Download - Market Opportunities and Regulations Microfinance in Indonesia

1.�Introduction Microfinancebeexplained intermsof the ‘inferiority’of limitations,namelythe inferior-ityof thepoor’s thataredifficultor limitedaccess to financialservices/banking.TheAsianDevelopmentBankexplaindefinitionmicrofinanceastheprovisionoffinancialservicesisthebroadest,suchasdeposits,loans,paymentservices,moneytransfersandinsurancetopoorandlow-incomehouseholdsandmicrobusinesses1.Indonesiahasthepopulationofover253millioncoveringanexpanseof17,508islandsandisoneofamembertheG20inSoutheastAsia.Indo-nesia’seconomyhasgrownatforthepasttenyears,withkeyimprovementsinbusinesscli-mateandpovertyreduction.Indonesiaisrenownedforitslarge-scalemicrofinancesectorwitharangeofcommercialbanksandover60,000MFIsreachingmorethan50millionpeople2.

＊ Ph.DStudentatTheGraduateSchoolofEastAsianStudies,YamaguchiUniversity.

Journal of East Asian Studies, No.13, 2015.3. （pp.173-194）

（Abstract）Thispaperprovidesasystematicassessmentofmarketopportunitiesandregulationsmicrofinancein Indonesiabasedonsocialeconomic,demographicconditions,potentialSMEsIndustry,marketsegmentation,marketpenetrationandhownewregulationsmicrofinanceinIndonesia.Indonesiahaspotentialmarketformicrofinancesector,witharangeofcommercialbanksandover60,000MFIs,morethan28,07millionpoorpeopleor11,37%fromtotalpopulationandmorethan55,8millionmicroenterprisesrepresenting98,79%ofthetotalbusinessindustryinIndonesia.Currently,manypeople in Indonesiadonothaveadequateaccess to thebank financing theyneedtogrowtheirbusinesses,particularly inruralareasand lackof training formicrobusinessesandpoorpeople.Tothatend,BankIndonesia issuedarulethatrequiresbankstohaveat least20%oftheir loanportfoliodedicatedtomicroloansby2018openingupnewopportunitiestofurthergrowthesector.Successfulmicrofinanceinfluencedbysomefactorssuchassocial-economic,demographicconditionsandregulations,so it is importanttoknowaboutthisconditions.LawActNo.1of2013givesfullauthoritytoOtoritasJasaKeuanganorOJKasaFinancialServicesAuthorityInstitutiontomakeregulations,licensing,andsupervisionsMFIsandexpectedtohelpthegovernmentofIndonesiatoimproveeconomicgrowthandreducepovertyinmicrofinancesector.Thispapergiveinformationnewregulationsmicrofinanceandconcludeswithpresentingrecommendationto improvingthemicrofinanceinIndonesiaforsustainabledevelopmentofthemicrofinancesectorinIndonesia.

Keywords:Indonesia.Microfinance.Market.Opportunities.Regulations

Market Opportunities and Regulations Microfinance in Indonesia

Devi Erna Rachmawati＊

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Indonesiahasapotentialmarket todevelopmentmicrofinance throughmicro-businessenterpriseswithmorethan55,8million (MicroEnterprises), representingsome98,79%ofallenterprisesandcontributingno lessthan35,81%ofGDPgrowthin20123. Despitethisprog-ress,theCentralBankIndonesiareportinMay2014,Indonesiastillfindsonly10,1millionhaveformalaccountsformicrocredit.Indonesiahasapproximatelyonehundredmillionpeoplewhocannotordonotaccessfinancialservicesofanykindacrossavastanddiverseeconomy.Cur-rently,manyof thesedonothaveadequateaccesstothebankfinancingtheyneedtogrowtheirbusinesses,particularlyinruralareas.Tothatend,BankIndonesiaissuedarulethatre-quiresbankstohaveatleast20%oftheirloanportfoliodedicatedtomicroloansby2018open-ingupnewopportunitiestofurthergrowthesector4. Indonesiahasarelatively longmicrofinancehistory,especiallycommercialmicrofinance.Theendofthe19thcenturypreciselyin1890IndonesiahadalreadyestablishedtheIndonesianPeople’sCreditBanksandnowweretheBankRakyatIndonesia(BRI).Indonesiahasmicrofi-nancepotentialmarket,butthestrictregulationsandhigh-interestrateshavehamperedeffortstothedevelopmentofmicrofinanceandforcingpoorpeopletrappedbyunscrupulousmoney-lenders.DemographicconditionsinIndonesiaischallengemicrobankingthatstillnotabletoreachthewholeruralcommunityinIndonesia,sotheroleofMFIsinIndonesiaveryimportanttoreducepovertyinIndonesia. Theslowpaceofreformintheregulatoryandlegalenvironmentalsodetersgrowthinthemicrofinancesector.In8thJanuary2013thegovernmentofIndonesiafinallymakenewlawreg-ulationonMicrofinanceInstitutions.Thisrulegivesfullauthority“OtoritasJasaKeuangan”orOJKasaFinancialServicesAuthorityInstitutiontomakeregulations, licensing,supervisionsmicrofinanceinIndonesia.TheroleofOJKasaFinancialServicesAuthorityInstitutionverynecessaryfordevelopmentmicrobankingandMFIstogivefinanceaccessformicrobusinesssectorandpoorpeople.Expectedtohelpthegovernmentprogramtoeconomicgrowthandre-ducepovertyinIndonesia. Theindicatorsofsuccessonmicrofinancenotonlyreflectedbytheeconomicgrowthofacountrybutalso influencedbyotherfactorssuchassocial-economic,demographicconditions,regulationsmicrofinance5.Soitisimportanttoknowaboutthisconditions,thispaperprovidesasystematicassessmentofmicrofinancebasedonexistingkeyreportsonsocial, economicconditions,demographicconditions,potentialSMEs Industry,market segmentation,marketpenetrationandhowregulationsmicrofinanceinIndonesia.Thispapergiveinformationaboutnewregulationsmicrofinance inIndonesiaandconcludeswithpresentingrecommendationtoimprovingthemicrofinanceforsustainabledevelopmentofthemicrofinancesectorinIndone-sia.

