Indonesia: Closing the credit gap for women entrepreneurs

5 min read

Different concepts in the civil, customary and religious frameworks require careful navigation

Every Indonesian citizen, man or woman, has equal opportunity to obtain a certain right on land ... for himself/herself as well as his/her family.

Any discussion of the legal framework in Indonesia must account for the fact that, while Indonesian law is based on a civil law system and produces legislative products applicable nationwide, their implementation coexists with that of customary laws (Hukum Adat or Adat Recht) and Shari'a law that are formally or informally adopted in certain areas in Indonesia. In principle, the adoption of either Adat law or Shari'a law is subject to and should be consistent with the prevailing Indonesian law and regulations. However, in several areas such as marriage and inheritance, there are tensions between the systems that can affect women's economic empowerment and independence. Adat law is a set of unwritten rules that apply to certain groups of people based on their traditions and customs. In many instances, Adat law covers informal dispute resolution procedures. Any sanction or decision applied by Adat law must not contravene the national law or regulations. Shari'a law applies to Muslims in particular localities, where it governs areas such as marriage, inheritance and finance. As of the date of this writing, Aceh is the only province in Indonesia that is given the privilege to formally adopt Shari'a law with limited scope. Our research into the legal frameworks relevant to the four areas of economic activity assumes that neither Adat law nor Shari'a law applies, except as noted below.

The Indonesia Marriage Law of 1974 does not prohibit married women from opening individual bank accounts.1 Indonesia ratified the UN Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) on September 13, 1984. Article 13 of CEDAW provides: "States parties shall take all appropriate measures to eliminate discrimination against women in other areas of economic and social life in order to ensure, on a basis of equality of men and women, the same rights, in particular...(b) The right to bank loans, mortgages and other forms of financial credit... "In June 2005, the Government of Indonesia published a national report on measures it had taken to comply with CEDAW obligations. The report stated: "Women have the right to seek bank loans for any purposes, including mortgage, open bank accounts, and to make deals with their business partners without the consent of their husbands or other members of the family." For married couples, Articles 29 and 35 of the 1974 Marriage Law provide that assets obtained during marriage, unless agreed otherwise through a prenuptial agreement, are joint assets. This is relevant to a married woman in seeking a loan because a loan will typically be secured by her assets as collateral. If the secured assets constitute joint assets, the loan arrangement would require the husband's consent; however it should be noted that if a married man seeks to secure a loan with jointly held assets, the wife's consent is also required.

Indonesia has two categories of land rights: certified land and Adat (customary) land. According to the Basic Agrarian Act, which applies to certified land, "every Indonesian citizen, man or woman, has equal opportunity to obtain a certain right on land to acquire its benefits and yields thereof for himself/herself as well as his/her family." Article 16 of the Basic Agrarian Act sets out different types of land rights for certified land.

Civil law stipulates broad equality in marriage. Article 35 of the 1974 Marriage Law states that women can retain all assets obtained prior to marriage as well as assets inherited during marriage, and, to the extent that there is a prenuptial agreement, women can independently apply for and possess titles to property.

Indonesia presents three different mechanisms of inheritance: the Civil Code, Islamic Law Code and customary law. The Civil Code provides for equal rights of inheritance.2 A surviving husband or wife inherits half of the joint assets of the deceased spouse, unless agreed otherwise. The remainder is distributed to the other legal heirs.3 Inheritances under the Civil Code are valid for Indonesians of Chinese descent, but other people, including Indonesian Muslims and non-Muslims may voluntarily place their inheritance under the Civil Code.4

Inheritance under the Islamic Law Code is valid only for Indonesian Muslims.5 The Islamic Law Code does not provide for equal rights of inheritance.6 A person may bequeath up to one third of his or her property by will unless agreed otherwise by all heirs.7 The remaining property or all property of a person who dies intestate is governed by Islamic succession rules. A widower is entitled to one half of his wife's separate property if the couple does not have children and one quarter if they do have children.8 A widow is entitled to one quarter of her husband's separate property if there are no children and one eighth if there are children.9 The remainder is distributed to the other legal heirs.10 The portion of inheritance is calculated on a case-by-case basis, but there is a general provision that a son inherits twice the portion of a daughter.11 Article 195 of the Islamic Law Code provides that a will applies only if agreed by all heirs.



1—World Bank Group, Women, Business and the Law 2016: Getting to Equal, 8 (2016). See also Sri Mulyani Indrawti, Women's Equality Before the Law – Not Yet, Not Everywhere, But Change Is Here, Huffington Post (Nov. 23, 2013).
2—Food and Agriculture Organization of the United Nations, Gender and Land Rights Database, Indonesia ("Gender and Land Rights Database, Indonesia").
3—Private Client Law in Indonesia ("Private Client Law in Indonesia").
6—See Gender and Land Rights Database, Indonesia.
7—Id.; Islamic Law Code, Art. 195.
8—Islamic Law Code, Art. 179.
9—See Gender and Land Rights Database, Indonesia; Islamic Law Code, Art. 180.
10—Private Client Law in Indonesia.
11—Id. See also Islamic Law Code, Art. 176.


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