Islamic Microfinance Institutions Research Articles

SWOT Analysis on The Opportunity to Establish Sharia Microfinance Institutions with The Concept of Cash Waqf as an Option to Overcome Loan Sharking Activities in Traditional Fishermen

The practice of loan sharking/middlemen in traditional fishermen activities in Ciwaru Village, Sukabumi, West Java has been going on for a long time and has been protracted. The absence of other practices besides the practices mentioned makes the Traditional Fishermen in Ciwaru Village, Sukabumi, West Java uneasy. SWOT analysis was conducted to assess the opportunity for the establishment of Sharia Microfinance Institutions with the concept of cash waqf as an alternative to the practice of loan sharks/middlemen that occur. This research uses qualitative research with field research methods and literature. The results of this study present strategies with a SWOT Matrix approach to overcome weaknesses and obstacles that are likely to occur if the establishment of Islamic Microfinance Institutions with the concept of cash endowments. Sharia Microfinance Institutions with the concept of cash waqf are very possible to be established in Ciwaru Village, Sukabumi, West Java and can be an alternative to the practice of loan sharking/middlemen in Traditional Fishermen.

The Strategy and Effectiveness of Baitul Maal wa Tamwil in Eradicating Loan Shark Practices in Java and Sumatra

This study aims to analyze the role of Baitul Maal wa Tamwil (BMT) as an Islamic microfinance institution in eliminating loan shark practices in communities, particularly in Java and Sumatra. Loan shark practices persist due to the ease and speed of loan disbursement, despite the high interest rates that entrap small communities in difficult-to-escape debt cycles. BMT offers a fair and interest-free Islamic financing solution based on profit-sharing principles and a more inclusive approach. This study discusses BMT’s financing strategies, such as lenient requirements, fast processing, and financial education programs designed to compete with loan sharks. The main findings indicate that BMT plays a significant role in providing fairer financing access to small communities and helping reduce their dependence on loan sharks. However, this study also reveals several challenges BMT faces, such as limited capital, strict regulations, and low financial literacy among the public. These challenges hinder BMT's ability to effectively compete with loan sharks in terms of speed and accessibility. The results of this study emphasize the importance of strengthening BMT’s capital, developing human resources, and innovating Islamic financing products so that BMT can play a more prominent role in eradicating loan shark practices in the community. With the right strategy and support from various stakeholders, BMT has great potential to continue growing as a more equitable and empowering financing solution.

The Strategy and Effectiveness of Baitul Maal wa Tamwil in Eradicating Loan Shark Practices in Java and Sumatra

This study aims to analyze the role of Baitul Maal wa Tamwil (BMT) as an Islamic microfinance institution in eliminating loan shark practices in communities, particularly in Java and Sumatra. Loan shark practices persist due to the ease and speed of loan disbursement, despite the high interest rates that entrap small communities in difficult-to-escape debt cycles. BMT offers a fair and interest-free Islamic financing solution based on profit-sharing principles and a more inclusive approach. This study discusses BMT’s financing strategies, such as lenient requirements, fast processing, and financial education programs designed to compete with loan sharks. The main findings indicate that BMT plays a significant role in providing fairer financing access to small communities and helping reduce their dependence on loan sharks. However, this study also reveals several challenges BMT faces, such as limited capital, strict regulations, and low financial literacy among the public. These challenges hinder BMT's ability to effectively compete with loan sharks in terms of speed and accessibility. The results of this study emphasize the importance of strengthening BMT’s capital, developing human resources, and innovating Islamic financing products so that BMT can play a more prominent role in eradicating loan shark practices in the community. With the right strategy and support from various stakeholders, BMT has great potential to continue growing as a more equitable and empowering financing solution.

How Does the Performance of Islamic Microfinance Institutions Affect the Welfare of SMEs?: Empirical study of BTM Mulia Babat

This study aims to assess the direct and indirect effectiveness of Islamic microfinance services, particularly financing products, in enhancing the welfare of small and medium-sized entrepreneurs (SMEs) in Lamongan, with Baitul Tamwil Muhammadiyah (BTM) Mulia Babat as the case study. The partial least square-structural equation modeling method is used in this quantitative study, examining data from 52 respondents, where the respondent data are BTM Mulia Babat business financing customers. The findings of this study found that Islamic microfinance services and business assistance directly have a positive impact on SMEs' increase in income. However, Islamic microfinance services and business assistance indirectly do not impact SMEs' welfare. Despite the increase in SMEs' income, it directly impacts SMEs' welfare. The novelty of this study is to identify the effectiveness of Islamic microfinance institutions in improving the welfare of SMEs. This study presents evidence of the impact of Islamic microfinance institutions on the welfare of micro and medium entrepreneurs. It can encourage more Islamic microfinance programs to offer feasible Islamic microfinance services as an alternative to boosting SMEs in the regions. This study's empirical implications and findings highlight the importance of business assistance from Islamic MIFs as business financing providers to support businesses.