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Journal of East Asian Studies

2.�Indonesia�Potential�Microfinance�Market Indonesiawasonethe firstcountriestodevelopcommercialmicrofinance inAsia6. Indo-nesiahastotalofpopulationofover253millionandtotalofpoorpeopleinIndonesiareached28.07millionor11.37percent (data fromCentralStatisticsAgencyIndonesia inSeptember2013),butMFI’spenetrationrate/activeborrowerstotheextremepoorpopulationonly1,2%(verylow).Thiscaseshowsthatthemarketshareofmicro-financeforthepoorpeopleinIndo-nesiaisstillquitelarge,soittakesagovernmentpolicythroughappropriateregulationtore-ducepovertythroughmicrofinancebyenhancingtheroleofMFIs.Table1showscomparativethehistoryofstartingmicrofinance industryandMFIspenetrationrate (activeborrowerstotheextremepoorpopulation).

Table 1. Comparative history microfinance industry, MFIs penetration rate (Active Borrowers to the ex-treme poor population) Indonesia and selected Asian countries.

Country History Microfinance (starting from)

MFIs’ penetration rate (active borrowers to the extreme

poor population)

Bangladesh 1970s Relativelyhigh(32.5%)

China 1990s Verylow(0.4%)

India 1960s Low(6.7%)

Indonesia 1890s Verylow(1.2%)

Pakistan 1950s Low(5.2%)

Philippines 1960s Low(2.0%)

Sources:SustainableMicrofinanceinAsia,Landscapes,ChallengesandStrategies,MilkenInstitute,January2014.

Microbankingmarket in Indonesia isstillverypotential,exampleoneofbankthat thefirstdevelopedmicrocreditisBRI,oneofthecommercialbankinIndonesiathatconsistentlytosupportbusinessdevelopmentsmicroenterprisesthroughBRIUnitMicrofinanceSystem.BankBRIhastotalmicro loansRp132,1trillionwithmicro loansgrew23,72%in2013andMicroLoanNPLatjust1.04%.Figure1showmarketshareBankBRIattheendof2013is29,50%fromothercommercialBank.Currently,BRIserves itscustomers through9,808operatingunitsande-channelnetworkspreadacrossIndonesia7,butthebankonlyconcentratedinJavaandSumatra.It isachallengeforbankBRIto improveservicesmicrobankingremoteruralareainIndonesia.

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ThechallengesdevelopmentBRIUnitistheglobalmarketcompetitionandthecompeti-tionmicrobanking industry inIndonesia,currentsituationmanybankconventionalbegantoopentheproductmicrototakeadvantageof largemarketopportunitiesmicroeconomicsuchasBankDanamon,andBankMandiri.Thehighmicrobankinginterestratesin2014withmi-croeffectiveinterestrateof22%/yearsisconsideredbythemicroenterprisesveryweight,it isonechallengeswithpresenceofnon-bankmicrofinance institutionespeciallycooperativemakesmicrobankingcompetitionincreasinglyfiercebutmarketisstillbigpotentialformicrobusiness inIndonesiaandopenopportunity forBankBRIunitandanothercommercialbankinIndonesiatodevelopproductinmicro-banking.BankBRImustdevelopBRIUnitMicrotoremotevillages,especiallyoutsideJava isstillconsiderabledevelopmentopportunities,morecreativetodevelopformicroproductsandmoremaximizeassistanceortrainingbusinessman-agementtomicroenterpriseslikeasGrameenBankinBangladeshthathasbeensuccesswithmicrobanking. AnalysisofthepotentialmarketmicrofinanceinIndonesiacanbeseenfromtheperspec-tiveofeconomicgrowth,socio-economicconditions, thepotentialofSMEsIndustry,microfi-nancemarketsegmentationandmarketpenetration.Willbediscussedasfollows:

2.1　Indonesia Economic Growth. Economicgrowth is themost fundamental indicatorofaneconomy’shealth, therateatwhichnational incomeisgrowing.It ismeasuredbytheannualpercentageratechange inanation’sgrossdomesticproduct(GDP)8.Ingeneral,economicgrowthisanindicatorcommonlytoseetheprogressortheabilityofacountry.Economicgrowthcanbeapowerfulindicatortomeasurethesuccessofareductionpovertyprogram.Nowinadditiontoeconomicgrowth,focusonpovertyalleviationhasbecomethefundamentalobjectivesofdevelopmentinIndone-sia.

Figure 1. Market Share Bank BRI

Source:AnnualReportBankBRI,2013

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CurrentlyIndonesiawantstodevelopprogrampovertyreductionthroughmicrofinance,it isassociatedwiththeroleofthemicrofinance institution,SMEsandempowermenteffortsonthemicrolevel.Forthisreason,SMEsinIndonesiashouldfocusonacceleratingeconomicgrowth,whichinturncanabsorblabor.Inthiscontext,theroleofMFIsverycrucial,suchascooperativesinIndonesiashouldbeinvolvedineconomicgrowthandpovertyreduction.Micro-financeinstitutionsmustprovidetrainingandassistancetothemicroentrepreneursandpoorpeople,andtogetherwithgovernment throughthedevelopmentofmicrofinancewith train-ingandsocialprogramtosupportgovernmentprogramstopovertyreductionandeconomicgrowth.Figure2presentsthestatisticratiobetweenIndonesiaandglobalgrossdomesticprod-uct(GDP)from2004to2013.

Source:Indonesiaandglobaleconomicgrowthforecastbywritercalculationbasedon:　　　 a.CentralStatisticAgency(BPS)Indonesia　　　 b.IMF　　　 c.WorldBank

Figure 2. Indonesia and Global Economic Growth Forecast 9

Indonesia’seconomicgrowthin2013is5,8%andtargetingeconomicgrowthof6%in2017.IndonesiaGrossDomesticProduct(GDP)percapitaoverthelasttenyearsissteadilyincreas-ing, this indicatesthatthe levelof incomeof thepeopleof Indonesia is increasing.However,currentlypeople’sincomeincreasehasnotbeenfollowedbyapatternofgoodfinancialman-agement.Datafromcentralstatistics,people’sdesiretosavemoneyduetotheincreaseinrev-enue(marginalpropensitytosave)tendstodeclineduringtheperiod2003-2012.Incontrasttothesameperiod,thepublicdesireforconsumption(themarginalpropensitytoconsume)tend

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toincrease.BasedontheNationalSurveyofFinancialLiteracybyOJKIndonesiain2013,theleveloffinancialliteracyamountedto21.84%,oronlyaboutone-fifthofthepopulationofIndo-nesiawhichhasawellliteratecategory.ThisconditionneedstheroleofOJKasFinancialSer-vicesAuthorityInstitutioninIndonesiatodeveloptrainingprogramforfinancialliteracy.Table2presentsastatisticratiobetweenIndonesiaandselectedAsiancountriesonmicrofinance.

