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Heterogeneous Characteristics of Microfinance Clients and Institutions: Theoretical Implications and Policy Issues in Indonesia

Author

Listed:
  • Agus Nugroho

    (PhD Candidate, Curtin University of Technology, Australia, The Indonesian Institute of Sciences (LIPI), Jakarta)

Abstract

Poor people have various motives in utilizing microfinance services. However, many factors inhibit access of the poor to formal finance, such as low levels of education, income, and assets. Social capital in terms of familial stability and memberships in business associations also affect access of the poor to finance. Heterogeneous clients lead to market segmentations in microfinance as MFIs (Microfinance Institutions) do not have the same capability to overcome informational problems of lending to poor people. Unlike moneylenders and cooperatives, microbanks often fail to serve poor clients as their financial operations are socially far from social networks of the community. Hence, the appropriate microfinance policy in Indonesia is through promoting operational linkages among formal, semi-formal and informal MFIs.

Suggested Citation

  • Agus Nugroho, 2008. "Heterogeneous Characteristics of Microfinance Clients and Institutions: Theoretical Implications and Policy Issues in Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 56, pages 179-213, August.
    • Handle: RePEc:lpe:efijnl:200810
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    More about this item

    Keywords

    Heterogeneous; Microfinance; Social Capital; Poverty;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values

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