Bill on Microfinance Institutions

The government submitted a Draft Bill on Microfinance Institutions (“Microfinance Bill”) to the House of Representatives in 2010. The Microfinance Bill is an important step toward creating legal certainty for microfinance activities in Indonesia and strengthening and developing a people-centered economy (ekonomi kerakyatan). The Bill’s main objective is to empower underprivileged and low-income citizens.

The Bill is expected to become a law in 2012, since it is included in the National Legislation Program (Prolegnas).

“Microfinance” (keuangan mikro) is defined in Article 1 (1) as financial sector activities to gather funds as well as issue micro-scale loans and financing facilities to underprivileged and low-income citizens. Microfinance activities are carried out using simple administrative procedures. Pursuant to Article 1 (2), a “microfinance institution” (lembaga keuangan mikro -LKM), is an institution that provides non-bank microfinance services, and is not motivated merely by profits.