Table 2. Statistic ratio between Indonesia and selected Asian countries on Microfinance10

Country2013 GPD

growth rate (%)

Population living on

below PPP $1,25 a day

(%)

MFI Active borrowers to

the total population

(%)

Percent of female

borrowers (%)

ROA (%)

Average loan balance per borrower

($)

Bangladesh 6.0 43.3 14.1 93.6 3.67 134Cambodia 7.5 18.6 9.2 77.3 4.04 1.170China 7.7 11.8 0.04 77.1 1.07 23.254India 5.0 32.7 2.2 95.9 -10.12 163Indonesia 5.8 11.37 0.2 86.8 4.03 289Nepal 3.8 24.8 2.6 98.5 2.44 250Pakistan 6.1 21.0 1.1 61.2 0.46 156Philippines 7.2 18.4 3.4 91.5 3.19 200SriLanka 7.3 4.1 2.9 77.7 1.92 355Vietnam 5.4 16.9 10.1 61.2 -2.74 610Source:MicrofinanceInformationExchangeMarket,InternationalMonetaryFund,WordBank,MilkenIn-

stitute,CentralStatisticAgencyIndonesia.

InIndonesiaapproximatelyonly0,2%ofthetotalpopulationinIndonesiaasmicrofinancialactiveborrowersonmicrocreditandsmall-scalebusinessestoearnaliving.IfcomparedwithothercountriessuchasBangladesh,thecountrywithsuccessfulmicrofinanceprogramshaveactiveborrowerstothetotalpopulationof14.1percentandGDPgrowth6.0percentin2013.TheGrameenBankisabankthatputsmicro-creditforthepoor,inBangladeshpioneeredbyMuhammadYunus.In1976,MuhammadYunuslaunchedamicro-credittopoorpeopleinBan-gladesh,micro-creditiswhatisalsotheoriginoftheformationoftheGrameenBankinBan-gladesh.ThesystemadoptedbytheGrameenBankisabeliefsystemandkinshipsystemandwithoutmustmaketheletteragreement,asdootherconventionalbanks.GrameenBankisnotapplyingsanctionsforitscustomersifitdoesnotreturnthemoney,sotherealbeliefsystem-fullyawake.ThesystemadoptedbytheGrameenBankdifferentwithconventionalexistingbankingsystem.Thissystem isaboldbreakthroughappliedbyMuhammadYunus inover-comingpovertyand famine inBangladesh.Micro-creditmethod issuccessful inovercomingtheproblemofpoverty inBangladesh.Thissystemisevidencedbythe increasingeconomicgrowthinBangladesh.ThissystemisdifferentfromthecurrentsituationinIndonesiawheremanymicrofinance institutionsandmicrobanksprefertogetprofit thoughthegovernmenthasplannedprogramsofpovertyalleviationthroughdevelopmentmicrofinance.

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2.2　Social Economic and Demographic Conditions in Indonesia Indonesia isoneof theworld’sbiggestarchipelagiccountry.Situatedbetweentwocon-tentsAsiaandAustralia/Oceania,ithasatotalof17.508islands.ThisstrategiclocationhasasignificantinfluencetowardsitsCulture,Socialconditions,Politics,andEconomy.TotalPopula-tioninIndonesia253.609.643(CIAWorldFactbook,2014).BasedonCentralStatisticsAgencyTotalpercentageofgenderinIndonesia,totalpercentagemale50.35%or127,69millionpeopleandtotalpercentagefemale49.65%or125.9millionpeople.Potentialmarkettodevelopami-crocreditsystemashasbeendonesuccessfullybyGrameenBankinBangladesh,whichgivescredittothepoorisgrantedtogroupsofhouseholds. Indonesiahas250millionmobilesubscribers,with143millionuniquemobilesubscribersenablingthepoorestpeopletohaveaccesstoreliablefinancialtransactions.ThisconditionisapotentialmarketcanbeusedtoimproveservicestodevelopmicrofinanceproductsinIndone-sia.MuslimpopulationinIndonesiais88%ofthetotalpopulationof253million.DatafromthecentralbankIndonesiashowsIslamicbankingassetstripled,increasingbyanaverageof31.5%annuallyin2013.ThisisapotentialmarkettodevelopIslamicmicrofinancebecauseforsomeMuslimpeople,interestrateis“Riba/Usury”andisnotallowedinthereligionofIslam,sothatIndonesiadevelopsystemsMicrofinance Islamic/Shariamicrobankingwith investmentandrevenue-sharingsystem.IslamicmicrofinanceorShariah-compliantmicrofinanceplaysasignifi-cantroleinIndonesiaasthelargestMuslimmajoritymarketintheworld11. Mostmicro-lendinghasbeenlocatedintheurbanareasofJavaandSumatra,wheretheIndonesianpopulation isconcentrated.Thedensityofpopulation inIndonesia isconcentratedinJava,withthedensestpopulationofthecapitalJakarta.JavaisaverypotentialmarketfordevelopingmicrofinanceinIndonesia.BasedonthepovertylineinIndonesia,povertyfoundinsomeislandsinIndonesia,amongothers,ontheislandofJava,Sumatra,Sulawesi,WestNusaTenggara,EastNusaTenggara,andthehighestpercentageofpoverty inMaluku,Papua. IntheseislandsisapotentialmarkettodevelopmicrofinancewithtrainingandsocialprogramforpovertyalleviationprogramsinIndonesia.Figure3showspovertyinIndonesia1976until2013. RoleofMFIsinIndonesiabecomeacriticalfactorinpovertyreductioneffortsareeffec-tive.Increaseinaccesstoandprovisionofstoragefacilities,financeandinsurancethatcanef-ficientlybuildtheempowermentofthepoorandtheirchancestogetoutofpoverty,throughtherateofconsumptionismoredefiniteandnotfluctuate,graduallycanbuildassets,developamicro-businessactivities,tostrengthenthecapacityacquisitionearnings,canfeelbetterlife.

