commercial banks;
• Demand deposits and accounts: Demand deposits showed uninterrupted growth for the 3.5 year period;
• Equity/own capital: Equity grew over the crisis period.

Finally the author makes the following observations for the post crisis scenario:

• The BPRs should be able to strengthen their strong equity position further, as they have more opportunities to grasp than problems to cope with;
• In the long run the BPRs are well positioned to continually combine financial sustainability with serving increasing numbers of micro clientele.