Islamic Microfinance Institutions Research Articles

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.

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.

Islamic Corporate Social Responsibility: CSR Practices by Islamic Microfinance Institutions in Lampung

Purpose: This article describes the practice of corporate social responsibility (CSR) adopted by Baitul Maal Wa Tamwil (BMT) in Lampung. This study also examines the literature on different views of CSR and how CSR can be rooted in organizational strategy so that it becomes an organizational competitive advantage. Methodology: A descriptive qualitative method was used in this study, in which the researchers conducted in-depth interviews with both BMT employees and beneficiary communities. Findings: This study found that Baitul Maal Wa Tamwil, which became the locus of research, namely BMT Assyafiiyah Berkah Nasional carries out CSR corporate social responsibility in several forms of programs both physical, facilitating and empowering in nature. The physical form is carried out by providing assistance for the construction of places of worship, Islamic boarding schools, the construction of drilled wells and a program to renovate livable houses. The form of facilitation is carried out by providing compensation, giving OTP (Sponsoring Parents), giving TPA incentives, community service cars and productive forms by giving rolling goats and providing business capital with a qordul hasan contract. This study recommends the need to increase the involvement of baitul maal wattamwil in the process of economic development in general, because the practice of corporate social responsibility will contribute not only to increasing the company's competitive advantage but also to increasing community empowerment. For the company, CSR will also ensure the company's sustainable growth due to improved image and increased customers leading to increased profitability.

A Dynamic Analysis of the Performance of Islamic Microfinance Institutions in OIC Countries-The Influence of Digitalization

The performance of microfinance institutions is debatable. Evidence shows that some microfinance institutions successfully achieve dual objectives, social and financial, while some fail to achieve them. Islamic microfinance institutions (IMFIs) are widely accepted in OIC countries as its products are based on Islamic principles, however its share is very small in the world. Therefore, this study aims to investigate the impact of macroeconomic, macro institutional factors and digitalization on the financial and social performance of Islamic microfinance institutions in OIC countries. Using panel data of 35 Islamic microfinance institutions from 2008 to 2019. The results found that macroeconomics and country-level institutional variables have mixed impact on the performance of Islamic microfinance institutions. In addition, digitization enhances the performance of (IMFIs). The study presents several policy recommendations for improvement in performance.

Uncovering the Dimensions to Increase Islamic Job Satisfaction in Socially Nuanced Economic Institutions

This study aims to explore the dimensions of Islamic Job Satisfaction that will be useful to increase Islamic job satisfaction in socially nuanced economic institutions. Samples were taken from employees of Islamic Microfinance Institutions (IMFI, LKMS, KSSPS BMT) at convenience. Data collection from 30 respondents using a questionnaire instrument was then analyzed using quantitative descriptive methods. The results showed that Islamic Job Satisfaction achieved a very high score for employees of social economic institutions (KSPPS, BMT) was very high (4,088 or 81.76%). The spiritual dimension of Islamic Job Satisfaction received the highest rating (4,386 or 87.72%), while the economic dimension received the lowest rating (3,908 or 78.16%). Future research suggestions take respondents from other socially nuanced economic institutions (educational institutions, health institutions) or other institutions (economic, governmental, social)

Faktor Dominan Yang Mempengaruhi Pertumbuhan Aset Pada Lembaga Keuangan Mikro Syariah Di Jawa Barat

This study aims to determine the dominant factors affecting the growth of assets of Islamic Microfinance Institutions in West Java. Besides this research is aimed at finding out how much influence the Third-Party Funds (DPK), Financing Received (PYD), Capital, Non-Performing Finance (NPF) and Profit (SHU) on the Growth of Assets of Islamic Microfinance Institutions in West Java. This research was conducted at Koperasi Simpan Pinjam dan Pembiayaan Syariah (KSPPS) in West Java with data collection techniques based on published data that have been validated in RAT and analyzed using descriptive analysis methods with a quantitative approach. The variables examined in this study are the variables of DPK, PYD, capital, NPF and Sisa Hasil Usaha (SHU) as independent variables and Asset as the dependent variable. As for testing the hypothesis, multiple correlation regression analysis was used with significance level of 0.05 with the help of the SPSS Version 26 and Microsoft Excel 2019 programs. The results of data processing and analysis in this study can be concluded that the dominant factor affecting the growth of LKMS assets that 1) TPF has a significant effect on assets 2) PYD has a significant effect on assets. 3) Capital has a significant effect on assets 4) NPF does not have a significant effect on assets 5) SHU does not have a significant effect on assets. However, DPK, PYD, Capital, NPF and SHU altogether have an effect on Assets.