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WithoutadequateaccesstoMFIs,almostallpoorhouseholdsinIndonesiawilldependontheabilityof financing themself,very limitedanddependon informal financial institutionssuchasmoneylendersormiddlemen.Thisconditionwouldlimittheabilityofthepoortopar-ticipateinandbenefitfromdevelopmentopportunities.Poorgroupswholiveinruralareasandstriveintheagriculturalsectoraresupposedtobeempoweredsothattheycangetoutofthecycleofpoverty.CurrentsituationinIndonesiasocialprogramforpoorpeoplestilllimitedwithdirectcashmoney,empowermentassistanceandsocialprogramtotrainingandeducationformicrobusinessor financial literacyforpoorpeoplestillnotenough.ThisconditionneedtheroleFinancialServicesAuthorityIndonesiatocreateregulationinenhancetheroleofMFIstohelpthegovernmenttoreducepovertythroughtrainingorassistanceformicrobusinessandpoorpeopleinIndonesiaandtheOJKasanewFinancialServicesAuthorityInstitutiondoesnotyetcreatetheregulationaboutthismatter.

2.3　Microfinance Industry in Indonesia FinanceaccessforSMEsectorandthedevelopmentofthemicrobanksandmicrofinanceinstitutionsbecomenecessary inordertoboosteconomicgrowth inIndonesia.Localgovern-menteffortstodevelopthesectorofSMEswouldhaveadirectimpactonimprovingthelivingstandardsofthepoorpeopleandincomedistributionintheregion,whichinturncanpromoteeconomicgrowth in Indonesia.So itbecomessignificantefforts to improveSMEaccess tosourcesofcapital,particularlyofthemicrofinancesector.Figure4showsthepercentageofIn-dustryinIndonesia.

Figure 3. Poverty in Indonesia (1976-2013)

Source:bywriterbasedonCentralStatisticAgency(BPS)Indonesia

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Figure 5. Percentage of SME Lending in 2013

Source:bywriterbasedonCentralBankIndonesiaReport,2014

Figure 4. Percentage of Industry in Indonesia

Source:bywriterbasedonMinistryofCooperatives,SmallandMediumEnterprisesTheRepublicofIndo-nesiaReport(2011-2012)

BasedonasurveyreportMinistryofCooperativesandSmallandMediumEnterprisesRe-publicofIndonesia,in2012totalofmicrobusinessindustryis55.856.176or98,79%oftheentirebusiness industry inIndonesia,potentialmarkettodevelopmicrofinancewithempowermentmicrobusinessinIndonesia. Basedondata fromtheCentralBankof Indonesia in2013,according tomostbusinessclassificationSMEsloansdisbursedcreditmicroloansamountedto21.6%(seefigure5).ThissuggeststhatmicrobusinesslendingisstillverylowcomparedwiththepotentialmicrofinancemarketinIndonesia,thisconditionisachallengesformicrobankingwiththehighlevelofin-terestratesthatisconsideredbymicrobusinessareveryweight.NeedtherolefromOJKasanewFinancialAuthorityServicesInstitutioninIndonesiatomakeregulationaboutmaximuminterestrate formicrobusiness in linewith thegovernmentprogramto improveeconomicgrowthinIndonesia.

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2.4　Microfinance Market Segmentation BasedondatareportedbyCentralBankIndonesia inMay2014,bytheendof2013re-cordedbankaccountgrowthofSMEsasawholerecorded10.1millionandapproximately80percentofIndonesia’spoordonothaveaccesstoformalfinancialinstitutions.Marketsegmen-tationformicrofinanceinIndonesiaforhouseholdsisdividedintotwogroupsthatareself-em-ployedandemployeesegments.Figure6showsmasssegmentationmicrofinanceinIndonesia,thecustomermassmarketsegmentinIndonesiaiscomprisedpoorpeople,microbusinessandhouseholdwith income5-150IDRmillionperannum,therearearound50millionhouseholdsinIndonesia.Thisconditionsuggeststhatthemarketpotentialformicrofinanceandtheefforttoexpandaccesstofinancialinstitutionsbythelowerlayersofsociety(financialinclusion)be-comes imperative inIndonesia.NeedtheroleMFIsto increasemicrofinanceservices for toutilizemasssegmentationinthemicrofinancesector,includingreachingthepoortoremotevil-lagesarea.

Figure 6. Mass Segmentation Microfinance in Indonesia12

Source:Writer

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2.5　Market Penetration Marketpenetration is comparisonof thecurrentmarketversus thepotentialmarketdemandforproducts.Basedonthewritercalculationmarketpenetrationforruralareaprod-uct is2,3%.Thiscurrentcondition indicatesthat lackofaccessmicrofinanceforpoorpeopleespeciallyruralareainIndonesiasoneedsroleofMFIstodevelopmicrofinanceinruralareaproductwithassistanceortrainingandeducationprogramformicrofinancecustomer.Table3showsdemandandsupplycalculationoutreachofmicrofinanceforpoorpeopleintheruralareaIndonesia.

Table 3. Demand & supply analysis outreach of microfinance for poor people in the rural area Indonesia (as of 2013)

Country Population Poverty

head-count11,37%

Number of poor people

(P)

Number of Poor in

rural Area(H)

Potential Market(70%)

(M=H*0.7)

Active Borrowers

(10%)

Market Penetration

(%)

Indonesia 253.609.643 11.37 28.835.000 17.740.000 12.418.000 1.241.800 2,3

Source:WritercalculationbasedonCentralStatisticAgency(BPS)Indonesia,2013

BasedonwritercalculationIndonesiamarketpenetrationmicrofinance industry is1,2%,thiscurrentconditionindicatesthatstillmuchmicrobusinessthatlackaccessmicrofinancefortheirbusiness,thisisduetothehighlevelofinterestandconsideredbymicroenterprisesareveryweightandbusinessmanagementtrainingformicrocustomernotyetmaximal,soneedroleofOJKasnewFinancialServicesAuthorityInstitutiontomakeregulationforstimulateMFIstodevelopmicro-businesswithsocialandtrainingprogram.Table4showsdemandandsupplycalculationoutreachofthemicrofinanceindustryinIndonesia.

