Islamic Microfinance Institutions Research Articles

RISK MAPPING ON LENDING METHOD OF SHARIA MICRO FINANCING INSTITUTION (INDONESIA EVIDENCE)

The purposes of financing method are to maintain the smoothness of financial return and to mitigate the risk of default, especially for microfinance institutions. It is similar to the 5Cs in banking. However, Islamic microfinance institutions have quite striking differences in practice. This research aimed to analyze the risk management of financing method on Sharia Micro Financing Institutions (SMFIs) in Indonesia with ERM (Enterprise Risk Management) approach classifying the risks become 4 part; strategic risks, operations risks, reporting risks, and compliance risks. The research method was a qualitative descriptive study by breaking down risk events into 2 categories, namely the financing process and the financing actors. The financing process was divided into 3 stages, namely pre-processing, processing, and post-processing. While, the financing actors were debtors, creditors, and funding source institutions.
 The data collection methods were observation, in-depth interview, and library research. This research identified 64 risk events. The risk that most often faced by financing actors was the one inherent in the debtor. While, the risk that mostly faced by creditors was during the pre-financing process. The highest undesirable risks were debtor’s misunderstanding of sharia and interest-based contracts, misassessment of the company propriety, and difficulty in insurance claims.

The Impact of Covid-19 on Islamic Economics and Finance Industry: Text Analytics using R

Covid-19 not only has an impact on the financial industry but also generally affected on the world economy. In the financial industry, currently, Islamic finance is growing fast. Thus, this study aims to determine the development of research on the impact of Covid-19 on the economy and the Islamic finance industry in the world by analyzing a study of 47 documents from the 2020-2021 period on the Scopus database using text analysis using R-studio. This study provides an analysis of keywords that are often used in the topic and provides an overview of the analysis of the most relevant words, word treemaps, co-occurrence networks, thematic maps, and conceptual structures. The results of this study indicate that Covid-19 has harmed several sectors of the Islamic economy and finance, including Islamic banking, Islamic capital markets, Islamic microfinance institutions, and tourism. In addition, the results of this study also provide several recommendations for several industries that have been negatively affected by the Covid-19 pandemic.

Pemahaman Pengelola Tentang Mudarabah Dan Aplikasinya Dalam Lembaga Keuangan Mikro Syariah Di Jawa Timur

This paper aims to determine a comprehention of manager about a mudarabah contract and its application in Islamic microfinance institutions (LKMS). The research method used field research with a qualitative research type. The locus is in Kediri and its surroundings. The research subjects are LKMS managers. The method of sampling is purposive sampling. Data obtained from observations, documentation and in-depth interviews. The results showed that the understanding of the LKMS manager regarding the mudarabah contract had the same understanding as the fiqh literature as stated by the DSN-MUI fatwa. However, the application is different. With the fatwa, LKMS is more careful in distributing its funds. This is because LKMS only acts as an intermediary institution that represents depositors (savers customers) to ensure that the funds are safe and generate profit sharing

Risk management practices of Islamic microfinance institutions to improve their financial performance and sustainability: a study on Baitut Tamwil Muhammadiyah, Indonesia

PurposeThis study aims to explore the risk management practices of Islamic microfinance institutions (IMFIs) to increase their financial performance and sustainability.Design/methodology/approachThis research used a qualitative approach to increase financial performance and sustainability. The study population comprised the Baitut Tamwil Muhammadiyah (BTM) in Central Java Province, Indonesia. The data collection techniques included questionnaires and an in-depth interview, and the framework was validated by the main participants.FindingsThis study showed that BTMs have implemented risk management using different standards. However, such risk management is carried out partially while prioritising certain risks and using different methods. The risk of Sharia compliance is the most recognised risk, while financing and operational risks are the most anticipated, because these two risk types directly impact financial performance and sustainability. In general, a risk management model can improve financial performance and sustainability. Nevertheless, there are obstacles in implementing risk management at BTMs, which include weak human resources, the employee selection process, human resource development and a good control system.Originality/valueThis research explored best practices for risk management in IMFIs and may contribute to the development of risk management in such institutions to maintain the financial performance and sustainability of their services.

