A thesis submitted in partial fulfillment of the requirements for the award of the degree of Master of Science

Thesis (M.Sc.) - Asian Institute of Technology, 1989

Since the rural credit. institution besides being a development agency also need a profit to become financially viable , the institution is faced with several problems , especially because its clients are the rural poor . The study is an attempt to examine the performance of the BKK (Sub-district Credit Board) , in its constituent units and in the system as a whole, and to assess the impact of credit on the borrower and -rural communities . The BKK as a decentralized organization in sparsely populated areas up to now has shown a good performance, both in financial and developmental aspect. But there is an indication which shows the BKK system to be in state of decline. This trends are increasing system arrears and a continued 1ack of improvements in units. The causes of these trends can be traced to management problems, especially lack of supervision. It is clear, that the decentralized organization must be supported by the capability of the staff at all levels. Even so, the problems are only now developing stages, and it is concluded that all can be overcome with the implementation of an overall action plan. However, by use of a scoring system, the study reveals that the credit programme has a positive impact in contributing benefit to the -rural borrowers and the rural borrowers had positive attitudes towards the credit program. But the program is not effective in reaching the rural poor in the scattered areas since BICK only has a limited Village Post activity. sensitive approach to local culture also is needed in implement-ion of the credit program in the rural areas Based on the overall findings of the , it. can be concluded that the future the programme depends on continued motivation and support by all concerned agencies . n list of recommendations is presented both for solving current and preventing new problems .