Transforming Risk-Averse Banks into Microfinance Champions in a Post-Disaster and Post-Conflict Environment

More than 25 years of conflict and a major disaster have led banks in Aceh and Nias Island in Indonesia to be averse to risks, especially when it comes to micro and small enterprises. Many of these banks were not adequately informed of the benefits they stand to gain from microfinance development.

This mindset was slowly changed through the Earthquake and Tsunami Emergency Support Project of the Asian Development Bank. The project featured a component on the adoption of Grameen Microfinance Technology which raised awareness among banks and revealed benefits gained from lending to micro and small enterprises. Through the project, bank managers and staff were given exposure trips, intensive training and on-the-job mentoring, which showed them how other Indonesian banks are thriving with microfinance and how they have successfully tapped the micro and small enterprise sector.

These activities have led several banks in both Aceh and Nias to fully commit to providing microfinance services. One bank in Aceh has become a training center which provides refresher courses in microfinance, while six are now offering expansive microfinance services. Inspired by the microfinance success of its branch in Nias, a bank is now providing such service in all of its branches in the North Sumatra province.  This transformation, hopefully, will spark economic growth and reduce poverty in disaster stricken areas such as Aceh and Nias, and inspire more banks in other areas to expand microfinance services and products.