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1. be transformed into a highly profitable, self-reliant financial intermediary, and
2. turn into a major microfinance provider, offering carefully crafted savings and credit products to low-income people at market rates of interest.

With non-targeted loans from $5 to $5000 at rural market rates of interest and unrestricted deposit services, the BRI Microbanking Division has weathered the Asian financial crisis well, making BRI the only profitable government bank in Indonesia. Several lessons can be drawn from BRI's experience:

• With attractive savings and credit products, appropriate staff incentives and an effective system of internal regulation and supervision, rural microfinance can be profitable.
• The poor can save; rural financial institutions can mobilize their savings cost-effectively.
• If financial services are offered without a credit bias, demand for savings deposit services exceeds the demand for credit by a wide margin.
• Incentives for timely repayment work.
• Outreach of a financial institution to vast numbers of low-income people and financial self-sufficiency (including viability and self-reliance) are compatible.
• Average transaction costs can be lowered and both the profitability of a financial institution and the volume of loanable funds can be increased by catering for both the poor and the non-poor, with their demands for widely differing deposit and loan sizes.

• aef university of cologne (EN)