AN ANALYSIS OF GOVERNMENT POLICIES FOR INCREASING ECONOMIC VIABILITY AND VILLAGE ORGANIZATIONAL SELF-RELIANCE IN COOPERATIVE RURAL CREDIT PROGRAMS

This thesis examines the relationship between economic and organizational development variables in rural cooperative credit programs in Indonesia. The research objective is to analyze current Indonesian government policy and examine how well it meets the criteria of promoting credit cooperative self-reliance while simultaneously meeting pre-defined economic objectives of credit institutions. A second related objective is to design and evaluate policy alternatives to better meet the stated criteria.; Chapter I presents a statement of the problem and methodology. Chapter II offers a literature review on rural credit issues in developing countries. Chapter III presents a background on cooperative issues and a history of cooperative development in Indonesia.;Chapters IV-VII form the major analytical portion of the thesis. Chapter IV presents the major argument that current government low-interest rate policy actually results in higher total borrowers costs. This is based on the observation that low interest rate policy forces the lender to centralize his loan transactions in order to cut costs and that this program centralization increases borrower transaction costs more than any net cost savings from low interest rate. Program centralization is also shown to inhibit the development of self-reliant organizations.;Chapter V argues that current high levels of delinquency could be alleviated by shifting a portion of the responsibility for delinquency away from the lender to newly created borrower "joint-responsibility" groups. . . . (Author's abstract exceeds stipulated maximum length. Discontinued here with permission of school.) UMI;Policies are analyzed related to four economic objectives--lowering total borrower costs; lowering lender delinquency cost; lowering lender administrative cost; and increasing institutional savings. Economic policy alternatives are subjected to the constraint that they must simultaneously satisfy the "organizational self-reliance" criterion. Self-reliance is operationalized through the usage of the concepts of "vertical decentralization" and "horizontal networking."...