Factors Influencing Public Interest in Using Sharia Microfinance Institution Produsts in Lamongan

Islamic Microfinance Institutions (IMI) have a strategic role with their main function being to collect funds from people with excess funds and channel the funds to people in need effectively and efficiently. The existence of IMI is expected to help people, especially those from the lower middle class, in gaining access to funding. However, the perception and attitude of the community towards bank interests and the profit sharing system show diversity. Some people still choose to accept interest and consider it the same as the profit sharing system, so an analysis of factors that influence the community's interest in using IMI products is needed. The purpose of this study was to determine the effect of knowledge, promotion, service quality, and religiosity on the community's interest in using IMI products in Lamongan. The sample used was 100 samples selected using the purposive sampling method. The data was processed using multiple linear regression analysis techniques. The test results stated that partially and simultaneously, the variables of knowledge, service quality, promotion, and religiosity had a positive effect on the community's interest in using IMI products in Lamongan.

Creating Sustainability in Islamic Microfinance Institutions Based on a Networking Approach

Purpose — This study aims to find a sustainable development model for Islamic microfinance institutions (Islamic MFIs) based on Islamic networking and the critical factors that support their sustainability. Design/Methodology/Approach — This study uses a qualitative approach by conducting a literature review to find research directions and undertaking focus group discussions (FGD) with a network provider and Baitul Maal wat Tamwil (BMT) managers in Central Java. The FGD involved five stages. The first stage was carried out with a network provider (the Association of Baitul Maal wat Tamwil (or PBMTI)), and the second to fifth stages were carried out with BMT members of PBMTI as Islamic MFIs, whose implementation sequence was based on accreditation ranking (A, B, C, and D categories). The purpose of this grouping was to find the views of different stakeholders on the role of networks. Findings — This study found that Islamic networks have an important role in building the sustainability of Islamic MFIs. This important role is based on Islamic values (i.e., faith, morals, daʿwah (preaching), and social care) and the facilities provided in the network. Originality/Value — This study is unique as it explores the role of networks that develop Islamic values and provide various facilities to develop Islamic MFIs so that they can serve the community better and in a more sustainable way. Research Limitations/Implications — The FGD was conducted with representatives of BMT members of PBMTI whose number and opportunities for communication are limited. Therefore, more intensive studies are needed to determine the impact of the network on the members based on the programmes or facilities offered.

Waqf and Microfinance Integration for Enabling Sustainable Financial Inclusion: Analysis of Sharīʿah Compliance

Purpose — Sustainability has remained one of the most significant challenges facing the microfinance industry, and Islamic microfinance is no exception. The need for Sharīʿah compliance poses an additional challenge for the Islamic microfinance industry. Many practitioners have argued that, in practice, social missions should be sacrificed for profitability so that microfinance institutions (MFIs) could achieve sustainability and competitiveness in the finance market. This paper investigates the potential of integrating waqf and microfinance to allay the challenge of balancing social responsibility (outreach) and financial sustainability within Islamic MFIs. Additionally, it analyses the Sharīʿah compliance requirements underpinning this integration. Design/Methodology/Approach — This study adopts a qualitative method of inquiry, utilising an inductive approach to understand the conceptual framework of waqf and financial inclusion and in discussing Sharīʿah compliance aspects of socially-oriented instruments in socio-economic development. Findings — The research finds some historical antecedents to evidence the inherent social mission of waqf which, if integrated with microfinance, ensures the sustainability of Islamic MFIs. This affirms that outreach and sustainability may not be mutually exclusive under waqf and Islamic microfinance integration. Originality/Value — This study, through historical antecedents and contemporary practices, establishes that waqf and microfinance integration can address the sustainability of the Islamic microfinance industry and preserve its social mission.

