Community-driven development and elite capture: Microcredit and community board participation in Indonesia

In the late 1990s, a series of events occurred that would change the course of Indonesian history in dramatic and irreversible ways. The Asian economic crisis resulted in months of runaway inflation followed by civil unrest in Indonesia’s major urban centers. Many observers concur that the turning point was on May 12, 1998, when four Indonesian university students were killed by Indonesian security forces (Bird 1999: 29). These and other closely related events, such as violent attacks on Indonesians of Chinese descent and the occupation of the National Assembly building by university students, led ultimately to the resignation of President Suharto (Siegel 1998). The resignation was followed by a period of consolidation of the pro-democracy and political reform movements. This consolidation encompassed a national dialogue about the need for clean government, an opening up of the news media and civil society in unprecedented ways and a series of electoral reforms. Another significant event in the late 1990s was the passing of two pieces of decentralization legislation, Law 22/1999 and Law 25/1999, that began to reverse a thirty-year process of centralization and that gave substantial political and fiscal power to local, municipal-level governments. These events presented incredible challenges and opportunities for Indonesia’s national development.2 One challenge was dealing with the rise in urban poverty rates spurred by the crisis. Another major challenge was sustaining the national momentum for more democratic, transparent and accountable governance from the village to the national level. Finally, there was the question of how successful state and civil society actors would be in using the new political spaces created by these events while also protecting them from elite capture