Reengineering State-Owned Banks for Unsecured Microcredit: A Business Process Perspective on Regulatory Adaptation in Indonesia

Abstract

This study examines the implementation of unsecured microcredit in Indonesia through the lens of Business Process Reengineering (BPR) within state-owned banks. A case study approach was adopted, involving in-depth interviews with key decision-makers from three state-owned banks and representatives from the Coordinating Ministry for Economic Affairs, the relevant regulatory authority. The research addresses a gap in the literature regarding the limited exploration of BPR applications in microfinance, particularly within unsecured microcredit systems that face high default risks and limited borrower financial data. The findings underscore the critical role of digitalization in improving credit risk assessment, enhancing operational efficiency, and reducing default risk by promoting transaction transparency and comprehensive debtor profiling. This study contributes to the literature on banking and financial regulation by demonstrating how BPR principles can be effectively integrated into microcredit schemes and how digital transformation strengthens risk management practices. By providing empirical insights into regulatory adaptation and the adoption of financial technologies, the study offers valuable guidance for policymakers, banking practitioners, and scholars focused on microfinance and regulatory compliance.