Google Play review analysis of digital mobile applications of Islamic microfinance institutions

Google Play review analysis of digital mobile applications of Islamic microfinance institutions

Analysis of Legal Studies on The Implementation of Qardh Bisyarti Rahni Products At KSPPS BMT USA Jepara

This study aims to analyze the legal review of the implementation of the Qardh Bisyarti Rahni product at KSPPS BMT USA Jepara. In addition, this study is expected to provide a better understanding of the efforts that need to be made to ensure legal compliance and operational sustainability of Islamic microfinance institutions. Qardh Bisyarti Rahni is one of the Islamic financial products implemented in Islamic microfinance institutions, which provides usury-free financing for the community. This study is important to ensure that the implementation of this product is in accordance with Islamic principles and does not violate applicable legal provisions. The approach used in this study is qualitative with a case study method. Data were collected through observation, interviews, and analysis of related documents. The results of the study indicate that the implementation of the Qardh Bisyarti Rahni product at KSPPS BMT USA Jepara has complied with applicable legal provisions and Islamic principles. However, there are several challenges that need to be considered, such as a lack of in-depth understanding of the legal aspects of Islamic law and changes in regulations related to Islamic finance.

Analisis Sistem Bank Wakaf Mikro Imam Syuhodo

Imam Syuhodo Micro Waqf Bank (BMW) is a sharia microfinance institution which aims to empower the community around the Imam Syuhodo Islamic Boarding School. The potential for growth and development of BWM Imam Syuhodo in Sukoharjo is expected to have great benefits for the Islamic-based economy. The policy regarding BWM as a sharia-based LKMS is intended so that BWM will become a pillar of strength in the sharia financial industry. The potential of the Imam Syuhodo Micro Waqf Bank certainly cannot be separated from the management system and Islamic good corporate governance (ICGC) implemented by the management at the BWM institution. The quality of the BWM institution depends on the implementation of a good business management system and an appropriate ICGC system. This research approach uses qualitative research. The aim of this research is to learn how to evaluate management, implement ICGC, and determine its effect on community empowerment. The results of the research reveal that the implementation of Islamic corporate governance at the Islamic microfinance institution Bank Waqf Mikro (LKMS BWM) Imam Syuhodo, when viewed using six indicators of Islamic corporate governance, has not been implemented in its entirety, where the indicators of trustworthiness, tabligh and fairness have been implemented well and to Siddiq, fathonah and sharia compliance indicators have not been implemented comprehensively and still need to be improved in their implementation

The Effect of Service Quality and Islamic Financial Education on Customer Growth and Risk Profile in Islamic Microfinance Institutions in Central Java

This study examines the impact of Service Quality and Islamic Financial Education on Customer Growth and Risk Profile within Islamic microfinance institutions operating in Central Java. A quantitative approach utilizing Structural Equation Modeling-Partial Least Squares (SEM-PLS) was employed to analyze data collected from 130 respondents using Likert scale surveys. The measurement model and structural model were evaluated to assess the relationships among the variables. The results indicate significant positive associations between both Service Quality and Islamic Financial Education with Customer Growth and Risk Profile. Service Quality emerged as a critical factor influencing Customer Growth, while Islamic Financial Education was found to enhance Risk Profile management. These findings underscore the importance of enhancing service delivery and financial literacy initiatives in promoting sustainable growth and risk management in Islamic microfinance.

Philanthropy for Widows at Islamic University-Based Islamic Microfinance Institutions in Madura Indonesia After the Covid-19 Pandemic

Philanthropy for Widows at Islamic University-Based Islamic Microfinance Institutions in Madura Indonesia After the Covid-19 Pandemic

Islamic Microfinance Institutions and Women's Empowerment: Addressing Challenges and Prioritizing Solutions

This study analyzes the challenges in empowering women with Islamic Microfinance and formulates priority solutions. The challenge analysis was conducted on six aspects including: regulation, empowered women, Institutional Microfinance Institutions (IMFIs), IMFIs (programs), business, and finance. Employing a qualitative approach, this study utilized the Delphi Analytic Network Process (DANP) involving 12 experts from academia, practitioners, associations, and regulatory bodies. Three primary challenges in women's empowerment were identified: first, empowered women face challenges managing their time due to domestic and economic responsibilities (0.324); second, IMFIs have a limited outreach, resulting in constrained empowerment information (0.321); and third, women lack knowledge and skills to manage their finances. To address these issues, three priority solutions are proposed: first collaboration among IMFIs to offer mentoring (0.237); second, development of social programs by IMFIs (0.236); and third, provision of expert mentors by IMFIs.

