Jumpstarting a Microfinance Revolution in Indonesia to Boost Women’s Financial Inclusion

Microlending that started with people affected by the 2004 Indian Ocean earthquake and tsunami, including women, promoted both financial inclusion and gender equality in Indonesia. Photo credit: ADB.

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Innovative and sustained support for Grameen-style lending expanded financial services for underserved groups, including women.


Koperasi Mitra Dhuafa (KOMIDA) is one of the largest microfinance institutions in Indonesia today, providing life-changing access to capital and mentoring to more than 800,000 low-income women across the archipelago. But when it started in 2004, KOMIDA founder Slamet Riyadi struggled to convince banks that its Grameen-style, no-collateral approach to microlending would work. For traditional finance institutions at the time, low-income borrowers—especially women—were simply not bankable.

That was until the Asian Development Bank (ADB) came into the picture in 2005.

In the wake of the devastating Indian Ocean earthquake and tsunami in December 2004, Riyadi was on the ground in Aceh, working with the international NGO Mercy Corps. Realizing the massive need to restart business activities and support economic recovery, he managed to secure IDR600 million ($60,000) from the Grameen Foundation, which he used to start introducing the Grameen system to the women in refugee camps in Aceh. He later needed more funds to expand Mitra Dhuafa’s reach, but banks were not willing to make the same bet on low-income women that Grameen was making.

ADB, which was also on the ground in Aceh at the time, saw that KOMIDA would be a faster channel for emergency funds for victims in the disaster-hit coastal locations than traditional banks. After initially channeling support to KOMIDA via Mercy Corps, ADB would continue supporting it through the government-owned Bank Aceh, with grants and loans totaling more than IDR34.5 billion ($2.2 million) over the next decade. The technical assistance under the Improving Access to Finance in Aceh and North Sumatra was the last project implemented to ensure the long-term impact of ADB's engagement in tsunami-affected areas, and it included some assistance to KOMIDA.

ADB’s support and innovative solutions, such as the introduction of the latest financial inclusion technology and the creation of sustainable fund-channeling agreements between microfinance institutions and local banks, kickstarted Grameen-style microfinance lending in the country.

Project Snapshot

  • November 2012 : Approved
  • June 2016 : Completed

  • $800,000 : Cofinanced by Japan Fund for Prosperous and Resilient Asia and the Pacific
  • $772,879.22 : Amount utilized by the project

  • Executing agency :
    • Ministry of Home Affairs, Indonesia
  • Financing :
  • Others :
    • Bank Aceh
  • Others :
    • Bank of North Sumatra
  • Others :
    • KOMIDA

In the early 2000s, nearly 40 million people lacked access to formal financial services in Indonesia, and over 40% lived on incomes below $2.25 per day.

Women were even worse off, with far more limited access to financial services, such as capital for business.

Though Indonesia has over 50,000 microfinance institutions, some of which have existed for over 100 years, most struggle to achieve their lending targets largely because of inefficiencies and lack of access to capital. Given the scale of the need, these institutions have substantial growth potential, if funding is provided effectively on a broader scale in the country.


Grameen-style microfinance lending was largely unknown in Indonesia at the time KOMIDA started, which made it difficult for the initiative to gain support from traditional finance institutions.

In 2005, when KOMIDA—then known as Yayasan Mitra Dhuafa (YAMIDA)—opened a new branch for savings and loan accounts in the Pidie district of Aceh, a staff of a commercial bank in the area told them they would not succeed.

Bankers in Indonesia at the time already had a pessimistic view of low-income borrowers. But Mitra Dhuafa’s pitch was even riskier: No-collateral loans. This was in line with the Grameen model that Riyadi spent years studying while working for Grameen founder Muhammad Yunus himself.

The scale of the need was severe, though. Most of the Indonesian population sit at the bottom of the pyramid, the poorest of the poor who are always faced with financial problems. Ironically, they also have the least access to financial institutions and banking services.

Among the bottom poor, women are considered even more marginalized. They face significant challenges in accessing credit due to the regulatory requirements of banks, as well as traditional cultural norms, though they are considered more responsible in managing family and business finances.

In the aftermath of the earthquake and tsunami in Aceh, these problems—the lack of access to financial services for low-income borrowers, the need to increase financial inclusion, and the marginalized state of women—were highlighted even more.


Armed with an initial $600,000 from the Grameen Foundation, YAMIDA began offering the displaced women in Aceh general micro-loans starting from as low as IDR100,000. For their first loan, women were allowed to borrow a maximum of IDR1.5 million. Once they repay that, the loan ceiling goes up progressively up to a maximum IDR5 million, which can be repaid over 6 months to a year at 25% annual interest rate.

