Islamic Microfinance Research Articles

Comparative Analysis of Murabahah and Mudharabah Financing Risk from Islamic Microfinance Institutions Perspective

The most frequently used financing contracts in Islamic financial institutions are murabahah and mudharabah. This study aims to reveal the phenomenon in the field about the description of the risk comparison between murabahah financing and mudharabah financing from the BMT side. This study uses descriptive qualitative research methods through data collection methods with in-depth interviews with nine respondents who have experience handling the risks of murabahah financing and mudharabah financing at BMT. This study shows that the risk of mudharabah financing is greater than the risk of murabahah financing. In practice, mudharabah financing tends to be relatively high due to asymmetric information and moral hazard. The inherent risk in murabahah financing is the risk of member default due to default or member negligence in returning installments. This study also identifies risk factors such as trust risk and sharia legal risk for murabahah financing with wakalah contracts. This study shows that BMT applies the precautionary principle and is appropriate to maintain the institution's health to minimize the risks that occur. This research is expected to be a reference in managing the risk of murabahah financing and mudharabah financing with innovative strategies. The BMT Islamic Microfinance Institution needs to stimulate and educate to reduce the risk of mudharabah financing so that it can become a top priority for financing.

Penerapan Manajemen Risiko Kredit Dan Likuiditas Dalam Memberikan Pinjaman Dan Pembiayaan Kepada Anggota (Studi Pada BMT Nashrul Umam Balen)

Based on the regulation of the Financial Services Authority (OJK) regarding the implementation of risk management in Islamic microfinance institutions, including the management of credit risk and liquidity risk. Credit risk (financing risk) is a risk that occurs due to the inability of the borrower and/or others to pay dependents to financial institutions. Whereas Liquidity risk is the risk that occurs as a result of NBFI liquidity management (Non-Bank Financial Services Institution) which failed. The purpose of this research is to know the application of risk management in providing financing to members. In this research, the author used a qualitative approach with a descriptive method and type of case study research on the object. With this methodology, the author describes the application of management credit and liquidity, methods of financing decisions, and integration of risk management in financing. The research results obtained are: (1) The application of risk management is to reduce financing so that NPL (Non-Performing Loan) financial institutions remain below standard; (2) In making financing decisions, the marketing department is required to: observe the main principle, namely 5C which relates to the overall state from prospective members, including character (character), capital (capital), capacity (ability), collateral (guarantee), and condition of the economy (state of the economy); (3) In the implementation of day-to-day operations of risk management integration credit and liquidity are indispensable in providing loans and financing to members. This is due to integration in implementation risk management for credit and liquidity risk can have implications for the liquidity position of BMT.

What Makes Islamic Microfinance Islamic? A Case of Indonesia’s Bayt al-Māl wa al-Tamwīl

This article highlights the weaknesses in the formalistic approach to Islamic finance which deals mainly with shariah compliance. This research examines religious elements that consist in the operations of the Indonesian Islamic microfinance institution by criticizing it for the costs of transactions, the composition of contracts, and the procedures for murābaḥah (working capital finance). Acknowledging that shariah principles were compromised to some extent, the BMT’s employees did not question the Islamic character and identity of the BMT. Highlighting their commitments to improving the economic conditions of the Muslim community, active involvement in charity and socio-religious works, business practices caring for the unfortunate people, and their Islamic networks, the employees believe that the BMT has implemented Islamic values. For them, Islamic finance is not only attributed to sharia compliance, but it must also contain a wide range of religious tendencies and practices. By stressing the importance of the aspirations and commitments of Muslim activists, this paper widens the discussion of how to vitalize Islamic finance.

Adoption of Islamic microfinance in Indonesia an empirical investigation: an extension of the theory of planned behaviour

The theoretical framework of the Theory of Planned Behaviour (TPB) has been widely used in analysing behavioural intentions to adopt Islamic finance. However, there is still little research investigating the adoption of Islamic microfinance. This study aims to determine the factors influencing behavioural intentions to adopt Islamic microfinance by developing the Theory of Planned Behaviour (TPB). The development is done by adding religiosity and knowledge variables as antecedents of attitude. A random sample of 262 members of Islamic microfinance. Variance-based partial least-squares structural equation modelling (PLS-SEM) was employed for data analysis. The results show that religiosity and have a significant influence on attitudes. Meanwhile, attitudes, subjective norms, and perceived behavioural control also significantly positively affect behavioural intentions to adopt Islamic microfinance. Then subjective norms greatly determine behavioural intentions to adopt Islamic microfinance. The findings of this study are important for Islamic microfinance to change marketing strategies. Islamic microfinance managers must develop a positive attitude through creating awareness and benefits of Islamic microfinance services by involving community leaders, especially religious leaders.