Analysis of Rahn and Murabahah Financing in Baitul Maal Wa Tamwil (BMT): Qualitative Study of Agricultural Businesses in Kanigoro, Blitar Regency, Indonesia

The agricultural sector in Indonesia plays an important role in supporting food security and economic stability. However, this sector is still faced with various obstacles, one of which is limited access to capital. Baitul Maal Wa Tamwil (BMT) as an Islamic microfinance institution offers financing solutions for farmers using sharia principles, such as rahn and murabahah. This research aims to analyze the rahn and murabahah financing schemes implemented by BMT in Kanigoro, Blitar Regency, as well as their impact on agricultural businesses in the area. This research uses a qualitative approach with a case study method. Data was collected through in-depth interviews with BMT administrators, rahn and murabahah financing customers, as well as other related parties. The data analysis technique was carried out using thematic analysis. BMT in Kanigoro, Blitar Regency implements rahn and murabahah financing schemes with sharia principles in accordance with the provisions of the Islamic religion. Rahn financing uses collateral, while murabahah financing uses a buying and selling system with an agreed profit margin. BMT rahn and murabahah financing has several advantages compared to conventional financing, namely: Based on sharia principles that avoid usury; Easy and fast application process; Competitive interest rates; Assistance and coaching for customers. However, BMT also faces several challenges in carrying out this financing, namely: Lack of public understanding about sharia financing; Strict requirements for applying for financing; High risk of crop failure. In conclusion, the rahn and murabahah financing offered by BMT in Kanigoro, Blitar Regency is an alternative solution for farmers in accessing capital. The implementation of this financing scheme has a positive impact on agricultural businesses and improves farmer welfare.

SHARIA MICROFINANCE MODELS: A GRAMEEN BANK APPROACH FOR SUSTAINABLE CONSTRUCTION AND WELFARE ENHANCEMENT

This research aims to build a model for strengthening Sharia microfinance through an adapted Grameen Bank replica based on the pillars of leadership, collaboration, spirituality, and women's freedom. This research used a quantitative method to analyze a Grameen Bank replica or build a model for strengthening Sharia microfinance. It provides an early description of the model's independent and dependent variables using Path Investigation and Structural Equation Modeling (SEM). Data were gathered through participatory observation methods, interview techniques, and the distribution of SEM questionnaires to MFI managers and beneficiary customers. The findings indicate a link between the influence of the Grameen Bank-based Islamic Microfinance Institution system on partners in terms of leadership, cooperation, economy, community, and spirituality, as well as alternative strategies for strengthening Grameen Bank-based MFIs in improving the welfare of women's microbusiness groups. This research encourages more attention and implementation of Islamic microfinance models in an effort to improve social and economic welfare, especially among vulnerable groups such as women micro-entrepreneurs.

Is Social Capital Determinant in Developing Islamic Microfinance Institutions?

Research Originality: One of the Islamic Microfinance Institutions (IMFI) was Baitul mal wa Tanwil (BMT) which generally has a program using the group loan methodology which is seen as utilizing existing social capital, manifested in personal relationships and networks.Research Objectives: This study aims to examine the impact of social capital factors on BMT business as an IMFI covering cultural values, religious traditions, people's world views, geographical characteristics, work ethic, institutions, and social networks.Research Methods: This study uses a mixed method explanatory with a qualitative method for testing the level of importance using the Analytic Process Hierarchy (AHP) f or the best priority in social capital factors and the ideal IMFI based on expert opinions as facilitators.Empirical Result: This result shows that the seven social capital factors at IMFI can be applied and considered applicable in developing business. The main priority factors are institutions and religious traditions. The IMFI that consistently applies social capital factors in developing IMFI business is BMT Bringhardjo (Yogyakarta) although it has not yet reached the maximum value. The determinants of social capital in the IMFIs business are considerably used to determine the IMFIs business development. It provides that the seven social capital factors at IMFI can be applied and considered applicable in developing business.Implications: The main priority factors are institutions and religious traditions. Investigating one of the IMFI was Baitul mal wa Tanwil that consistently applies social capital factors in developing IMFI business as a business that empowers social capital as a guarantee feasibility and business feasibility from micro communities that have so far been un-bankable. JEL Classification: D02, D04, O14How to Cite:Subchi, I., Jahar, A. S., & Prasetyowati, R. A.. (2024). Is Social Capital Determinant in Developing Islamic Microfinance Institutions. Etikonomi, 23(1), 233 – 248. https://doi.org/10.15408/etk.v23i1.31769.

