With an estimated 90 percent of Indonesia's 50 million businessperson lacking access to regular bank financing, MF could provide the capital needed for entrepreneurship among some of more than 7 million unemployed Indonesians. The following identified market failures will be addressed by the project: 1. uneven and limited capacity among MFIs and banks- 2. limited value of MFI products and 3. insufficient industry organizations for the promotion of best practice and advocacy for industry interests in policy dialogue.

In order to support the further development of Indonesia's commercial MF sector and increase access to MF services - based on the principles of responsible finance - to Indonesia's urban and rural poor, the program will operate two interrelated components i) to facilitate the MF sector's transformation by improving the capacity and sustainability of a MF industry body to represent sectoral interests advance good MF practices, and ii) by building the capacity of targeted financial institutions to offer relevant financial products to microlenders. In this regard, the development of housing MF products will address the large finance gap in the market for low cost housing and, in turn, improve the living conditions of low-income households.

By end of 2018, the project is expted to have supported the development of an MF industry body into an entity that has, among other things, catalyzed at least 100 member MFIs to sign an industry code of conduct for responsible finance. Furthermore, the work is expected to raise the industry body's MFI membership to at least 200 committed members.

In addition, it is expected that the project will facilitate USD 316 million worth of outstanding loans by partner banks and MFIs. This includes USD 9 million in loans financed by the FIs engaged in housing MF by 2018. The specific work on housing MF is also expected to have a demonstration effect with at least two other FIs following course by developing their own housing MF products.

Expected results:  

Provision of advisory services to an MFI industry body.

Promotion of responsible finance practice to industry members.

Awareness raising and dissemination about industry best practise and industry-wide interests to broader industry stakeholders, including non-member MFIs and regulators.

Provision of advisory services to banks and MFIs for up- and down-scaling.

Phase 1 01.01.2014 - 31.12.2018   (Completed)