Rajawali Foundation Institute for Asia

The World’s Best-Kept Financial Inclusion Secret Revealed: The Untold Success Story of BRI Microbanking Since 1895

Jay Rosengard, November 2022 

Bank Rakyat Indonesia (BRI), Indonesia People’s Bank, has been the most successful promoter of financial inclusion in Indonesia since the country declared independence in 1945. 

BRI’s first major financial inclusion initiative was the 1970 creation of a nationwide network of BRI “unit desas,” or village units, for channeling Bimas (Mass Guidance) agricultural credit. The primary objective of Bimas was to promote national self-sufficiency by bringing the Green Revolution to Indonesia. However, by the 1983–84 planting season, successful rice farmers no longer needed Bimas support, leaving only marginal and failing farmers in the program.

BRI thus began its microbanking metamorphosis and rebirth with painful adjustment and slow adaptation, subsequently laying the foundation for dramatic growth and rapid expansion. Three principal policy changes turned unit desas from marginally useful, extremely costly entities that had outlived their initial mission into profitable rural banks providing vital financial services: 1) transformation of unit desas from Bimas conduits to full-service rural banks; 2) internal treatment of unit desas as semi autonomous units of account (discrete profit/loss centers); and 3) evaluation of unit desas based primarily on their profitability rather than on hectares covered or money lent. BRI has built on its successful commercialization of microbanking in the mid-1980s to grow, broaden, and deepen its microbanking business over the past three decades. 

BRI faces two significant future challenges if it is to remain a profitable and effective global leader and national driver of financial inclusion. First, it must continue to evolve and adapt amidst an increasingly difficult political and economic environment. This is indeed a formidable challenge but one BRI has successfully met since Indonesia declared independence in 1945. However, the second challenge facing BRI is even more daunting. While continuing to navigate the treacherous waters of well-intentioned but counterproductive national policies that threaten to undermine past accomplishments in financial inclusion, BRI must also manage a transition back to sustainable, market-based microbanking.

Europe’s Fissures with China Deepen

Europe’s Fissures with China Deepen

October 18, 2022

With a new ban on forced labor and frustration over Beijing’s continued support of Russia mounting, the EU’s relationsip with China is set to reach a new low.  

What to Expect from the 20th Congress of the Chinese Communist Party

Tony Saich, September 2022

On October 16, the Chinese Communist Party (CCP) will convene its 20th Party Congress. Held every five years, the Congress is a critical event. While nothing is seriously debated there, the symbolic function of the Congress is extremely important. It summarizes past achievements and sets out future objectives, all while displaying an outward power and unity. The Congress brings together just over 3,000 delegates from the provinces, the People’s Liberation Army (PLA), and some central agencies for about a week to approve the report of the General Secretary, amendments to the party statutes, and any other documents placed before them. In theory, this sets in motion the appointment of a new leadership by electing candidates to the Central Committee (around 200 members and 150 alternates). In reality, the Congress approves the slate proposed by the outgoing Political Bureau (Politburo) and senior leader- ship. In turn, the Central Committee elects members of the Politburo, its Standing Committee, and the Secretariat, again based on lists provided after the Party leadership has finished haggling.

This Congress will be special, as General Secretary Xi Jinping seeks a third term as political leader (either as general secretary or party chairman), confirms his place and ideas even more concretely within the party statutes, and seeks to appoint a leadership cohort drawn from his associates. Below, I provide my best guesstimates on his chances of reappointment, the leadership structure, and indications for future policy trends.

A play button sits on top of a blurred background in which you can make out the outline of a book against a red background

Behind the Book: Anthony Saich's "From Rebel to Ruler"

August 22, 2022
The rise of the Chinese Communist Party is a story of a small band of young men who navigated a treacherous political landscape. That story has shaped the trajectory of modern China, and is traced in the latest book by Harvard Kennedy School Professor Anthony Saich.
Can the US Regain the Lead in the Microchip Race?

Can the US Regain the Lead in the Microchip Race?

July 27, 2022

President Biden hopes the passage of the CHIPS Act will jumpstart American microchip production. But as Jason Hsu explains, subsidies will only go so far in the global competition to gain dominance in the semiconductor industry. 

Taiwan: A Risk Analysis Through the Lens of Hong Kong
Kwok, Dennis W. H., and Johnny Patterson. 2022. “Taiwan: A Risk Analysis Through the Lens of Hong Kong”. Read full text Abstract

Dennis W.H. Kwok and Johnny Patterson, May 2022

This paper aims to provide an overall risk analysis of the Taiwan Strait situation by using Hong Kong’s experience over the past three decades as a point of comparison. The authors focus on three areas where those watching Taiwan can learn from Hong Kong. Since Deng Xiaopeng’s rule, Hong Kong and Taiwan have been inextricably intertwined, with China intending to reunify both territories using the “one country, two systems” formula. There are, of course, fundamental differences between the situations in Taiwan and Hong Kong. But there are also many similarities from which one can draw useful lessons. In the past three decades, Hong Kong tried to preserve its liberal democratic values whilst coexisting under an authoritarian regime. Hong Kong’s experience proved that a liberal democratic society cannot survive alongside an increasingly aggressive and authoritarian Chinese Communist Party (CCP) regime. Taiwan essentially faces the same dilemma.

Hong Kong offers four key insights: First, Hong Kong provides a window through which to understand the modus operandi of Xi Jinping’s CCP. Political priorities trump all others —while CCP actions make sense within the system, they may confuse outsiders. Ultimately, Xi’s words should be taken literally and seriously. Second, the failure of the “one country, two systems” formula and Hong Kong’s collapse should not be lost on Taiwan. The so-called “United Front” tactics and the political polarization that occurred in Hong Kong are being emulated in Taiwan, with the Kuomintang’s (KMT’s) platform feeling increasingly untenable and anachronistic, especially in light of Hong Kong’s experience. Third, the infiltration of Mainland capital into Hong Kong over the past two decades has changed the underlying structure of Hong Kong as a business and financial center. The effect of ‘red’ capital made local Hong Kong and international business voices irrelevant. The authors saw their ability to influence and thereby moderate government policies waned over the years—leading to disastrous consequences for Hong Kong. Finally, Hong Kong has changed the geopolitical landscape in ways that have profound ramifications for Taiwan and how the international community perceives the CCP. The CCP openly walked back on an international treaty registered with the United Nations. The response of the international community and businesses reveals important lessons about the West’s vulnerabilities to this kind of geopolitical shock should the situation over the Taiwan Strait worsen.

Three Chinese flags fly above a building

The End of Party Rejuvenation? Jérôme Doyon Explores

December 8, 2021

The Chinese Communist Party's recruitment trends show that it is attracting fewer young people, but state employment continues to entice young Chinese, says China Public Policy Postdoctoral Fellow Jérôme Doyon. 

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