Understanding Their Needs & Wants: The Key for Building a Successful and Sustainable Microfinance for the Poor

This paper defines microfinance and explores its various aspects. It states that:

• Microfinance has proven itself as a poverty alleviation tool;
• The term microfinance refers to the provision of financial services to poor people both in the rural and urban areas;
• Indonesia has been successful in the area of microfinance in terms of financial performance, variety of institution and outreach;
• Bank Rakyat Indonesia (BRI) is an outstanding example of the financial system approach to microfinance.

The paper lists the advantages of microcredit as:

• It is directly involved in financing activities, while also indirectly playing a role as a social safety valve;
• It alleviates the financial constraints on low-income households and micro enterprises;
• It increases the risk-bearing and risk-coping abilities of low-income households;
• It empowers women and improves their role in family decision making activities.

The paper then details:

• The institutional background of BRI and its involvement with microfinance;
• BRI-Units established to support the government by providing subsidized credit to farmers;
• Factors that have made the BRI Unit successful.

The paper concludes by stating that the success of the BRI-Unit system shows that dealing with poverty issues can be a potential business opportunity.