POTENSI DESA DAN STRATEGI PENERAPAN EKONOMI ISLAM DALAM PENGELOLAAN BISNIS BUMDES

This research departs from the not yet optimal role of the BUMDes institution as a village business driver that carries a social mission and commercial mission in the three villages that are the objects of this research, namely Rompo Village, Karumbu Village and Rupe Village. From this, the two main problems to be answered are what is the potential that can be managed for the development of BUMDes business units and how is the strategy for implementing Islamic economics (sharia) in managing BUMDes business. To answer these problems, the researcher uses two analyzes as a theoretical framework, village potential analysis, and SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). The results of the research analysis are the potential business sectors that deserve to be developed are businesses in the real sector (agriculture, livestock and fisheries), trade, tourism, and agro-industry sectors. While the results of the SWOT analysis recommend (a) S-O Strategy; The BUMDes Business management approach uses Islamic principles with a business unit management strategy based on the real sector and business units of Islamic microfinance institutions. (b) W-O Strategy, HR development strategy and entrepreneurship (c) S-T Strategy, Islamic economic implementation strategy. (d) W-T Strategy; Build awareness and motivation to work and be alliance with Islamic concepts, Instill values ​​of concern for local village products, Increase participation of business actors and Develop several business lines

KESESUAIAN PERLAKUAN AKUNTANSI MURABAHAH DENGAN PSAK SYARIAH N0.102 PADA ISLAMIC MICROFINANCE INTITUTIONS

The purpose of this study was to determine the appropriateness of the accountingtreatment of murabahah financing in Islamic Microfinance Institutions named KSPPSBMT Mandiri Sejahtera East Java as a seller and buyer with PSAK Syariah No. 102.This study uses descriptive qualitative research by combining analyzed research instruments asdata triangulation to make it easier to match concepts and theories to the practice containedin the research object so that it is easier to get results that are in accordance with the facts.The results showed that the accounting treatment of murabahah financing at KSPPS BMTMandiri Sejahtera East Java was mostly carried out in accordance with PSAK Syariah No.102, both in terms of recognition of acquisitions, recognition of profits. However, therecognition and measurement of urbun (advance payment) is not appropriate because when thefinished goods are purchased by members, urbun is not recognized as a receivable but as anadvance for the remaining acquisition of goods for murabahah financing.Keywords: Murabahah Accounting, PSAK Syariah No. 102. and Islamic MicrofinanceInstitutions

Pengaruh Pemasaran Produk Baitul Mal Wa Tamwil (BMT) dan Implementasinya Berbasis Digital di Pekalongan

The purpose of this paper is to examine the implementation of digital-based marketing of BMT products in Pekalongan. This theme departs from the gap that the digitalization trend has influenced business behavior in Islamic microfinance institutions (BMT). The type of this research is field research in three Islamic microfinance institutions in Pekalongan. The research approach of this study uses a phenomenological qualitative descriptive method. The results of this study, firstly, show that the marketing of financial institution products has used e-mobile applications through two work system patterns, namely (1) Unitary System Work Patterns with nine services (2) Unitary System Work Patterns through four services. Secondly, the implementation of this marketing through various digital media channels that are synergistic, linear, and practical-economically carried out in three steps, namely (1) Data Digitization (2) Creating and Utilizing Digital Media, and (3) Synergizing Data into Digital Media. Thirdly, services through digital products go through six processes, namely (1) account creation, (2) filling in personal data (3) attaching attachments, (4) data verification, (5) institutional confirmation, and (f) finishing.

Financing Growth Analysis in BMT Al-Furqan Padang Sibusuk

Purpose: This study aims to find out about the growth of financing for customers or members of BMT Al Furqan Padang Sibusuk in its role as a sharia microfinance institution to be a solution for small communities to get business capital and also to see the enthusiasm of the community in accessing financing for BMT Al Furqan Padang Sibusuk.Design/Method/Approach: This research is a semi-quantitative research, a combination of analysis carried out qualitatively and quantitatively, in which the nature of the categories is analyzed qualitatively, while the characteristic values to be used are numerical values that resemble quantitative analysis.Findings: After doing the research, it was found that the public's interest in getting access to financing at this microfinance institution was quite good, there was an increase in the amount of financing disbursed, and the amount of financing growth at BMT Al-Furqan Padang Sibusuk from the 2019 period and the 2020 period on financing products. Mudharabah and murabahah financing products experienced growth, namely the provision of mudharabah product financing in 2019 amounted to Rp.483.687.000 and grew in 2020 to Rp.529.228.000 (8,6 percent). Meanwhile, murabahah product financing in 2019 was Rp.892.839.000 rupiah and experienced growth in 2020 of Rp.1.537.940.000, - (41,1 percent). This microfinance institution has also provided many benefits, such as making it easier for members to get financing for business capital, especially micro and small businesses.Originality/Values: To obtain information about the development of financing carried out by BMT Al Furqan Padang Sibusuk, Sijunjung Regency, where this Islamic microfinance institution or BMT is not yet well known to the people of Sijunjung Regency.