Table 4. Demand & supply outreach of the microfinance industry in Indonesia (as of 2013)

CountryMicro

Enterprises (ME)

Active Borrowers /The number of credit

micro account (H)

Potential market

(M=ME-H)

Market penetration

(%)

Indonesia 55.856.176 10.100.000 45.756.176 1,2

Source:WritercalculationbasedonCentralBankIndonesia,2013,foractiveborrowerandTotalMicroEn-terprisesfromMinistryofCooperatives,SmallandMediumEnterprisesTheRepublicofIndonesia2011-2012

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3.�Regulation�for�Microfinance�in�Indonesia TheLawAct21of2011aboutLembagaOtoritasJasaKeuanganorOJKasaFinancialServicesAuthority Institutionmakes Indonesiahasanew independentagency in termsofregulationandsupervisionareintegratedintotheoverallactivityinthefinancialservicessec-tor.TheestablishmentofOJK,makingpowerspossessedbyCentralBankIndonesia(BI)willmove toOJK.TheCentralBankIndonesiawillbemoreresponsible indealingwithmacro(macro-prudentialsupervision)thatfocusonthestabilityofthefinancialsystemwithmitigatingsystemicrisk,andOJKauthorizedindealingwithmicro(micro-prudentialsupervision)thatfo-cusonthehealthofindividualbankinginstitutions.TheformationoftheOJKgiveshighhopestotheIndonesiangovernment,theFinancialServicesIndustrycommunity,and,ingeneral,theIndonesiansociety.StartinginJanuary2014CentralBankIndonesiaprovidesauthoritytosu-pervisethebankingsectorincludingmicrobankingsector. TheLawActNo.1of2013givesfullauthoritytotheOJKinlicensing,regulationsandsu-pervisionsofMFIs.ThecurrentchallengesforOJKarethemanytypesandkindsofMFIsinIndonesiasoverydifficulttomonitoringandneedeffortsfordevelopingMFIs.WithintegrationregulationandsupervisionofMFIs,expectedthedataandinformationrelatedaboutMFIsinIndonesiacanbeaccessedwiththebetterbutuntilnowOJKnotbeenabletodeterminehowmanyMFIs inIndonesia inrealterms.ThechallengeOJKasanewFinancialServicesAu-thorityInstitutionisneededlongtimetothetransferprocessoftheprevioussupervisoryagen-cies,suchasthetransferofcooperativewhoseimplementationwillbeginin2015andseveralotherfinancial institutionssuchastheBMTthatstillneedlongtimetotakesdatacollectionandmakeclearregulation.BesidesthatforthefutureOJKmustdevelopprogramlikeastrain-ing&socialformicroenterprisesandpoorpeopleandanotherprograminlinewithfocusandexpectationofthegovernmentthatestablishmentofOJKcanhelpthegovernmentineconomicgrowthandreducepovertyinmicrofinancesector.

3.1　Microfinance Institution Regulation MicrofinanceInstitutions(MFIs)whenreferringtoAct1of2013onMicrofinanceInstitu-tionsaredefinedasspecial financial institutionestablishedtoprovidebusinessdevelopmentservicesandcommunityempowerment,eitherthroughloansorfinancingformicro-enterprisesandcommunitymembers,themanagementofdeposits,aswellastheprovisionofconsultingservicesforbusinessdevelopmentisnotsolelyforprofit.ThedefinitionimpliesthattheMFIisaninstitutionthatalsoforsocialmotive,whichismorecommunitydevelopmentactivitieswithwithoutprejudicetoitsroleasafinancialintermediary.Asafinancialinstitutionthatservesasintermediaryinstitutions,MFIsarealsoconductingsavingsandloans,whichactivitiesinaddi-tiontoprovidingloans,butalsorequiredtoprovideawarenesstothepublicsaving,especiallylow-incomecommunities.

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LawActPOJK.05of2014 isnewRegulation fromOJKthatconcerningthe licensingofBusinessand InstitutionalMicrofinance Institutions, inArticle2 states the legal statusofMicrofinanceInstitution iscooperativeor limited liabilitycompany, limited liabilitycompanyspecializedatleast60%ofitssharesownedbylocalgovernment/district/cityorvillage-ownedenterpriseswhiletherestofthelimitedliabilitycompanysharescanonlybeheldbycitizensofIndonesiaorcooperatives.Theamountofpaid-incapitalorprincipalpaymentsissetatamini-mum:a.Rp50million,-(fiftymillionrupiah)forthebusinessareacoveragevillages/wards.b.Rp100million,-(onehundredrupiah)forcoverageofthedistricts.c.Rp500million (fivehundredmillionrupiah)tothecoverageareaofthebusinessdistrict/city.Licensesforaperiodof60days,afterall,theproceduresdeclaredcomplete.

3.2　Micro - Bank Regulation TheregulationofBankIndonesiaNumber14/22/PBI/2012describecommercialmicrobankingregulationintheprovisionofmicro-creditandtechnicalassistanceinthedevelopmentofmicro,smallandmediumandalsoexplainsthecriteriaforfinancingSMEsinIndonesia.InIndonesia, thetransactionvalueofmicrofinance isonlydefinedatthemicro-credit limitonlythemaximumof50million.Asforotherfinancialtransactionssuchassavings, insurance,re-mittance,paymentsystemsnoclearregulation.　NewRegulationfromOJKAct20/POJK.03/2014abouttheestablishmentofMicroBank-ingRuralBank,inwhichthelegalRuralBankisLimitedLiabilityCompany,CooperativeandRegionalCompanymayonlybeownedbyIndonesiancitizens,IndonesianLegalEntityorLocalGovernment,paid-upcapitaltoestablishminimumBPR:a.Rp14billion(fourteenbillionrupiah)forareacoveragezone1.b.Rp8billion(eightbillionrupiah)forareacoveragezone2.c.Rp6billion(sixbillionrupiah)forareacoveragezone3.d.Rp4billion(fourbillionrupiah)forareacoveragezone4.Zonedeterminedbasedontheeconomicpotentialoftheregionandthelevelofcompetitionoffinancialinstitutionsinthedistrictorcityconcerned.ChallengesofOJKasnewFinancialSer-vicesAuthorityInstitutiontomakeclearregulationaboutsaving,microinsurance,remittance,paymentsystemsbecauseuntilnownoclearregulation. Summaryof typeandregulationsmicrofinance in Indonesiacansee inTable5whichshowsthetypeandregulationsmicrofinanceinIndonesia.

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Tabl

e 5.

