worldwide (Christen et al., 1995). 9 BRI's Unit Desa system had an average loan size of 89 percent of per capita GDP in 1995 (Charitonenko Church et al., 1997). These programs' average loan sizes range from US$67 to US$130 (Table 11). When loan sizes are converted to US dollars using purchasing power parity, all of these programs have average loans that are smaller in size than those of the nine microfinance programs.'<sup>0</sup> For the five programs studied, women account for 40 to 62 percent of borrowers (Table 11) versus 24 percent of Unit Desa borrowers (Christen et al., 19q95). Women account for a relatively large share of borrowers primarily because the programs' loans are well-suited to petty trading. In Indonesia, women are heavily represented among petty traders.

_Reasons for Evolution in Program Performance._ The BKK system suffered a considerable shock in 1993. In part this was due to economic concerns that shook Indonesia's entire financial system. The problem appears worse on paper than it actually was because records of arrears rates were corrected in that year. Finally, political interference catalyzed by elections negatively impacted units' lending decisions. Since that time however, units have performed well. In 1994 and 1995, BKK could have operated profitably without subsidies, had very acceptable arrears rates, and impressive outreach depth. Program managers claim that for each new facility, arrears begin high and then decline over time. Borrowers initially assume that this is a subsidized government program, and it takes time to educate them to the fact that the loans must be repaid. However, program managers claim to have improved this education process and have trained the staff of new units accordingly.

LKP in Dompu requires a higher interest rate than either BKK or P4K to compensate for subsidies. Political influences and weaknesses in program management create the need for this relatively large subsidy. Indeed, one unit was driven to the blink of insolvency through corrupt management practices.

The PHBK program had a troubled start, but has improved significantly since 1993. Program organizers attribute initial, high program costs and arrears rates to inadequate screening of participating NGOs and groups, and to reliance on the program's Model 2, which provides financing to credit users through banks making loans to NGOs which lend to credit groups which lend to members. Alternative program models are simpler and more direct. Program volume has increased in recent years partially due to the program's aggressive marketing to rural banks (BPRs). BPRs are much closer to PHBK' s target market than many of the larger government and private commercial banks. Also, they have little, if any, bureaucracy and therefore possess the flexibility to adopt the PHBK group lending approach quickly. PHBK is still expanding its

> 9Programs are: BRI Unit Desa (Indonesia), Grameen Bank (Bangladesh), BancoSol (Bolivia), Bankin Raya Karkara (Niger), Agence de Credit pour L'Entreprise Privee (Senegal), La Associacion Dominicana para el Desarrollo de la Mujer (Dominican Republic), Fundacion Integral Campesina (Costa Rica), K-Rep (Kenya), and CorpoSol (Colombia).

> **10** The information required to convert loans values in US dollars into loan values in US dollars adjusted for purchasing power parity was obtained from World **Bank,** 1996.

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