In the past, credit programmes including subsidies and neglecting savings mobilization have undermined rural finance. In recent years, the number of countries has been growing in which banks mobilize savings and practise commercial banking; but the rural poor still have to rely on informal financial institutions, which are better adjusted to local conditions. During the early 1980s, a novel approach entered into the debate: linking informal and formal financial institutions, with financial self-help groups acting as intermediaries between microentrepreneurs and the banks. This reduces transaction costs substantially, for the benefit of both. Within APRACA (Asian and Pacific Regional Agricultural Credit Association), Indonesia has been the first to implement such a pilot project. In a favourable policy climate, a project was designed which incorporates the major features of sustainability, such as reliance on institutional capacity, co-operation between governmental and private voluntary bodies and pre-existing grass-roots organizations, domestic resource mobilization, market forces, flexibility and socio-cultural adjustment. In 1989, 30 bankers, 30 PVO staff and 815 self-help group staff were trained. From May to September, a first set of some 20 bank units, 10 PVOs and 100 self-help groups entered into their initial financial transactions.