Microfinance and Poverty Alleviation: Lessons from Indonesia\u27s Village Banking System

Indonesia needs an aggressive poverty reduction strategy to counter the 1997 Asian financial crisis, which has propelled millions of its citizens into poverty. Microfinance is a proven method of reducing poverty and has been successfully used within Indonesia in government-supported programs. In addition to continuing its state-run microfinance programs, Indonesia should support increased non-governmental organization ( NGO ) participation in microfinance programs by permitting NGOs to conduct the full range of activities of a state-run microfinance program. Such a move would help to ensure that microfinance services reach people with the least access to the formal financial sector