Managing the Regulatory Space: Examining Credit Union Accountability to Government in a Lightly Regulated Context

This paper examines how credit unions manage accountability to government in the lightly-regulated context of Indonesia. Adopting a qualitative methodology involving a case study approach, two credit unions are examined, through focus group discussions with credit union management and review of credit unions’ annual reports and strategic plans. Findings reveal few formal compliance-based accountability mechanisms in relation to government, and limited emphasis on these mechanisms by credit unions. However, informally, credit unions involved government in various strategic ways to demonstrate accountability and legitimacy, and seek support from them, thereby managing the regulatory space to maintain a lightly-regulated context. This paper provides insights into how credit unions adopted a predominantly co-operative approach to manage and negotiate a space of limited regulation by actively demonstrating legitimacy and accountability. Presented in the form of an engagement pyramid involving four levels (i.e. compliance, self-regulation within the sector, engaging with regulators, and selectively challenging regulation perceived as unfair or unhelpful), this approach is particularly important given the seemingly less effective regulatory frameworks in more developed countries. It provides a reference for other organisations, both within the third sector and beyond, to consider how their actions might respond to and constructively shape the regulatory space, beyond comply or evade.