BADAN KREDIT DESA (BKD) PROGRAM
The Badan Kredit Desas (BKD) is a system of village-owned financial institutions located in
West, Central, and East Java, and Yogyakarta. BKD units were first established in 1898 and have
existed in their present form since 1952. The BKD concept is based on a Dutch system of village
banks. Each BKD unit is owned by an individual village, and operated by three residents of the
village. Units generally transact business only one day per week. They operate from a village
public building or the home of one of the village leaders. There are 5,345 BKD units, of which
4,806 were active at the end of 1996.
BKDs were established with small capital grants from provincial governments. Their loan capital
is derived primarily from this initial grant, retained earnings, and required and voluntary savings.
BKD units sometimes also borrow from BRI, other BKD units, local governments, and other
parties. In practice however, most BKDs keep large deposits with BRI branches or Unit Desa
and have little need of loans.
BKD earnings are used for commissions to their staffs and fees to an accountant and BRI. The
profits remaining after these deductions stay with the unit in the form of retained earnings.
Supervision. BRI managers at regional and head offices define the business of BKDs. BKD
records are prepared weekly by an accountant hired by the unit. BKDs are supervised by BRI
staff or contract workers. BKDs generally receive at least one supervision visit per month.
Supervisors review the units’ bookkeeping, cash handling, and portfolio quality. They arrange for
excess BKD funds to be deposited with BRI branches, organize BRI loans to BKDs, and
facilitate BKD units’ lending to each other. Supervisors can dismiss unit staff. BRI staff who act
as supervisors are paid Rp. 9.6 million (US$4,110) annually for their service. This is equivalent
to about 4.3 times annual per capital GDP. Supervisors hired as contractors are paid less but are
part of a BRI pension pla