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Lessons for Africa from Indonesia's Experience in Smallscale Entrepreneurial Finance
Author(s) -
Due Jean M.,
Darmawan Delima,
Syukur M.
Publication year - 1992
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/j.1467-8268.1992.tb00148.x
Subject(s) - government (linguistics) , business , population , state (computer science) , finance , unit (ring theory) , interest rate , economic growth , economics , financial system , philosophy , linguistics , demography , mathematics education , mathematics , algorithm , sociology , computer science
Indonesia has developed some very successful credit schemes for both men and women smallscale entrepreneurs and farmers in rural and urban areas; one is a state‐owned commercial bank which reaches out into the poorer areas; one is owned by local governments, but supervised by the state‐owned commercial bank; and one is owned and operated by the provincial government. Can the factors which led to their success be transferrable to the African setting ? The authors argue that they can, but that the high population density, the vibrant economy and the relative stability of the price level are important positive factors in Indonesia not found in sub‐Saharan Africa. Nevertheless, the paying of a market rate of interest on savings and encouragement of savings, the integration of the credit scheme into the commercial banking system, an interest rate on loans which covers the spread between savings borrowing and costs plus administrative costs, high levels of repayment, untargeted credit, good management, financial viability of each branch unit, and convenience in location are transferrable and should be part of African institutions leading to the smallscale sector.