Prawiranata, Iwan R (2013) Sustainable microfinance in Indonesia : a sociocultural approach. PhD thesis, Victoria University.

Abstract

Microfinance programs were established in the Netherlands East Indies as a strategy to alleviate poverty in pre-dominantly Moslem rural communities. When Indonesia won its independence, these government-subsidized microfinance programs based on the payment of interest were continued until 1983, when the Indonesian government deregulated the banking system. Subsequently, microfinance programs were developed on a commercial basis to become one of the largest microfinance sectors in the world, but one that has not been focused on poverty alleviation. This research has examined issues of sustainability of microfinance institutions, poverty alleviation, sociocultural and religious values in three local communities in West Java. It contends that sociocultural and religious factors influence human behavior as well as the agency of borrowers and the microfinance institutions. With respect to Sundanese cultural and Islamic values, the borrowers and microfinance institutions, guided by their own interests, accommodate complimentary and contradictory elements. In this accommodation, bank officials play a critical role as arbiters and mediators. Local religious leaders, supporting the economic interests of their community, have sanctioned the payment of interest on microloans.

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