Indonesia
Indonesia has a large and highly diverse microfinance market with welldeveloped private, public and mutual sub-sectors and a considerably smaller civic subsector. Overall some 33 million people borrow from financial institutions whereas 47 million place their savings and deposits there. Reaching the bulk of the borrowers are supervised village banks, savings and deposit units of multi-purpose cooperatives, the microfinance division of BRI and the many People's Credit Bank (BPRs). Savings are mostly collected through commercial banks and predominantly through BRI.
Indonesian microfinance is essentially a home-grown industry that attracts very little off-shore capital, partially because of high liquidity levels in the domestic capital market but also because the lowest tier of the banking sector (the BPRs) is prohibited from attracting foreign capital as well as from foreign (co-)ownership. There are interesting examples of institutions that have successfully worked around these obstacles but their number is quite limited as yet and it remains doubtful if these examples could be replicated at any scale.
Because Indonesian microfinance is largely urban-based and focused on small entrepreneurs, it does not have a strong tradition of group-based delivery formats. Service provision is largely individualized and relatively expensive with standard loan products carrying average tenures of two to three months and costing 2 to 5% interest per month at a national inflation level of approximately 6% per annum. The upside of this is that service delivery is highly responsive to clients' actual financial needs and not subject to time-consuming group meetings and articulate graduation schemes. Despite the unparalleled high number of MFIs and the availability of capital ready for microfinance there exists a considerable gap between supply and demand in microfinance. The reason for that is to be found in the urban focus of most MFIs. Indicative is that BRI Unit Desa dropped the word desa (village) from its name. Likewise, whereas BPRs are classified as rural banks by Bank Indonesia, they rarely operate in rural settings.
The MicroNed members active in Indonesia in 2009 are Cordaid (8 projects), Hivos (9 projects) and Rabobank Foundation (17 projects). Cordaid is the general MicroNed country coordinator for Indonesia.
