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Overview on MFIs in Indonesia and GTZ strategy in capacity building. Workshop on “Sustainable Microfinance: Developing a Sector Strategy and Building Institutional Capacity” World Bank Office Jakarta, 11 – 12 February 2002 Dominique Gallmann, Deputy Team Leader. - PowerPoint PPT Presentation
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Overview on MFIs in Indonesia and GTZ strategy in capacity building
Workshop on
“Sustainable Microfinance: Developing a Sector Strategy and Building Institutional Capacity”
World Bank Office Jakarta, 11 – 12 February 2002 Dominique Gallmann,
Deputy Team Leader
“The Alchemy of Microfinance”“…it is as if Indonesia has been the world’s largest laboratory on rural financial market experiments…Many different institutional forms have been tested by trial and error… Valuable lessons have been embedded in the variegated experience of Indonesia’s rural financial markets, along a rich continuum of shades and shapes.”(Gonzalez-Vega / Chaves, 1992: 38)
Typology of MFIs Institution and ownership
(formal /informal, Bank/non-bank, NGO/Govt. program)
Financial services (credit and/or savings, asset size, viability)
Clientele and outreach (gender, income level, targeted)
Sustainability and viability (dependence on subsidies, cost coverage)
MFIs in Indonesia: formal sectorserves some 40 - 50 million clients
Commercial Banks BRI Unit (3,700) BDB and others
BPR ( 8,500) 2,240 Peoples Credit Banks (BPR) 4,566 active Village Credit Boards
(BKD) 1,600 Rural Fund and Credit
Institutions (LDKP) Cooperatives ( 4,000)
1,105 Credit Unions (Kopdit) 1,582 Saving & Credit Service Posts
(TPSP) 1,160 Saving and Credit Coops (KSP)
Pawnshops (633)
MFIs in Indonesia: semi-formal sector serves ? million clients
400(?) NGOs with microcredit projects
various ministries with their own microfinance projects (P4K, PHBK, UED-SP, UPPKS, IDT)
MFIs in Indonesia: informal sector serves ? million clients
Roscas (Arisan) Moneylenders Family members
BRI Unit Must do something right Excellent savings mobilization, LDR only
around 37% (no other microbank could afford this)
Excellent scale of outreach (savings: 20 – 25% of all households; credit: 6% )
Unit system is highly profitable, however BRI as a commercial bank faces other risks
The three BPR families (1)BPR Unit Bank
LDKP
LPD
LKDP
BKK
BKD
Ownership mostly private
village (adat)
local govt village (govt)
Established after 1988 1984 1970 1902
BPR license
all none partly Collective license
Financial Services
Loans, savings, deposits
Loans, savings, deposits
Loans, savings, deposits
Mostly credit
Coverage Nationwide (Jawa/Bali)
Sub-district
Bali
Village
Central Java
Sub-district
Java / Madura
village
Supervision BI BPD BPD/BI BRI for BI
The three BPR families (2)
BPR Unit Bank
LDKP
LPD
LKDP
BKK
BKD
Active Units 2,240 1001 160 4,566
Total Assets
5,6 t 500 bn 68 bn 222 bn
No Clients 4,8 m 500,000 180,000 800,000
Avg Outst
Loan
1,300,000 535,000 424,000 142,000
Avg Savings
141,000 130,000 134,000 14,000
Avg Deposits
8,165,000 2,204,000 4,026,000 27,000
BPR Unit Banks
2,240 BPR, most are privately owned regulated under the banking act as secondary
banks Good financial intermediaries (LDR 75%) Reasonable outreach: 4,8 million savers and
1,7 million borrowers but mostly in Jawa and Bali
Only some 60% sound/fairly sound Industry is profitable again since 1999
BPR - BKD 4,566 BKD, owned by the village, controlled by village
government Problematic legal basis: Staatsblad No 357 of 1929, Decree
of MoF, Banking Act No 7, 1992 and Govt. regulation No. 71, 1992
Considered as banks, supervised by BRI on behalf of Bank Indonesia although having no legal body and not fulfilling criteria to become BPR
Operating only in Java and Madura Focusing on Credit financed by retained earnings + forced
savings, voluntary savings marginal, overliquid Industry is stagnant, viability questionable, if loans properly
written off, industry probably insolvent
LDKP
1,600 LDKP established by Provincial Govts, mostly Govt. owned (PD), except for LPD and LPN that are village owned
Regional Development Banks act as supervisors, financial intermediary and technical assitance provider
625 LDKP transformed into BPR (mandated by Govt. regulation No. 71, 1992)
LPD in Bali and BKK in Central Java most successful type of LDKP
Outreach: LPD serve 50% of all households in Bali; BKK serve about 5-10% of the households in their working area
Viability: most LPD and about 50% of BKK are profitable, loan portfolios are sound and performing
Finding about BPR
Long-term performance of the BPR is closely linked to their capacity of savings mobilization. The higher the share of savings of total assets the faster the growth, the higher the profitability and the better the loan performance fo the respective BPR system.