THE CONDITIONS OF BAITUL MAAL WAT TAMWIL (BMT) IN INDONESIA: A LITERATURE REVIEW

The purpose of this research is to analyze the condition of BMT, is an Islamic microfinance institution in Indonesia, based on a literature review using SWOT analysis. Based on the SWOT analysis BMT’s strengths, weaknesses, opportunities, and threats will be mapped through four types of strategies, namely aggressive, competitive, conservative and defensive strategies. The results indicate that based on the analysis of aggressive strategies, BMT is a community-based agency that has an opportunity to capture the market; BMT can use the ZISWAF fund in cooperation with charity institutions. Based on the analysis of competitive strategies, BMT competition with conventional micro institutions can be solved by Islamic economic socialization about the prohibition of usury; competition with Islamic banks that have a microfinance program can be solved with the distribution of business; BMT sustainability issues can be overcome by strengthening the regulation, supervision, infrastructure, human resources, and capital. From the conservative strategies, BMT has limitations in terms of capital, human resources, and marketing strategies. This problem can be overcome through their linkage with Islamic Banks and companies, using CSR and low-cost funds from Islamic Banks. Other opportunities are the transfer of knowledge about finance, managerial expertise, as well as the right marketing strategy. In addition, a lack of oversight in BMT can be solved by maximizing the role of associations and agents of BMT. Meanwhile, from the defensive strategies, fundamental reform of government is required to develop BMT’s rules, oversight, feasibility measurement and clear level of health.

Designing micro-fintech models for Islamic micro financial institutions in Indonesia

PurposeThis study aims to design appropriate micro-fintech models for Islamic microfinance institutions (IMFIs), especially Baitul Maal wat Tamwil (BMT) in Indonesia, thus enabling BMT to combine Islamic social and commercial microfinance optimally.Design/methodology/approachThis study uses the analytic network process and Delphi methods, with three groups of experts as the respondents, namely, academician-regulators, BMT practitioners and Fintech practitioners.FindingsThe first results show that the micro-fintech tools needed by IMFI/BMT are digital banking, payment, peer-to-peer (P2P) financing, P2P social and e-commerce. These could be developed by a BMT alone or with an APEX or Association, which could also collaborate with an existing fintech company that specialises in micro-fintech, applying the offline to online approach. This means that commercial funding, as well as social fundraising of zakat and waqf, would be conducted online, whereas commercial financing for micro and small enterprise customers and the disbursement of zakat and waqf would be conducted offline. The second results show that the limited open ecosystem and hybrid ecosystem are the most appropriate micro-fintech ecosystems for IMFIs/BMT, with various alternative models. In addition, the private closed ecosystem preferred by BMT would be feasible if all criteria show improvement in the future.Research limitations/implicationsThis study is qualitative in nature. The methods used have limitations, meaning the models could be improved by incorporating other methods. Moreover, the case and respondents are all Indonesian, which means that the results may only be applicable to BMTs in Indonesia.Practical implicationsA BMT and/or BMT association could immediately apply micro-fintech with a limited open ecosystem, while in the future, they could apply micro-fintech with a private closed ecosystem.Social implicationsThe micro-fintech model could be used to optimise the collections of zakat, infaq and waqf, meaning BMT could provide more social programmes for those in need.Originality/valueThe growth of fintech in Islamic microfinance has occurred only recently, while only a limited number of studies have been conducted; therefore, no study exists on the development of a micro-fintech model appropriate for IMFIs, especially BMT.

