Bank Rakyat Indonesia: Unit Desa 1970-1996
Charitonenko, S. & Patten, R. & Yaron, J.
Publication Date: 1998
Published by: World Bank - Sustainable Banking with the Poor (SBP)
Document Type: Case Study
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A successful experiment in economic development
The Unit Desa (Village Unit) system of the Bank Rakyat Indonesia (BRI) is the result of the transformation of 3,600 state-owned, rural branches acting as disbursement centers for subsidized agricultural credit into financially self-sustaining, microfinance intermediaries.
The paper concludes that the following are successful aspects of this scheme:
- Loan product;
- Deposit products;
- Management;
- Operating environment;
- Transferability of lessons learned;
- Government support;
- Social setting;
- Economic environment.
It points out that the Village Unit approach may not work in areas characterized by one or more of the following attributes:
- Sparsely populated;
- Economically stagnant or declining;
- Supported by only weak human and physical infrastructure;
- Lack of a social ethic to help ensure that repayments are made on unsecured loans;
- Lack of strong and visible government policy support for decentralization.
The paper suggests that some principles from the BRI Village Unit system experience might be usefully applied in other areas if adopted selectively and executed with caution and adaptability, but there are few, if any, settings that would warrant the unaltered replication of the Village Unit system.[Adapted from author]
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