Islamic Microfinance and Poverty Alleviation in Indonesia

Abstract

Many scholars have discussed how Islamic microfinance works to eradicate poverty. However, detailed studies reviewing the literature related to this topic in Indonesia are lacking. Using a systematic method to review, analyze, and synthesize the literature, this study highlights how IMFIs play their role in alleviating poverty in Indonesia. Seven databases of Emerald Management, Science Direct, Google Scholar (English keywords), Google Scholar (Indonesian keywords), Proquest, Scopus, and Academic Search Complete were used to gather articles published from early January 2016 to the end of 2020. From the data collected, it is found that the number of published articles with the theme “Islamic Microfinance Institutions and poverty alleviation” decreased beginning in 2019, with most of the research consisting of case studies in West Java using qualitative research methods. The impact felt by the community through the implementation of these programmes includes increasing societal welfare and reducing the number of poor micro and small entrepreneurs. This perceived influence has economic, social, and spiritual benefits that can help Indonesia’s economic and social growth. This review is expected to contribute to the evidence supporting poverty alleviation through Islamic microfinance in Indonesia. This becomes important in determining the direction of development and improvement of policies related to the problem.