The foundation applied a group lending system, in accordance with the Grameen model, including regular weekly meetings at each microfinance center. This created group responsibility for loans granted to individuals. It also assigned account officers to help mentor the borrowers in carrying out their business activities.

But the foundation needed more capital to set up branches and expand its reach. Failing to get the backing of commercial banks, YAMIDA found support from ADB.

First, ADB disbursed $800,000 to a Mercy Corps microfinance program that included KOMIDA in the provinces of Aceh and North Sumatra. It also supported two microfinance programs in Aceh through a multi-donor fund, one of which provided financial support for KOMIDA.

Second, a $200,000 grant from the Japan Fund for Poverty Reduction (now known as the Japan Fund for Prosperous and Resilient Asia and the Pacific) was placed in Bank Aceh for overall microfinance systems training and development and for on-lending by KOMIDA to women entrepreneurs.

And third, another JFPR-funded technical assistance project, Improving Access to Finance in Aceh and North Sumatra, continued to provide support to microfinance in Aceh and North Sumatra. Grants amounting to IDR63.8 billion for Bank Aceh were used as a revolving and guarantee fund channeled to micro and small enterprises, targeting the productive poor. KOMIDA was selected to utilize IDR20 billion, which it channeled to women micro-entrepreneurs in eight districts and funded the opening of more branches in three districts.

The idea behind microfinance is to empower borrowers by helping them build a business that can generate income and grow. This meant that KOMIDA cannot simply provide business loans. Therefore, its finance products range from savings and microbusiness loans to financing for sanitation and clean water, household appliances and electricity, educational support, and the renovation of homes and places of business. Beyond finance, it also provides training in family health and financial literacy, including financial management for micro-entrepreneurs. This approach of combining training and financial services increases the responsible financial inclusion of women.

The ADB-supported project also developed integrated supply chain loan products that involved three parties sharing collateral and loan commitments—farmers/fishermen, clusters, and processors. It produced a microfinance services manual for partner banks and updated Grameen lending policies for linkage banking with a micro-banking cooperative.


The scale of KOMIDA’s nationwide operations today and its strong growth year after year are testaments to its success.

From less than 400 borrowers and only one office in 2005, KOMIDA has now disbursed more than IDR 13.6 trillion (approximately $880 million) to more than 824,000 low-income women through 324 branches across Indonesia. Its track record continues to be healthy, with nonperforming loans of less than 5%.

KOMIDA’s ADB-supported partnership with Bank Aceh has since been replicated by Bank Muamalat, Bank Syariah (Islamic lending), Bank Syariah Mandiri, and Bank of West Java. They also have partnerships with about 34 organizations, both national and international institutions.


The following lessons from the successful partnership between ADB and KOMIDA provide insights and best practices that other countries may find useful in designing and implementing financial inclusion projects and programs:

  • Women are bankable. KOMIDA has a simple business model of providing small loans at reasonable interest rates to groups of low-income women. But increasing access to finance is not enough. Combining it with training leads to responsible financial inclusion of women.
  • Catalyze private sector support. ADB kickstarted Grameen-style microfinance lending in Indonesia through its support of KOMIDA. It also gave a model for other financial institutions to follow.
  • Quickly adapting regulations to new needs is essential. Through technical assistance, ADB introduced the latest financial inclusion technology to banks and provided management expertise, such as by introducing and creating sustainable fund-channeling agreements between microfinance institutions and local banks. In a disaster situation, using a microfinance institution without onerous regulations also means affected people can receive cash quickly.

Priasto Aji
Senior Economic Officer, Indonesia Resident Mission, Asian Development Bank

Aji has served as project officer for ADB-financed projects and activities where he brought his experience in technological innovation, financial inclusion, and agro-industry accelerator management, among others. As Resident Mission economist, he also conducts economic surveillance and research, writes papers and articles, including contributions to ADB’s Asian Development Outlook series, and helps design and implement loans and technical assistance. He holds degrees from the University of Strathclyde in the United Kingdom and the University of Siena in Italy.

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Poornima Jayawardana
Financial Sector Specialist, Finance Sector Office, Sectors Group, Asian Development Bank

Poornima Jayawardana has been involved in ADB's financial inclusion interventions in Southeast Asia, including leading financial inclusion programs for Indonesia. She holds an MSc in International Development from the University of Manchester in the UK, and BBA, MBA, and PhD degrees from the Ritsumeikan Asia Pacific University in Japan. She has also received Professional Executive Education on Financial Inclusion and Financial Technology from Harvard University, Oxford University, and Cambridge University.

Asian Development Bank (ADB)

The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

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