Financial Inclusion through Islamic Microfinance: Empirical Evidence from Developing Countries

This study explores the important role played by Islamic microfinance in promoting financial inclusion in developing countries. Using empirical evidence, this research shows how Islamic microfinance institutions have helped in reducing poverty and improving the economic welfare of underprivileged communities. Through secondary data analysis and case studies, this research highlights how sharia economic principles such as the prohibition of riba (interest) and the emphasis on asset-based contracts have facilitated access to financial services for individuals previously underserved by conventional financial institutions. This research also discusses the challenges faced by the Islamic microfinance sector and provides recommendations for the future

Peran Sociopreneur dalam Transformasi Sosial dan Pengentasan Kemiskinan Melalui Lembaga Keuangan Mikro Perspektif Sosiologi dan Antropologi

This article discusses social transformation and poverty alleviation, these are the two main challenges in community development. The role of the socialpreneur, who is a social entrepreneur, has great potential in creating positive change in the context. Socialpreneurs can play a role in overcoming poverty problems through microfinance institutions. Socialpreneurs can use innovation, creativity, entrepreneurial spirit to identify pressing social problems and find sustainable solutions. The author uses qualitative methods, with secondary data analysis, sourced from books, journals and articles related to this discussion. The results of his research stated that poverty is a serious problem that endangers scarcity, health and education. Islam encourages its followers to avoid poverty, and Islamic microfinance institutions are effective in reducing poverty. The integration of social entrepreneurship in microfinance institutions helps maintain a balance between profitability and social impact. Measures such as poverty-focused services and business training support social transformation and poverty alleviation. Socialpreneurship allows individuals to run a business while contributing to social change. The millennial generation views this as a way to achieve Sustainable Development Goals (SDGs). In efforts to eradicate poverty through socialpreneurship, sociological and anthropological perspectives help understand cultural values, social interactions, and the influence of stigmatization on poor communities.

THE JOURNEY OF ISLAMIC MICROFINANCE IN INDONESIA: A SOCIAL MOVEMENT'S THEORETICAL APPROACH

Although Islamic Microfinance Institutions (IMFIs) have become a new and developing financial industry, the Indonesian community has not explored this organization's journey. Therefore, this study analyzes how the IMFI journey in Indonesia gained public trust and the development to date. A library research approach based on archival records and previous studies was used, and the social movement theory framework was employed to identify factors that influence society's trust in this institution. This paper shows three (3) factors that affect the societal acceptance of IMFIs, which were, first the differences in the roles and functions of other Islamic finance organizations. Second, the passion of IMFI activists for the development and lastly, strengthening legitimacy for IMFIs is significantly needed to establish regulatory legislation. Hence, the findings in this study can become a reference for policymakers towards IMFI development in Indonesia, particularly on the uniformity of legal umbrellas applying to all types of this institution. This paper adds to the literature on IMFIs and contributes new research by employing a social movement approach in the development analysis of the organization, particularly in Indonesia.

Does product knowledge, Islamic branding and religion influence interest in accessing Islamic microfinance institutions?

This study aims to determine how preference variables mediate the relationship between product knowledge, Islamic branding, and religiosity on farmers' interest in accessing Islamic Microfinance Institution (Baitul Maal Wat Tamwil (BMT) financial services. The study population consisted of 100 farmers in Kedungadem District. The data analysis method used is Smart-PLS (Partial Least Square). The results of the study according to direct testing show that farmers' interest in using BMT services is significantly influenced by factors such as product knowledge, Islamic branding, and preferences. Indirect testing shows that preference can mediate the relationship between product knowledge and farmers' interest in using BMT, while preference cannot mediate the relationship between Islamic branding, religiosity, and farmers' interest in using BMT.

COVİD-19 Pandemisinde İslâmî Mikro Finans Kurumlarının Performansı: Varlık Kalitesi Önemli mi?

