IN THE JOURNAL | INDONESIA 360
Microfinance: Good business for the banks
July-September 2016
By: Keith Loveard and Shinta Eka Puspasari

The Indonesian government believes that pushing money into the micro, small and medium enterprise (MSME) sector is a major part of boosting economic performance. It is a pro-people policy that has generally been accepted as a genuine way of providing improved equality. Yet a study of the profits being made by the banks suggests they are the major beneficiaries of the microfinance business and that much more could be done to generate grass-roots economic activity.

If the banks are doing well, the non-bank institutions are doing even better. Details on this sector are hard to come by since none of the institutions publish financial reports. Yet previous reports suggest that some charge as much as 94 percent a year for loans, a rate that puts them into the category of loan sharks.

Why MSMEs matter



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