Why the Bank Rakyat Indonesia Has the World's Largest Sustainable Microbanking System

This paper describes the turnaround of Bank Rakyat Indonesia's (BRI) microbanking system, from a massive, failed subsidized rural credit program to the largest commercial microbanking system in the world.

The paper discusses:

• The reasons for failure of BRI's units from 1970 to 1983;
• An overview of BRI's microbanking performance at its units from 1984-2004;
• The severe financial, economic, and political crisis in Indonesia in the late 1990s, and the units' remarkable record of continued wide outreach and profitability throughout the crisis.

The paper then provides reasons for the extraordinary successes of the BRI's microbanking system in 2003, stating that the transformation of the BRI's commercial microbanking occurred due to the changes in the four main components:

• Vision and leadership;
• Policies;
• Politics;
• New BRI culture for microbanking.

The author also studies the emerging global microfinance industry and the microbanking challenges for Indonesia and for BRI. She concludes that the only way to provide financial services to large numbers of poor people on a long-term sustainable basis is by operating as a profitable business.