Typ

e an

d Re

gula

tions

Mic

rofin

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in In

done

sia

Typ

e M

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finan

ce in

Indo

nesi

aR

egul

ator

y Lo

w A

ctLi

cens

e R

egul

atio

nSu

perv

isio

n R

egul

atio

nD

epos

it In

sura

nce

Age

ncy

Bank

Bank

BRI

Uni

t(BR

ISpe

cial

fo

rM

icro

Cred

it)T

heB

ank

Act

No

10/1

998

Bank

Indo

nesia

,the

Cen

tral

Ban

kBR

IBra

nche

s,*B

ank

Indo

nesia

for

BRIa

sa

Who

le(C

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ank)

New

Rol

e:A

fter

1 J

anua

ry, 2

014

base

d on

Ac

No

21/2

011

abou

tOJK

sup

ervi

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Oto

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Jas

aK

euan

gan

(OJK

)as

Fina

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lSer

vice

sA

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rity

Inst

itutio

n

Has

Dep

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ranc

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y,h

asth

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aran

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for

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rec

usto

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Rura

lBan

k(B

PR/B

PR

Syar

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The

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Rura

lBan

k,w

ithp

rivat

e,lo

calg

over

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tor

coop

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owne

rshi

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Bank

Indo

nesia

,the

Cen

tral

Ban

kA

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3.3　Comparative microfinance regulatory authorities in Indonesia and with another country. ThefundamentalseconomicprobleminIndonesiaisaninternalchallengeintheformofagapwhichischaracterizedbythepresenceofunemploymentandpoverty,whiletheexternalchallengeis improvingthecompetitivenessoftheeraof freetrade.EstablishmentofOJKasaFinancialServicesAuthorityInstitutionhasbeenveryprecisewithintegratedMicrofinanceregulationandsupervision,expectedcandevelopMFIsandcanhelpthegovernmentofIndo-nesiatoencourageeconomicgrowthandreducepoverty.MFIscanbeaninstrumentforthegovernmentprogramtoinalleviatingpovertyduetothedevelopmentofmicroenterprisesinthecontextofpovertyreductioncannotbeseparatedfromtheroleofMFIs.Whilebanksarenotabletoreachouttomicroenterprises,MFIscanprovidefinancialsupportwithappropriatecharacteristicstosupportmicroenterprises.MFIscanhelpthegovernmenttoalleviatepov-ertythroughcommunityeffortstoincreaseproductivityanddevelopmentmicroenterprisesattherurallevel.MFIshasafunctionasanintermediaryinaneconomicactivityiffunctioningproperlywillproduceaddedvalue.Thefunctioncanaddbyutilizingtheservicesofintermedia-tionoffinancialinstitutions,includingtheproductiveeffortsmadebythepoorsocanimprovetheincomepoorpeople.Withcurrentphenomenon,itcannotbedeniedthatroleOJKasFi-nancialServicesAuthorityInstitutionveryimportanttomakeregulationsinlinewithdevelop-mentofMFIsandtheempowermentMFIsisoneprerequisitethatmustbemetinordertodevelopamicrobusinessaimedatreducingpovertyinIndonesia. OJKasnewFinancialServicesAuthorityInstitutioninIndonesiacanlearnandadoptthesystemofBangladeshwhichsuccesstopovertyalleviationthroughmicrofinance.Thegovern-mentofBangladeshhasbeenpromotingpublicsectormicrofinanceprogramswith financialsupportfrominternationalfinancialinstitutionsoragenciesforpovertyalleviation.Theenact-mentoftheMRAAMicrocreditRegulatoryAuthorityActin2006markedasignificantchangeinpolicyonNGO-MFIs.TheregulationofmicrocreditactivitiesofmicrocreditorganisationsinBangladeshwithaviewtoensuring transparencyandaccountabilityof theiroperations,requiresNGO-MFIs tobecomeLMFIs if theywant tocontinue theiroperationsandallowsLMFIsto“providevariousinsuranceservicesandotherloansforsocialwelfarepurposetothecreditorsandtheirfamilymembers13.”.InBangladesh,therearemainlyfourtypesofinstitutionsinvolvedinmicrofinanceactivities14:a) GrameenBank(GB)b) NGO-MFIshavinglicensesfromMicrocreditRegulatoryAuthority(MRA)c) CommercialandSpecializedBanksd) Governmentsponsoredmicrofinanceprograms (e.g. throughBRDB,cooperativesocieties

andprogramsunderdifferentministries). JudgingfromthecurrentsituationwheretheconditionofmicrofinanceinstitutionsinIn-donesiadidnothastheDeposit InsuranceAgencytogiveaguaranteesecure forcustomer,andmanymicrofinanceinstitutionsnotbeenabletodevelopmicroinsuranceproducts,soneed

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activerole fromOJK.Thegovernmentof Indonesia throughOJKasaFinancialServicesAuthorityInstitutionexpectedcandevelopthesocialprogramsortrainingandassistancetomicrobusinessesandpoorpeoplewithadoptasystemfromtheGrameenBankinBangladeshwhichhasbeensuccessfulwithPovertyAlleviationthroughmicro-creditdevelopment.BesidesBangladesh,Pakistan, Indiaalsohasan integratedregulatorysystemwhileChinaRegulatoryauthoritiesconductedthePeople’sBankofChina (PBC)andtheChinaBankingRegulatoryCommission(CBRC).Table6showsComparativemicrofinanceregulatoryauthoritiesinIndone-siaandwithanothercountry.

Table 6. Comparative microfinance regulatory authorities in Indonesia and with another country

Country Regulatory authorities

Bangladesh MicrocreditRegulatoryAuthority(MRA)

China People’sBankofChina(PBC),ChinaBankingRegulatoryCommission(CBRC)

India ReserveBankofIndia(RBI)

Indonesia FinancialServicesAuthorityInstitution/OtoritasJasaKeuangan(OJK)

Pakistan StateBankofPakistan(SBP)

Source:bywriterbasedondatafromMilkenInstitute,CGAPandFinancialServicesAuthorityInstitu-tion(OJK).

4.��Improving�Microfinance�in�Indonesia Povertyreductioncanbecarriedoutthroughmanytoolsandprogramsthatareeitherdi-rectlyorindirectlybyencouragingmicrobusinessproductivethroughtheprovisionofmicrofi-nanceloans(microcredit).Inaddition,OJKasaFinancialServicesAuthorityInstitutionneedtocreateablueprintastructureddesigntodevelopMFIsandstrengthentheMFIsinIndonesia.OJKalsomustreinforcetheinstitutionswithcoordinatingallgovernmentinstitutionsatcen-tralandlocallevelstoprovideguidanceandoversightoftheoperationalactivitiesofMFIsinIndonesia.Ontheother,theinsuranceforsmallcommunitiesisstillconstrainedintermsofdis-tributionso,nottotouchthosewholiveinruralareas.Theabsenceofprotectionofthefinan-cialriskforlow-incomepeoplecouldpotentiallyencouragepeoplefellintopovertyintheeventofadisaster.Thiscondition isnoteworthyconsideringthe insurancecompanycanpreventthat.Low-incomepeopleneedamicro-insuranceproductsthatprovidebenefitsinaccordancewiththeneeds,withpremiumsthatareaccessible,easytounderstandpolicy,andpaymentofclaimsquickly.Thesystembecomesnecessarybecauseoftheeaseofaccesstobearealthing.Forthiscondition,OJKisexpectedtogetdataaboutinsurancecompanieshavebeenprovid-ingmicro-insuranceproducts, it istimetheinsuranceisalsobeneficialtothepoor(insuranceforpoorpeople)inIndonesia.ThedutyandresponsibilityOJKasFinancialServicesAuthorityInstitutiontoencourageMFIsdevelopmicroinsuranceproductsMFIsinIndonesia.OJKmust