Islamic Microfinance Institutions, Indonesian Economic Democracy, and Development (A Maqashid Approach System Perspective)

This study aims to expand on the theoretical notions of sharia economics, economic democracy, and Indonesian development. Economic identity is influenced by religion, culture, and other valuable components of life, including the state's ideology. Religious ideals, cultural constructions, governmental ideology, and/or a synthesis of these values should all be protected from development. This is Auda's considerable offer, which connects maqasid al-shariah with systems theory to bolster Islamic studies' intellectual integrity. The Shariah economy, social system, and state ideology should be united to attain economic welfare. As a result, the maqashid shariah system approach provides a methodological framework for examining the existence of shariah microfinance institutions, economic democracy, and development in their entirety

Peran Lembaga Keuangan Mikro Islam dalam Meningkatkan Kesejahteraan Pengusaha Mikro

The purpose of this study is to analyze the structure and development as well as the problems and challenges faced by Islamic microfinance institutions in improving the socio-economic welfare of Islamic micro-entrepreneurs in the province of Banten. Islamic microfinance institutions have a social purpose in addition to the goal of obtaining profits that can be utilized by micro-entrepreneurs to develop their businesses. Islamic microfinance institutions have the potential to act as a mechanism for banking institutions. Data were analyzed based on micro-entrepreneurs with field survey methods and descriptive analysis. Field visits and interviews will be organized and conducted face-to-face with the manager of the microfinance institution. In the semi-structured interview process, respondents were asked to express their views on the research problem. It is hoped that the results of this study will obtain opinions from respondents regarding the role of Islamic microfinance intitutions in (1) improving the socio-economic welfare of micro entrepreneurs, (2) problems faced by microfinance institutions in distribute financing to micro-entrepreneurs. In general, respondents thinks that operations in Islamic microfinance institutions are currently not optimal due to several existing limitations. Respondents strongly agree that Islamic microfinance institutions should provide products, services, and instruments
 to respond to the needs of the poor in overcoming poverty and of course the services, products, and instruments offered must be distinguishable from other services, products, and instruments.

Financial Performance before and during the Covid-19 Pandemic on Islamic Microfinance Institutions (Case Study Btm Kaliwungu)

Islamic banking in Indonesia is facing a number of challenges in the midst of the Covid-19 pandemic, and impacting Sharia Micro Finance Institutions will face several potential risks to financial performance. For this reason, research is needed to analyze the impact of Covid-19 on sharia microfinance performance. In this case, BTM Kaliwungu analyzes financial statements using financial ratios, namely Return On Asset (ROA), Capital Adequacy Ratio (CAR), Non-Performing Finance (NPF) and Financing Deposit to Ratio (FDR). This is a quantitative study with trend analysis in Microsoft Excel. The data were collected three years (December 31, 2017- December 31, 2019) before and one year (December 31, 2020) after the announcement of the first case of Covid-19 on March 2, 2020. The financial statements demonstrate the overall impact of Covid-19 on sharia microfinance performance (BTM Kaliwungu). During the existence of covid-19, the CAR ratio has no effect. ROA displays the results of criterion calculation quite well before or during the Covid-19 pandemic. The NPF calculation results show that the poor standard is still within the acceptable standardized range. Furthermore, in the case of FDR, it necessitates a greater reliance on third-party funding.

Islamic Microfinance Institutions and Empowering Women-Based MSMEs in an Effort to Reduce Poverty

Poverty is a problem that has been rooted in society. One of the efforts to decrease a poverty is empower MSME through Microfinance Institutions because they can directly reach the grass root. This study aims to find out how the pattern and role of women-based MSME empowerment in poverty decrease efforts carried out by KSPPS Baytul Ikhtiar. The research method used is a qualitative method. The results of this study indicate that KSPPS Baytul Ikhtiar adopted a pattern of empowerment of the Grameen Bank which was modified in such a way with sharia principles. In addition, this study also shows that there are 4 main roles of KSPPS Baytul Ikhtiar in poverty alleviation efforts, providing access to capital, providing access to assistance, empowering women and her family.