Strengthening Sharia Microfinance Regulations And Business Models In Indonesia

This article aims to elaborate on the regulation and model of Islamic microfinance in Indonesia. A clear understanding of the types of microfinance and the business model run by Islamic microfinance is needed to answer the problems faced by this institution. Solid and stable Islamic microfinance institutions serve a critical role in increasing access to loans and business capital for the poor and micro-enterprises. So far, the poor have not been reached by formal financial institution programs. This study employs a normative juridical approach using primary and secondary legal documents. The study results show that the role of the sharia supervisory board and the Cooperatives and SMEs Office has not played an optimal role in ensuring the compliance of microfinance managers with sharia principles and values and prudent microfinance management. The presence of regulations and institutions that guarantee sharia microfinance deposits is needed to protect managed funds and increase public trust.

Identifikasi Mission Drift Pada Keadilan Jender dan Inklusi Sosial di Lembaga Keuangan Mikro Syariah

Islamic Microfinance institutions (IMFIs) their operations are expected to not only consider financial performance, but must accommodate the principles of gender justice, because humans both men, women and people with disabilities are equally as khalifatullah fil ard to manage the earth as God wills. However, several studies show a shift in the mission carried out by IMFIs. This research aims to determine the forms of mission drift that occur at IMFIs, especially Baitul Maal Wat Tamwil in 3 districts in Central Java, District of Jepara, Kudus and Demak. These three regions were chosen because they have different levels of IMFIs development. The research results show that the forms of mission drift that occur include: (1) Differences in the accessibility of financial services based on gender; (2) Changes in IMFIs customer priorities; (3) Product changes that prioritize bankable customers; (4) Increasing of Margin, Ujroh profit sharing portion and costs; (5) Changing the focus of financing to be more profit-oriented. The implication of the results of this research is that MFIs need to mainstream gender by paying attention to the portion of financing and absorbing public funds in a Gender-equity manner by encouraging balance between the portions of men and women. Regulators need to carry out strict supervision so that their commitment to maintaining the IMFIs mission values, apart from that, stimulus to institutions that prioritize gender justice also needs to be provided.

Improving Productive Waqf in Baitul maal wa Tamwil

Baitul maal wa tamwil (BMT) is Islamic microfinance institutions which utilizes waqf as a nazir. This research attempts to describe the model of improving waqf productive and baitul maal of BMT. So far, the implementation of the management concepts of baitul maal and baitut tamwil has not been balanced, BMT management is too focused on commercial financing of the function of baitut tamwil. This paper used qualitative approach, based on in-depth interview with experts of waqf and BMT practitioners and academicions. The results of the study show that good management in BMT is the existence of equality or balance between maal and tamwil. Human Resources baitul maal management needs to be strengthened in improvising productive waqf. The existence of a business plan that is made will create the direction and performance of the collection and utilization of waqf assets.

Asymmetric information issues in micro-business financing of Baitul Maal wa Tamwil

Purpose – Despite its potential advantages, poverty interferes with economic progress in developing countries, obstructing small and medium-sized businesses from obtaining external financial assistance via Islamic microfinance. This study explores the problems related to asymmetric information in the context of funding microbusinesses in Baitul Maal wa Tamwil (BMT), with the goal of improving our understanding of the risks associated with financing in Islamic microfinance institutions, namely BMTs.Methodology – This research utilized a qualitative approach and content analysis to study BMTs in Indonesia, involving academics, practitioners, and voluntary participants. The sample size was adequate for achieving data saturation.Finding – This study demonstrates that there might be asymmetric information during the execution of contracts, leading to deviant behavior by BMT management and partners. The study additionally identified the risk characteristics present in Islamic MFIs, emphasizing the necessity for implementing novel lending mechanisms, such as group lending and individual collateralized loans. Implication – This study underscores the importance of resolving the substantial administrative overheads associated with these institutions. It is advisable to utilize additional research methods such as interviews, observations, and documentation to augment the depth of the research and engage a varied array of individuals for a comprehensive collection of information.Originality – Studies of Islamic microfinance in Indonesia have examined its performance, obstacles, and experience. However, empirical data on agency problems such as moral hazard and asymmetric knowledge are lacking. For optimal BMT operating efficiency and Shariah compliance, it is essential to comprehend these challenges.