Bank Perkreditan Rakyat (BPR)


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Brief History Methodology Area of Operations Clients Poverty Focus
Distinctive Features Innovations Financial Results Challenges and Development Plans Inclusion in Financial Sector




Brief History

The term Bank Perkreditan Rakyat (people's credit bank) is a generic term that may refer to four different types of small financial institutions : BKDs, LDKPs, old style BPRs and new style BPRs. Their history and the services they provide to their clients is different for each, some are deposit-taking only, other are only providing credit, and some do both.


The term BPR may designate secondary banks (in opposition to commercial banks) such as the Badang Kredit Desa (village-owned credit organizations) and Lumbung Desa (village savings and loan institutions) that began to appear in the early 1900s. Their first goal was to promote agriculture by providing loans to farmers and as demand for money rose in other sectors, non-agricultural businesses were later included. 


Old style BPRs were introduced by Bank Indonesia in 1978. After the 1988 financial reforms of PAKTO 88, new secondary banks were established, also called BPRs. Specific requirements for pre-existing BPRs (capital, size of deposits) were set but never fully respected. Today, BPRs includes licensed financial institutions, mostly privately-owned, that meet the criteria specified in the 1992 Banking law, and number 2,148 in 2004 (accounting for 15% of the microfinance market), and almost 9,000 public rural financial institutions that are not licensed, and can be categorised as generic BPRs, which include village-owned BKDs of Java and Madura, and the Lembaga Dana dan Kredit Pedesaan (LDKPs) or Rural Fund and Credit Institutions, owned mostly by provincial governments (or in some cases by villages).



BPR are allowed to accept deposits, but are limited in terms of location, function and portfolio composition. BPRs operate on banking principles, offering loans, savings and term deposits, but no checking accounts.

As of December 2003, 61.5% of the portfolio of loans outstanding was used for working capital, 35% for consumption, and 3.5% for investment.


Area of Operations

BPRs operate mostly in affluent, urban areas of Java and Bali, but are also present in all other provinces of Indonesia. Their expansion is limited by the high capital requirements to open new branches or to operate outside a specific district.




Active clients

Active savers

Active borrowers


5 millions 5 millions 2.4 millions


As of March 2004


Poverty Focus

BPRs do not generally focus on the poor but serve the upper end of the microfinance market, and middle classes. Some BPRs are pro-poor as they were set up and are owned by NGOs (Bina Swadaya or YDBP).


Distinctive Features

They are locally based and mostly privately owned institutions. Initially set up with paid-up capital of 50 million rupiah, this requirement was increased in 1999 to 500 million rupiah, for local areas. Minimum capital requirements were also increased for BPRs operating in the Jakarta region, from Rp 50 million to Rp 2 billion (US$192,000), and for provincial capitals to Rp. 1 billion. The regulators have sought to encourage a consolidation of the BPRs, with larger but fewer ones. In result, the creation of new BPRs has slowed down since the new legislation.


BPRs are closer to communities than commercial banks are. They mostly operate in urban and peri-urban areas, generally in cities, district and sub-districts capitals. They generally provide easy access to financial services, with mainstreamed procedures and simple products requirements.


BPRs are supported by the ProFI project implemented by GTZ, which include a training and certification program for BPRs managers and directors. 


PERBARINDO, the main national association of BPRs, provides technical support to its 1,575 BPRs members, 80% operating in Java and Bali.



Some BPRs collaborate with cooperatives in mobilising savings in schools, remunerating the cooperatives by sharing the interest earned on the deposits collected.  


Financial Results

In 2003, BPRs collectively made a Rp. 429 billion in profit.


Loan Portfolio  

Portfolio at risk (%)

Savings Deposits


RoE / RoA

Rp. 9,431 billion 8% NPL Rp.2,665 billion (savings) Rp.3,360 billion (deposits) > 100%

25% / 3.4%

As of March 2004

Challenges and Development Plans

Current efforts to develop BPRs focus on the development of a certified training system, the extension of technical assistance, enhanced utilisation of information technology and consumer empowerment and protection. BPRs, especially private, are constrained by a lack of funds available for lending, as they are restricted to access soft loans from foreign sources and have difficulties to mobilise savings due to limited trust of clients. 


Inclusion in the Financial Sector

Bank Indonesia's policy continues to focus on the restructuring of the banking sector, and in that context some BPRs have been forced to close down. BPRs, especially the private entities, seek to establish linkages with commercial banks as they face problems to mobilise savings from clients, due to the limited trust in financial institutions. PT UKABIMA, a wholesale organisation set up by CRS, provides lending, investment and technical assistance to BPRs.



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