(Steinwand, 2001:324)
MFI OverviewM F IM F I Fin. Fin.
Interm.Interm.OwnerOwner ViabilityViability OutreachOutreach
Depth/ScaleDepth/Scale
BRI LDR:35% Govt. +++ + / +++
BPR LDR:75% Private + + / +
BKD Credit Village -/+ ++ / -
LPD LDR:94% Village +++ +++ / +++
Integrated systematic concept Macro,- Meso- und Micro Level
Macro LevelPolicy advice
ProFIProFI Meso LevelPromotion of associations
Training system
Micro LevelNon-bank MFI
Micro LevelBPR, LPD
Strategy in MFI Capacity Building
Po
licy
Ad
vice
1 2 3 4Su
pp
ort
fo
r A
sso
ciat
ion
s
Tra
inin
g S
yste
m
No
n-b
ank
MF
I in
N
TB
, NT
T
The ProFI ProgrammeThe ProFI Programme
Programme ComponentsProgramme ComponentsRoof/Programme
Complex Programme structure - Stakeholders
BPR
PerbarindoGTZ BI
DPSNSEPerbar.Found.
Apex-Institutions
Non-bank MFI Non-bank MFI
BPD NTT, NTB, SulselProv. Governmts
NTT, NTB
LPD
BPDBali
Prov. Govern-
ment Bali
LPD-Association
MFI Customers
LDP Customers
BPR Customers
ProFI
MFI Customers
MFI Customers
BPR Customers
BPR Customers
LDP Customers
LDP Customers
Pilot Project Areas of ProFIPilot Project Areas of ProFI
NTB & NTTBaliEast-Java
1. Policy Advice
Objective: MFI use the improved
framework conditions to improve their soundness
1. Establishment of policy dialogue with all stake-holders and decision making institutions
2. Deposit protection scheme for BPR
3. Improved regulation and supervision of BPR
4. Improved regulation and supervision of LPD
5. Legal framework for non-bank MFI is available
2. Support for BPR and LPD association
Objective: BPR and LPD improve
their performance by using improved services offered by their associations
1. Support concept and strategy for Perbarindo/LPD association developed2. Technical and organisational requirements created, management works efficiently3. Financing of association secured and sustainable
3. Training System
1. Stakeholders are sensitized for the need of a systematic training system
2.“Standard Board” and “Regional Examination Boards“ are established
3. Regional training institutions and trainers are identified an accredited
4. Financing of the training system secured
MFI employ their trained personnel in a more efficient way
Objective:
4. Establishment of non-bank MFI in NTB, NTT
Objective:
Various options to support non-bank MFI in NTB and NTT are identified, developed and tested as far as possible
1. Selection of suitable project areas and support strategies and organisations
2. Support strategies are tested