Indonesia

Case Studies Bank Rakyat Indonesia (BRI) More studies about Bank Rakyat: A Review of Commitment Savings Products in Developing Countries Agricultural development bank reform: the case of unit banking system of Bank Rakyat Indonesia (BRI) Savings Mobilization Strategies: Lessons from Four Experiences

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Based on the Comparative Database on Microfinance Regulation by the IRIS Center of the University of Maryland

Case Studies

Bank Rakyat Indonesia (BRI)
The Experience of Bank Rakyat Indonesia in Microfinance, 2004
Written by: M. Jarot Eko Winarno

This paper presents the history and experience of the largest and most profitable microfinance institution, Bank Rakhyat Indonesia (BRI) and highlights key characteristics of its products and operations. The author argues that political support, a clear mandate and certain degree of independence allowed BRI to become a strong and profitable financial intermediator.

The key points presented in this document are:

• BRIs transformation from a subsidy-dependent organization into a commercial institution was possible thanks to the political support and commitment for several years at the Ministerial level.
• Commercial goals were clear to staff and customers. BRI made a great effort on 'borrower discipline' to get rid of the non-repayment culture promoted by government programs.
• Credit products' success has been based on customer's trust that BRI will provide a loan when they need it, based on their own merits, no external factors are involved.
• Savings products' have grown substantially and have been tailored to rural needs and provide: security, liquidity, convenient location, confidentiality, access to credit and positive real interest rate.
• Key to the overall success of BRI has been the well-trained staff, simple rules that govern the rural units, good supervision and the fact that responsibility falls at the local level.
  

Summarized from: "A Review of Commitment Savings Products in Developing Countries", 2003 (612 KB, PDF)
By: Nava, Ashraf, Nathalie Gons, Dean S. Karlan, and Wesley Yin

Bank Rakyat Indonesia is a state bank that has received widespread recognition for its ability to achieve scale in micro-savings mobilization--close to 3 billion in voluntary savings through 16.1 million savings accounts in the late 1990s. Its most popular savings products are SIMPEDES and SIMASKOT, which are targeted to small rural and urban savers respectively. These savings products are characterized by flexibility: clients are able to access unlimited withdrawals instantly. There is no minimum balance and clients earn a positive interest rate. SIMPEDES and SIMASKOT account holders participate in a lottery that holds a prize drawing every six months, which may serve as a deadline for bonuses since the account's amount determines the issuing of lottery coupons.

DEPOSITO is a fixed deposit instrument, which, like all fixed deposit products, is goverened by the restricted timing of withdrawals.

This paper first examines different designs that provide incentives to clients to commit to save. Mechanisms are divided into depositside mechanisms that help clients make regular deposits, and withdrawal-side mechanisms that help clients restrict the use of their funds except for well-planned uses or emergencies. Using results from a short web-based survey of microfinance instititutions, the paper describes different commitment savings products in use around the world.

Agricultural development bank reform: The case of unit banking system of Bank Rakyat Indonesia (BRI), 2001
Written by: Klaus Maurer and Hans Dieter Seibel

The paper shows that the case of BRI presents evidence that, in a deregulated policy environment, a government-owned agricultural development bank can (a) be transformed into a highly profitable, self-reliant financial intermediary, and (b) turn into a major microfinance provider, offering carefully crafted microsavings and microcredit products to low-income people at market rates of interest. Making good use of government seed money and a World Bank loan during an initial phase, it has now fully substituted savings deposits for external loans as its source of funds. With an outreach to 25 million saving accounts and 2.7 million borrowers through a network of over 3,700 banking units operating as profit centers, BRI covers its costs from the interest rate margin and finances its expansion from its profits. With non-targeted loans from $5 to $5000 at rural market rates of interest and unrestricted deposit services, the BRI Microbanking Division has weathered the Asian financial crisis well, making BRI the only profitable government bank in Indonesia.

Savings Mobilization Strategies: Lessons From Four Experiences, 1998. (36 KB, PDF)
CGAP

Around the world, poor households save in various forms and for various purposes. Although empirical evidence suggests that the poor would deposit if appropriate financial institutions and savings facilities were available, little progress has been made to establish microfinance institutions (MFIs) as full-fledged financial intermediaries. The CGAP Working Group on Savings, formed in 1996 and chaired by GTZ (representing Germany), completed case studies of four deposit-taking MFIs and a related comparative paper in 1998. This note represents a synopsis of these studies.

BRI

In 1989, the Bank Rakyat Indonesia (BRI) unit system had $534 million in deposits. By 1996, it had US$ 4 billion. Three one-page cases describe:

• what the BRI did to mobilize deposits on such a massive scale;
• the systematic approach to promotion that helped achieve this growth; and
• how the BRI unit system uses tiered interest rates to manage financial costs while encouraging higher account balances.

This case study can be found in Savings Operations for the Poor: An Operational Guide, edited by Madeline Hirschland, forthcoming from Kumarian Press ( 1294 Blue Hills Avenue, Bloomfield, CT 06002 ).

See also:

Microfinance revolution: lessons from Indonesia (volume 2), 2002, Robinson, M.

RBP: Savings in the Context of Microfinance - Lessons Learned from Six Deposit-Taking Institutions Deposits, 1998, Sylvia Wisniwski

Where are they now?, 2006, Ruth Goodwin-Groen

Savings and Credit Cooperatives as Microfinance Institutions. Two Case Studies: Koperasi Citra Lestari and Koperasi Mawar Putih in East Java, 2005

Asia Resource Centre for Microfinance