Does Islamic microfinance contribute to economic empowerment in Tunisia?: a case study of Zitouna Tamkeen

PurposeIslamic microfinance is a substantial tool for poverty alleviation and economic empowerment. The paper aims at accessing the potential of Islamic microfinance for the purpose of achieving the economic empowerment in Tunisia.Design/methodology/approachA structured questionnaire survey method is used. The method is intended for some of the beneficiaries of Zitouna Tamkeen (ZT), the only Islamic microfinance institution in Tunisia. Responses are analyzed using the statistical package for the social sciences program.FindingsThe authors infer that though the Islamic and conventional microfinance have similar objectives, the methods are different. What is more, the economic empowerment requires not only financial inclusion and entrepreneurship, but also skill development. The results of the survey reveal that ZT has contributed to certain economic empowerment of most of ZT's beneficiaries. In addition, the authors bring to the fore that providing supportive infrastructure and investment is a prominent component of the economic empowerment process.Research limitations/implicationsIn the paper, the sample is limited.Practical implicationsThe authors have highlighted that some structural barriers to entrepreneurship – such as legal, operational and marketing challenges – need to be addressed in a practical way.Originality/valueThis paper establishes the relationship between the Islamic microfinance and economic empowerment. The current paper is the first investigation in this field in Tunisia.

An Innovative Sukuk-Waqf for Islamic Microfinance Institutions: Integrating Maqasid Al-Shariah, SDGs and Waqf

Microfinance institutions (MFIs) have been widely recognized to promote financial inclusion and contribute towards poverty eradication by facilitating the access to financial products and services to the under-privileged and unbankable segment of society. Nevertheless, numerous studies have shown that many MFIs face the issue of economic viability and financial sustainability due to the lack of fund mobilization. By considering the success of conventional MFIs, several countries have introduced Islamic MFIs by adopting the Islamic modes of financing on the asset side of the conventional MFIs model. However, they face the same problems as their conventional counterparts on their liability side. The present study aims to introduce a Sukuk-waqf model as a source of funds for the Islamic MFIs through as cash waqf. In achieving this objective, the study adopts a qualitative research approach and proposes a Sukuk-waqf model for the development of Islamic MFIs. The combination of cash Waqf with Sukuk for raising funds for the Islamic MFIs is expected to contribute to the economic sustainability and viability of the institutions. In modelling the Sukuk-waqf model, the study attempts to integrate SDGs, Waqf, and Maqasid al-shariah, which emphasis on the poverty eradication, social justice, and economic welfare through the notion of Hifze deen (preservation of faith), hifze maal (preservation of wealth) and by providing access to the poor for productive resources such as education, training, and credit. The results from this study are expected to provide important inputs for the sustainable development of Islamic MFIs and assist the MFIs to contribute towards achieving the SDGs and ultimately, the Maqasid al-shariah.

Rancang Bangun Strategi Pemberdayaan UMKM melalui Wakaf Produktif Berbasis Model Sharia Grameen Bank di Era New Normal

Abstract
 Economic conditions in the midst of the Covid-19 pandemic, the people of Bira Tengah Village, Sampang Regency, have not been able to achieve a level of welfare even though in the village there is tourism potential for Lon Malang Beach and abundant marine products. The majority of housewives in the area do not have income-generating jobs. Thus, a solution is needed to optimize the role of housewives in the village to improve their economy in this new normal era. The purpose of this research is to create a solution idea in revitalizing the community's economy in order to alleviate poverty and increase the role of housewives in Central Bira in the new normal era. In writing this scientific paper, it uses research methods with a qualitative descriptive approach, data collection by interviews and literature studies as data sources. The concept of Sharia Grameen Bank is a model of Islamic microfinance institutions that apply sharia economic principles by utilizing capital from cash waqf and partnering with cooperatives supported by the use of the LOL website (Lon Malang Luminous Heaven) which can optimize the implementation process of Sharia Grameen Bank implementation). LOL (Lon Malang Luminous Heaven) is a website that is used as a medium in raising and distributing funds from productive waqf empowerment programs through cooperatives with murabahah contracts to housewives business groups in Central Bira.

