Muntigunung Lembaga Perkreditan Desa, Indonesia: Village Ownership as a Model for Remote Outreach of Financial Services

Lembaga Perkreditan Desas (LPDs), village-based financial institutions in Bali, Indonesia present an interesting model for remote outreach. This village-based model has the potential to broaden access to rural, remote areas by making use of existing local governance structures. Because the LPD is owned and governed by the customary village council it means that nearly every village on the island has, at least, access to financial services.

The LPD system has many innovative elements—a supervisory design that allows for cost recovery, an incentive structure for staff tied to performance, community ownership and the use of local customary laws for credit control. However, the LPD case also highlights the risks of MOIs being too locally oriented, especially regarding internal governance, without effective external regulation and supervision to counterbalance the influence of traditional power structures.

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