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giveconsumerprotection,andtheOJKhasregulationsActNo.1/POJK.07/2013aboutCon-sumerProtectionFinancialServicessectorwhichexplainsthepromotionpolicy inwhichthesaleofproductsandservicesfromMFIsshould includethenameor logoofMFIsandmustregisteredandsupervisedbyOJK,butuntilnowtheOJKhasnotcooperatedwiththeDepositInsuranceAgency,thismatterisachallengeforthefutureoftheOJKtogiveguaranteeforsecuremicrofinancecustomersinIndonesia. ThechallengesofOJKtodevelopmicrofinancealsothesocialconditionproblemsinwhichtheweak financial literacyIndonesiansociety,especially thepoorpeople,Basedon financialliteracysurveyin2013,thenationalfinancialliteracylevelsarestillrelativelylowonly21.84%.Lackofknowledgeabout the industryand financeproducts makethecommunityeasytotempted in investmentproducts thatofferhighreturns in theshort termwithoutconsider-ingtherisks.Forthenextstarting in2015,OJKneedto improvethemicrofinancemarket,makeclearregulationsandmakeprogramtoimplementationbusinesseducationandfinanceliteracywithamissiontoeducatemicrobusinessandpoorpeopleinmicrofinance,improvingaccessto informationandmarketingmicrofinancethroughthedevelopmentofsupporting in-frastructureforfinancialliteracy.Forthedevelopmentofmicro-financeinthefutureOJKneedtodeveloptrainingandsocialprogramsformicrobusinessesandpoorpeopleareinlinewiththegovernment’sfocusonreducingpovertythroughmicrofinanceashasbeendonebyothercountriessuchasBangladeshandIndia. OJKmusthavepromotionprogramandappropriatestrategiestoreducepovertyallevia-tion.Indonesianeedsanaggressivepovertyreductionstrategy.Nowsocialprogramstoallevi-atepovertyinIndonesiaismerelyaprogramprovidingdirectgiveintheformofmoney.TheIndonesiangovernmentrarelydoeshold trainingskills toopenasmallbusiness,marketingtrainingandimportanceofmoneymanagementandknowledge/financialeducation,supportformicro-enterprisesalsohavenotbeenabletoreachawholeIndonesiashouldsupportincreasednon-governmentalorganization (“NGO”)participation inmicrofinanceprogramsbypermittingNGOstoconductthefullrangeofactivitiesofastate-runmicrofinanceprogram.Suchamovewouldhelptoensurethatmicrofinanceservicesreachpeoplewiththeleastaccesstothefor-malfinancialsector. BasedonthepotentialmarketinIndonesiaauthorsproviderecommendationsforOJKtoimplementingthe“modelofdevelopmentofmicrofinanceinIndonesia”likeasFigure7.Indone-siahaspotentialmarketofpoorpeopleandmicrobusiness,soneedtheroleofOJKtomakeaclearregulationfordevelopservicemicrofinancethroughtrainingandsocialprogramsinlinewithfocusthegovernmenttoeconomicgrowthandreducepovertyinIndonesia.

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Potentialmarketwithofmobilebankingusers in IndonesiaenablingthepoorestpeopletohaveaccesstoreliablefinancialtransactionsbasedonlocationdemographicsandIndonesiawithithasatotalof17,508islands,foritmicrofinancedevelopmentprogrammustbebalancedwithadequateinfrastructuretotakeadvantageofinformationtechnologysuchasmobilebank-ing,etc.andprovidethebestserviceformicrobankingcustomersandforthefuturedevelop-mentofmicrofinance.Povertyreductionprogramsbasedonempoweringmicrobusinessesisaprogramthataimstoprovideaccessandeconomicempowermentformicrobusinesses.Impor-tantaspectsofthereinforcementistoprovidethebroadestaccesstothepoortobeabletotryandimprovethequalityoflife,butnowOJKdidnothavedivisionTraining&Socialprogramtodevelopmicrofinance,soauthorgiverecommendationtodevelopmicrofinanceforthefuturewithtrainingandsocialprogramcoverage-basedempowermentprogramgroupmicroenter-prisesinIndonesia,Figure8showstherecommendation.OJKasaFinancialServicesAuthorityInstitution inthe futuremusthaveaspecialdivisionforTrainingandsocialprogramtodevelopmicrofinance inIndonesia.MotivationandTrain-ingProgram,Telecentres,TelevillagesandTelelearning,PeerTutoringandGroupTutoring,EntrepreneurshipProgram,likeasashorttrainingtalkisgivenonissuesrelatingtotraininginhealth,sanitation,cleanenvironments, familyplanning,education, financial literacy,budget-ingandproductdevelopment.Trainingisneeded,notjustatthebeginningofaprogram,butthroughoutthelifeoftheprogramandAssistanceinmotivatingthewomenintheprogramstomaketheirrepaymentsandtoimprovetheirincome-generatingskills.TeleCottagesarecommunitycenters thathavemodernelectroniccommunication facilitiesthatenable thepopulationtoshareresources ineducation, training,employment,andsocialandeconomicdevelopment.Foreffectiveandefficiency, thetelecottagesneedacommunityfacilitywithtelecommunicationsandinformationprocessingequipmentsothatthepubliccanaccessthem.Thetelecottageconceptwasmeanttobenefitthelocalcommunitiesbyprovidingservicestolocalbusinessesanddistanceworkingopportunities,andinsomeplaceshasalready

Figure 7. A model of development microfinance in Indonesia

Source:Writer

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providedlocaltrainingfacilities,openlearningaccesspointsfordistanceeducation,andexpand-edsocialnetworks15.