THE KSPPS STRATEGY OF BMT AIRLANGGA WAS DEVOTED TO PERSADA DURING THE COVID-19 PANDEMIC

The Covid-19 pandemic has affected many aspects. Not only for MSMEs but also Islamic microfinanceinstitutions. This study aims to determine the strategy of Islamic microfinance institutions, namely KSPPS BMTAirlangga Bakti Persada during the Covid-19 pandemic. This research uses a descriptive qualitative approachwith a case study method. The results of this study indicate that KSPPS BMT Airlangga Bakti Persada has acertain strategy so that it can survive in the Covid-19 pandemic era. The strategy includes risk managementand operational management at the institution. Risk management includes the management of default riskby members and management of default risk by the institution. Operational management is related to healthprotocols so that employees are not exposed to the Covid-19 virus.

Waqf Fund Management through Micro Waqf Bank Program in Indonesia

Waqf is a muamalah activity that has a very important economic and social role in Islamic history. Waqf is one of solutions to the problem of poverty and social inequality in society. The establishment of the Micro Waqf Bank initiated by the government together with the Financial Services Authority (OJK) has played an important role as one of the new Islamic microfinance institutions in financial inclusion in Indonesia. This paper will discuss how the management of waqf funds through the Islamic Waqf Bank program based on pesantren in efforts to alleviate poverty and social inequality which has become a chronic problem in Indonesia. The discussion in this paper uses the literature study method in which the writer's team looks for various sources of literature such as books, internet, journals and others. This paper confirms that the Micro Waqf Bank has an important role in the efforts to empower the economic community, especially for people who are around the boarding school but it is still necessary to make regular improvements both from the operational side of the Micro Waqf Bank and the alignment of the naming of the institution in order to avoid any misunderstanding among the community especially Muslims.

Financial and Social Efficiency Analysis of Islamic Microfinance Institutions

PurposeThe purpose of this paper was to investigate the impact of credit risk-taking on financial and social efficiency and examine the relationship between credit risk, capital structure and efficiency in the context of Islamic microfinance institutions (MFIs) compared to their conventional counterparts.Design/methodology/approachThe stochastic frontier approach was used to estimate the financial and social efficiency scores, in a first step. In a second step, the impact of risk-taking on efficiency was evaluated. The authors also took into account the moderating role of capital structure in this effect using the fixed and random effects generalized least squares (GLS) with a first-order autoregressive disturbance. The used dataset covers 326 conventional MFIs and 57 Islamic MFIs in six different regions of the world over the period of 2005–2015.FindingsThe overall average efficiency scores are less than 50%, where CMFIs could have produced their outputs using 48% of their actual inputs. IMFIs record the lowest financial (cost) efficiency that is equal to 28% on average. The estimation results also reveal a negative impact of nonperforming loan on financial and social efficiency. Finally, the moderating effect of leverage funding on the relationship between credit risk-taking and financial efficiency was confirmed in CMFIs. However, leverage seems to moderate the effect of risk-taking behavior on social efficiency for IMFIs.Originality/valueThis paper makes an initial attempt to evaluate the effect of risk-taking decision and its implication on efficiency and MFIs' sustainability. Besides, it takes into consideration the role played by the mode of governance through the ownership structure. In addition, this research study sheds light on the importance of the financial support for the development and sustainability of these institutions, which in return, contributes to a sustainable economic

