Reform, growth and resilience of savings-led commercial microfinance institutions: the case of the microbanking units of Bank Rakyat, Indonesia

For three decades microfinance has rapidly expanded around the globe. The recent global crisis was feared to have stopped, if not reversed, this process. CGAP reported in 2009 that the microcredit portfolios of many MFIs “are stagnant or shrinking”. This study is based on the hypothesis that savings-led MFIs tend to be resilient to such crises, presenting the units of Bank Rakyat Indonesia (BRI) as a case. During the 1970s the units served as channels for subsidized credit. A global crisis in 1982 forced the bank to either close or reform them. With new savings and credit products at market rates of interest, they grew into the largest provider of microfinance. When crisis hit in 1997/98 and again in 2008/09, they proved resilient. Moreover, in 1998 they inspired the restructuring of insolvent BRI, now the most profitable bank with the widest (inclusive) outreach in Indonesia.