Figure 8. Improvement training & social program coverage-based empowerment program group micro en-terprises in Indonesia to development microfinance for the future

Source:Writer

Basedonthediscussionabove,itcanbeconcludedthatinordertodevelopmicrofinanceinIndonesia,whichthegovernmentofIndonesiahavepotentialmarketformicrofinancebusi-nessitwouldbebetterforOJKasaFinancialServicesAuthorityInstitutiontomakesclearregulationandmakespecialdivision intrainingandsocialprogramwithprofessionalismandimplementationofgovernmentpracticetodevelopmicrofinanceinIndonesiatoreducepovertyinIndonesia.

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5.��Conclusion� Microfinancemarketbasedonsocioeconomic,demographicconditionandmicrobusinessinIndonesiaisverypotential.Thenumberofpeoplewhohaveaccesstomicro-financeinstitutionscoversonly10percent.Withcurrentconditions,theefforttoexpandaccesstofinancialinsti-tutionsbythelowerlayersofsociety(financialinclusion)becomescrucial.WiththeIndonesianlawsrulesrequiringbankstohaveaminimumof20%oftheirloanportfoliodedicatedtomicro-creditin2018openednewopportunitiestodevelopthemicrofinancesectorinIndonesiaforthefuture. TheSuccessofMicrofinance influencedbythesocialeconomic,demographicconditionsandregulation.LawActno21of2011givesfullauthoritytoLembagaOtoritasJasaKeuanganorOJKasaFinancialServicesAuthority Institutionmakethegovernment Indonesiahasanewindependentagency interms integratedofregulationandsupervisiontotheoverallac-tivity inthe financialservicessector includingmicrofinancesector. FundamentalseconomicprobleminIndonesiaisaninternalchallengeintheformofagapthatischaracterizedbythepresenceofunemploymentandpoverty,while theexternalchallenge is improvingthecom-petitivenessoftheglobalmarket.EstablishmentofOJKhasbeenveryprecisewithintegratedMicrofinanceregulationandsupervision,expectedcandevelopMFIsbyencouragingbusinessmicroproductivethroughtheprovisionofmicrofinanceloanscanhelpthegovernmenttopro-moteeconomicgrowthandreducepoverty. ForthefutureOJKneedtodeveloptrainingandsocialprogramsformicrobusinessesandpoorpeopleareinlinewiththegovernment’sfocusonreducingpovertythroughmicrofinanceashasbeendonebyothercountriessuchasBangladeshandIndia.Importantaspectsofthereinforcementistoprovidethebroadestaccesstothepoortobeabletotryandimprovethequalityoflife,butOJKasanewFinancialServicesAuthorityInstitutionnotyethavedivisionTraining&SocialtoDevelopMicrofinance,sotheauthorgiverecommendationforOJKistomakenewdivisionfordevelopmicrofinanceforthefuturewithsocialprogramcoverage-basedempowermentprogramgroupmicroenterprisesinIndonesia.

Note1 ThedefinitionofMicrofinancefromAsianDevelopmentBank,Microfinancehavemanydefinitionbutno

standarddefinitionof themicrofinance,microfinanceexceptthatallrelatetotheactivitiesof financialservicesforthepoor’swhohavelimitedaccesswhendealingwithformalfinancialinstitutions.Althoughsomedifferentargument,microfinancecanbeapowerfulwaytoreducepovertyandpromoteeconomicdevelopment(e.g.,Littlefieldetal.2004;Goldberg,Nathanael2005;Appah,Ebimobowei2012).

2 SeeAnOutlookonIndonesia’sMicrofinanceSector.Retrievedhttp://www.gbgindonesia.com/en/finance/article/2013/an_outlook_on_indonesia_s_microfinance_sector.php

3 BasedondatafromMinistryofCooperativesandSmallandMediumEnterprisesRepublicofIndonesiaReport,2012.

4 BasedontheCentralBankIndonesiaRegulationnumber14/22/PBI/2012Article2.

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5 Somestudiessuggest that the factors influencingthesustainabilityofmicrofinance institutions is thefinancialregulationsinthecountryandthegeographicalcoverageandreach,whichisthestudyofLaw-rence.KimandoN.etal,FactorsInfluencingtheSustainabilityofMicro-FinanceInstitutionsinMurang’aMunicipality,InternationalJournalofBusinessandCommerce,2012.

6 SeeBWTPAsiaResourceCentreforMicrofinance.Retrievedhttp://www.bwtp.org/arcm/indonesia/I_Country_Profile/CountryProfile_Indonesia.pdf.

7 DatabasedonAnnualReportBankBRIin2013.8 SallyBoltonandStefanieKhawEconomicGrowthopinion.Retrievedhttp://www.theguardian.com/busi-

ness/2006/jul/10/ukeconomy.globalrecession.9 AnnualgrowththeglobalGDPdataareasof2004-2013taken fromworldbankdata;Annualgrowth

IndonesiaGDPdataareasof2004-2013take fromCentralStatisticAgency (BPS) Indonesia;ForecastgrowthIndonesiaandglobalGDPdataareasof2014-2017takenfromIMFWorldEconomicOutlook,April2014.

10 GDPdataareasof2013;povertydataasoflatest-availableyearsrangingfrom2009to2012takenfromtheworldbankdata;otherdataasof2011take fromtheMicrofinanceInformationExchangeMarketandpovertydatafromCentralStatisticAgencyIndonesia2013.

11 See theOutlook for Indonesia’s IslamicBankingSector,GlobalBusinessGuide Indonesia.Retrievedhttp://www.gbgindonesia.com/en/finance/article/2013/the_outlook_for_indonesia_s_islamic_banking_sector.php.

12 ImprovementauthorfromanalyzedbyAdimarwan,Karim,Faith-BasedMicrofinanceinIndonesia,For-micArequipaPeru,2009.Whichstate thatAdimarwanKarimdoesnotclassifypoorpeople into themassmarket,whileIndonesiahasapotentialmarketofthepoor,especiallyinruralareasarestillmanyunreachedbymicrofinance.

13 RetrievedPolicyandregulation formicrofinance inAsia,TheFoundationDevelopmentCooperation,BankingWithThePoorNetwork,CitiFoundation,2010

14 SeeMicrocreditandPovertyAlleviation:TheBestPractice inBangladesh.Retrievedhttp://saarc-sec.org/uploads/document/Bangladesh.

15 RetrievedGibbons,D.S.(Ed.).(1994).TheGrameenReader:TrainingMaterialsfortheInternationalRepli-cationoftheGrameenBankFinancialSystemforReductionofRuralPoverty.(2ndEd.).Dhaka:GrameenBank

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