PENGARUH FAKTOR SOSIAL, BUDAYA DAN RELIGIUSITAS TERHADAP KEPUTUSAN ANGGOTA MENABUNG DI BMT UGT SIDOGIRI CAPEM SEMPU

This research is motivated by the competitive conditions of Islamic microfinance institutions, especially in BMTs which are getting tighter from time to time, so that each BMT must create a new marketing strategy in order to maintain and achieve a wider market share and can increase member satisfaction, namely with social factors. , culture, and religiosity. The purpose of this study was to determine the effect of social, cultural and religiosity factors on members' decisions to save at BMT UGT Sidogiri Capem Sempu and to determine the econometric model of the problem. In this study using a quantitative approach. Hypothesis testing using t-test and f-test shows that: (1) social variables have a significant effect on members' decisions to save at BMT UGT Sidogiri Capem Sempu. (2) The cultural variable has no significant effect on members' decisions to save at BMT UGT Sidogiri Capem Sempu. (3) The religiosity variable has a significant effect on members' decisions to save at BMT UGT Sidogiri Capem Sempu. Social, cultural and religious factors have an influence of 20.1% on members' decisions to save at BMT UGT Sidogiri Capem Sempu while the remaining 70.9% is influenced by other variables not explained in this study.

Development Sharia Investment During Covid-19 Pandemic

The development Islamic finance industry continues increase, with presence various Islamic financial products are increasingly varied. Islamic financial products are not only depositing funds in sharia banking but also developing investment products sharia financial institutions. Sharia investment can contribute economic recovery during Covid-19 pandemic. Determine development several sharia investment products and sharia financial institutions and to describe development sharia investment during Covid-19 pandemic. Orientation forms investment are intended for economic recovery affected pandemic. Type research used is library research qualitative method. Data source used is secondary data. Data obtained from has been presented institution, including data from Financial Services Authority (OJK), and from Directorate General Financing and Risk Management (DJPPR) Ministry Finance. Data obtained were then processed by researchers and then described. Data analysis technique used research is descriptive qualitative. Study show developments in Sharia investment products, Retail Sukuk, in 2019 experienced growth 13.15 percent, and savings Sukuk reached 8,436,570,000. For PeerToPeer (P2P) Sharia fintech institutions, assets in the April 2021 period grew 85.54 percent, and assets Islamic microfinance institutions grew 2.24 percent. Development sharia investment during Covid-19 pandemic through increased investment through digital technology. Sharia investment focuses economic recovery supports government activities. Sharia investment development Retail Sukuk (SR) and Savings Sukuk (ST), was transferred economic recovery. Maximum development sharia investment through sharia fintech for recovery sectors affected during Covid-19 pandemic. Development sharia investment through sharia financial institutions, increasing productive financing of SMEs. As well as development sharia investment based on investor profits and social needs sectors impacting Covid-19 pandemic.

DIMENSIONS OF PERFORMANCE VALUE OF SHARIA MICRO FINANCE INSTITUTION

ABSTRACTThe performance appraisal of financial institutions is generally measured by using financial ratio indicators. Sharia microfinance institutions are institutions that have been developed by both the Government and the society which have economic and social functions. Social functions that are grown from belief values will have a long-term impacts, both consistency and sustainability. Exploring social values based on Sharia principles is needed to make the operational basis for Islamic microfinance institutions more measurable, both in financial performance and social performance.There are three principles in evaluating the performance of Islamic microfinance institutions, namely (1) the principle of fairness, (2) the principle of honesty, and (3) the principle of partnership. These three principles are the basis for operationalizing LKMS, both in product development, services and corporate governance.Key words: Dimension, Sharia financial principle, Micro finance, fairness, honesty, partnership.

Studi Literatur Peran Lembaga Keuangan Mikro Syariah Dalam Meningkatkan Kesejahteraan

This study aims to investigate the contribution of Islamic microfinance institutions in an effort to promote public welfare based on a selected literature review. The findings of this study unravel the gaps in the Islamic microfinance literature regarding the existence of Islamic microfinance institutions. The research design was carried out by collecting selected literature from the Scopus database and conducting a literature study on the research data. There are 25 articles with research results that strengthen the existence of Islamic financial institutions that contribute to efforts to promote prosperity. This is a new fact that LKMS can be used as a solution to poverty alleviation with its various unique characteristics. This study also found that the State of Malaysia was in first place in the publication of articles related to LKMS and was followed by the State of Indonesia. This study recommends that future research analyzes the comparative contribution between Islamic banks and Islamic microfinance institutions.
 Keywords: Islamic Microfinance Institutions, Literature, Welfare