Extending small credits profitably in Indonesia
Although the Government of Indonesia attaches great importance to the promotion of small credits, little is known about the transaction costs of extending small credits by type of institution. To fill this gap the central bank of Indonesia launched a survey of 14 rural financial institutions.The survey results give useful insights for small credit policy preparation. After the financial deregulation of the past 10 years, the main challenge for the Indonesian financial authorities is to stimulate access to small credits without returning to the old ills of selective credit policies.
Three complementary strategies of small credit promotion are suggested: firstly, promoting small and low-cost financial institutions according to the regional need for small credits; secondly, promoting interest differentiation by banks; and, thirdly, enhancing appropriate banking technologies
at primary banks.
The survey results give useful insights for small credit policy preparation. After the financial deregulation of the past 10 years, the main challenge for the Indonesian financial authorities is to stimulate access to small credits without returning to the old ills of selective credit policies.
Three complementary strategies of small credit promotion are suggested: firstly, promoting small and low-cost financial institutions according to the regional need for small credits; secondly, promoting interest differentiation by banks; and, thirdly, enhancing appropriate banking technologies
at primary banks.
Small Customers, Big Market
Back matter - Small Customers, Big Market
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