Abstract
Indonesia has attracted attention as a country driving economic growth of Asia, second to China. In order to lead to economic growth by expanding domestic demand, it would be beneficial to focus on micro businesses, which are responsible for nearly 90% of employment. The growth of small business financing is relatively low. There is a possibility that the fruits of economic growth is not enough to prevail in micro business layer. With this result, the possibility of disparities between regions and disparities between enterprise-wide to expand is also a concern. Micro businesses are often lacking of experiences of banking in Indonesia. They are expected to grow small businesses through the banking. For this purpose, it is necessary to develop the banking with potential micro-businesses customers. The government is introducing a program to boost it, but there may be weak incentives for banks to participate. So far, it has not been possible to include significant progress. Lending operations of micro-businesses (which is microfinance),is not easy to enter because gathering information of such businesses are difficult. Particular banks have unique know-how and competitive edge. They locate many bases efficiently and the overhead costs are significantly different from the normal banking business. They provide microfinance as a self-sustaining banking service. In other words, rather than the social goal of poverty reduction, microfinance in Indonesia has been provided for profit targeting a low-income population. Microfinance is a very attractive business because its profitability, its potential growth and its stability are high. There is also a movement of followers in the local financial institutions. Considering the conditions under which microfinance for-profit is possible, it would be possible to point out that the regulations that allows a relatively high interest rates, proprietary know-how to reduce the operational cost, and the high ability of screening and monitoring using information collected in the field. Microfinance in Indonesia, not intended to pursue a social objective of poverty reduction, but it is possible to be evaluated as to increase the funds availability of micro-businesses, contribute to the improvement of the living standards of low-income earners as a result.
