Bank Rakyat Indonesia: The First Village Bank System in Indonesia

Abstract

This Chapter provides an overview of Bank Rakyat Indonesia (BRI) being the oldest banking institution in the country. Established as a community bank encompassing Unit Desa (‘Village Unit’) and Badan Kredit Desa (‘Village Credit Unit’), the bank has served the communities for more than a century, supporting the people of Indonesia, particularly in the rural areas and agricultural sectors. Following an account of Indonesia’s era of independence with special attention to the subsequent ‘Five-Year Development Plan’ introduced after 1967 by President Soeharto as the successor of the first President Soekarno, a brief history is presented of BRI. Originating from an initiative by Raden Aria Wirjaatmadja from Banyumas, who initiated the provision of small loans with lower interest rates to assist the poor people in the society during the Dutch colonial era, BRI has been cooperating since the 1960s with the Government of Indonesia, acting as a ‘development agent’ by implementing various government programmes to support the poor people of the country. The account also documents that throughout its history, BRI has focused its services mainly on the lower levels of the economy and has continued to support small and medium enterprises, both in rural and urban areas. The description of Unit Desa (UD) as a well-known unit of BRI which has provided credit services to the micro-enterprises since the 1970s shows that the unit later became formalised through cooperation with the Government of Indonesia with the aim to support the Revolusi Hijau (‘Green Revolution’) programme to achieve self-sustained food security through increased agricultural production. Finally, the evolutionary process of BRI is described from its original objective of providing services to local communities, particularly in the rural areas, to its present global orientation on the financial markets, like most other large commercial banks today.