This research aimed to analyse the moderating impact of non-performing financing on the effect of the distribution of murabahah financing and ijarah financing on the return on assets of Islamic microfinance institutions. The research method used was quantitative, using regression panel data. As for the research results, it is known that ijarah financing has no significant effect on increasing the return on assets of Islamic microfinance institutions. Meanwhile, murabahah financing positively and significantly affects increasing return on assets. Furthermore, the non-performing financing variable becomes a moderating variable that weakens the relationship between the distribution of ijarah financing and murabahah financing to the return on assets of Islamic microfinance institutions. The novelty of this study is to link the quality of the funding with the financial performance of Islamic microfinance institutions during the COVID-19 pandemic.

GREEN ISLAMIC MICROFINANCE

In the last decade, conventional microfinance institutions started to consider their environmental bottom line in addition to their financial and social objectives. Previous studies identify empirically the characteristics of conventional MFIs that are involved in environmental management in developed markets and their role in facing environmental and climate challenges in Arab countries. However, little is known about the triple bottom line of Islamic microfinance institutions. This paper aims to investigate the environmental performance of Islamic microfinance highlighting the synergies between Islamic microfinance and green inclusive finance. For that purpose, this research uses secondary data from multiple sources and descriptive data analysis. Basing our analysis on the Green Index framework to assess whether Tunisian Islamic MFIs are green institutions for the period between 2017 and 2021, we find growing scores of MFI’s environmental performance. The results provide empirical evidence of the Islamic microfinance contribution to sustainable finance in Tunisia. The results indicate that the institution shows the interest of its shareholders in initiating environmental strategy while conventional institutions are in the process of planning or developing products and strategies. Meanwhile, the institution provides green financings last year, the awareness of environmental opportunities and risks seem less evident for the management of the Islamic MFI. This study contributes to the ongoing debate of whether Islamic microfinance has a triple bottom line. This research also provides insight into the environmental performance of IMFI in Tunisia. The findings provide useful information to managers, investors, and policymakers.

An integrated cash waqf and Islamic crowdfunding model (I-CWCM) for SMEs: Policy implications for the post-Covid-19 pandemic

Purpose – This paper aims to discuss the proposed model, called Integrated Cash Waqf and Islamic Crowdfunding Model (I-CWCM), for small and medium enterprises (SMEs), including micro-enterprises and household businesses in the digital era.Methodology – The author documents some cash waqf models and Islamic crowdfunding models that have been developed by previous researchers. And then modified and introduces the I-CWCM model based on the relevant literature study.Findings – In this model, the cash waqf funds (temporary and perpetual) will be invested in Islamic investments and productive asset programs. The investment return gained from cash waqf investments will be utilized for providing financial services by using PLS financing schemes and non-PLS financing schemes for SMEs.Implications – The article is conceptual in nature, and the developed model has not been tested either through interviews or empirical testing. For further research, it is necessary to validate the model either through interviews or by developing hypotheses. Furthermore, the I-CWCM will be possible to set up Islamic social finance institutions, Islamic financial institutions, and Islamic microfinance institutions in a country with a majority Muslim population like Indonesia, especially in times of crisis such as Covid-19 outbreaks.Originality – The originality of this study is the I-CWCM will include two important unit funds: (1) the reserve fund is for sustaining the cash waqf founder, and (2) the backup risk fund is for addressing any risk in business and non-business financing activities.

Impact assessment of Islamic microfinance on small and medium-sized enterprises in Mogadishu, Somalia

Small and medium-sized enterprises (SMEs) play an increasingly vital role in the economic advancement of nations. Nonetheless, these enterprises often face challenges in accessing formal external funding channels. The emergence of Islamic microfinance presents a potential solution to alleviate the financial constraints confronting SMEs. Given the primary mission of Islamic microfinance institutions (MFIs) to uplift the socio-economic status of the underprivileged, it becomes imperative to scrutinize their influence on SME growth. This study aims to ascertain the effects of Islamic microfinance on SMEs in Mogadishu, Somalia. Employing a systematic random sampling method, a carefully selected sample of 100 SMEs was determined. A structured survey framework was developed to collect data, and data analysis was conducted using the Statistical Packages for the Social Sciences (SPSS). The study reveals that micro-savings significantly contribute to SME augmentation, with comparatively limited impact from micro-insurance. While many SMEs benefit from Islamic microfinance, there is a shortfall in the attainment of required funding among beneficiaries. This research sheds light on concerns related to borrower defaults, pre-financing screening deficiencies, resource inadequacy, and the absence of governmental and donor support in Islamic microfinance institutions. The implications extend to future research opportunities, emphasizing the need for governmental and stakeholder efforts to streamline financing acquisition from MFIs by relaxing collateral requirements for SME borrowers.

Analisis Bibliometrik Arah dan Perkembangan Penelitian Bertema Lembaga Keuangan Mikro Syariah di Indonesia Tahun 2013-2022

This study aims to analyze the trends, and directions of research developments regarding Islamic microfinance institutions in Indonesia indexed in Google Scholar from 2013 to 2022. The data analysis method used is the bibliometric analysis, in which the data analysis will determine the most frequently researched topics which is still rarely investigated in research, especially in journals article on the role of Islamic microfinance institutions in poverty. The data analysis tool used is VOSviewer. The results show that the development of research for ten years has increased, the total number of researches from Google Scholar data is 353 studies, of which there are 137 research journal publications. The name of the author who has produced the most works is Edi Susilo; as many as five studies and the direction of development of keywords that are still rare and not yet diverse discussing the topic of Islamic microfinance institutions are capital, economic empowerment, micro small and medium enterprise (MSME), and ZIS.

Pengembangan Model Fintech-Micro BMT (FIT)

This article's goal is to create a Fintech Micro BMT (FIT) financial technology innovation model for the Islamic microfinance institution Baitul Maal wa Tamwil (BMT) at the APEX/association scale. Being a successful and independent institution (financial self-uffency) as a commercial function and assisting in reducing poverty (poverty alleviation) as a social function are the two fundamental goals of BMT. The goal of fintech micro BMT is to accomplish both objectives. Through the use of descriptive analytic techniques, the research was carried out utilizing qualitative approaches. Primary data from interviews and secondary data from literature reviews make up the utilised data. The basic prototype of the application and its features were analyzed for model innovation using the Business Model Canvas framework. This was followed by a description of the BMT and MSME simple financial reporting accounting systems as well as the credit scoring model. In order to solve the issue of liquidity gaps (mismatch), this study produced a Fintech micro BMT model that maximizes the dualities of commercial BMT functions (increasing market share) and social (ZISWAF). Business management, accounting reporting, as well as a qualified credit rating model, support these two tasks. The triple bottom line purpose of BMT—economic growth, community empowerment, and sustainability—is also embodied by fintech micro BMT. The adoption of Fintech micro BMT is anticipated to assist BMTs in expanding their role in developing the sharia microfinance network, promote cooperation among BMTs in Indonesia, boost the volume of BMT financial transactions, integrate MSME actors as recipients of ZISWAF financing and donors with BMTs, promote market transparency, and lower the risk of information asymmetry in the process of providing financing.

Risk management of Islamic microfinance institutions: unique practices at crucial risks

The objective of this study is to gain a better understanding of risk management and control practices at BMT UGT Nusantara, an Islamic microfinance institution in Indonesia, with a particular emphasis on financing risk, liquidity risk, and Sharia compliance risk. These three risks are said to occur frequently and have a direct impact on performance. Because of the uniqueness of the site, the design of this qualitative research is descriptive and exploratory with a holistic single-case approach. In-depth interviews, field observations, focus group discussions, and a review of supporting documents were used to collect data. Because the interactive cycle process includes data collection, data reduction, data presentation, and data withdrawal, data analysis employs an interactive model. The data was validated using the criteria of credibility, transferability, dependability, and confirmability. The study's findings show that BMT UGT Nusantara, an Islamic microfinance institution in Indonesia, employs traditional-partial risk management on financing risk, liquidity risk, and Sharia compliance risk. Risk management is carried out by integrating "macul bumi", or outward efforts based on sincerity, and "macul langit", or spiritual efforts. Furthermore, it employs information systems that play an important role in risk management in order to improve organizational performance and competitive advantage.