ISLAMIC MICROFINANCE AS A TOOL FOR WOMEN EMPOWERMENT AND SUSTAINABLE ECONOMIC DEVELOPMENT GOALS IN BANGLADESH

Bangladesh is now playing a role model in conventional microfinancing programs in the whole world. Though the financial sectors of this country cover both conventional and Islamic modes. There exist some limitations of conventional microfinancing operating by NGOs. The Islamic microfinancing programs are not enhanced in comparing conventional microfinancing due to a lack of proper policy formulation. Most people are practicing Muslims and want to avoid interest. The Islamic financial institutions have emphasized women's empowerment through shariah-based microfinancing and achieving sustainable economic development. The main objective of this study is to investigate the effectiveness of Islamic microfinance for empowering women and achieving SDGs in Bangladesh. The methodology of this study is based on secondary data including existing relevant literature and annual reports of different financial institutions. The findings of this study show that Islamic microfinance institutions perform a significant role in empowering women as well as attaining SDGs and have a broader scope to flourish more by applying their various investment modes. This study will help to promote shariah-based microfinancing in the future and transmit microfinance systems to other countries of the world. This paper also tries to recommend some strategies and policy options to promote shariah-based microfinancing to reduce the challenges to ensuring women's empowerment and attaining SDGs.

Do Islamic microfinance institutions affect the socio-economic development of the beneficiaries? The evidence from Turkey

PurposeThis paper aims to investigate the effect of Islamic microfinance on poor households through the case of the IKSAR Qard al-Hasan Program in Turkey. To achieve this aim, it examined the changes in the socio-economic status of beneficiaries before and after the program.Design/methodology/approachThis paper adopts the convergent parallel mixed method design. It conducted two surveys to micro-entrepreneurs: the first is when they received the loan and the second is when they finished their installments. In addition to the longitudinal data obtained from these two surveys, qualitative data were collected by participant observation and interview technique with visiting these people periodically throughout the interest-free loan (qard al-hasan).FindingsAccording to the results obtained from the analysis of the pre- and post-surveys, a statistically significant increase of 35% was experienced in the monthly household income after receiving the qard al-hasan loan compared to before. Similarly, a statistically significant increase was found in the monthly expenditures of 23 out of 30 households after receiving the qard al-hasan.Originality/valueThere are two originalities of this study. To the best of the authors’ knowledge, it is the first research that examines the only Islamic microfinance program in Turkey. Second, it uses longitudinal data while examining the impact of Islamic microfinance on the welfare of the poor. In the relevant literature, no study has been identified that uses longitudinal data in Islamic microfinance. Similarly, a limited number of longitudinal studies examine the impact of conventional microfinance institutions on the poor.

Effects of demographic factors on women’s participation in the Islamic microfinance scheme: an analysis using the theory of bounded rationality

PurposeThe purpose of this paper is to identify the factors that influence the individual bounded rationality of the rural poor toward participation in borrowing from rural development scheme (RDS). Specifically, how do respondents’ demographic variables such as gender, age, education, income and religion affect their attitude, subjective norms (SNs) and perceived behavioral control (PBC) to influence bounded rationality toward actual participation in borrowing the Islamic funds from RDS?Design/methodology/approachTo answer these questions, the theory of bounded rational planned behavior as its basis was established. Data (n = 375) were collected from rural women clients of RDS based on snow-balling sampling technique. Data were analyzed following the procedure of structural equation modeling.FindingsThe results indicate that all the demographic variables except education influence attitudes, SNs and PBC in turn influence the individual respondents’ bounded rational intention toward participation in RDS.Research limitations/implicationsThe sample was not randomly drawn to represent a population to which findings could be generalized. Instead, it was a snow-balling sample, and as such, the ability to generalize the findings very far beyond the sample is limited.Practical implicationsThis paper implies that respondents’ socioeconomic characteristics are important to consider changing individual subjective rationality of human being toward performing actual behavior.Social implicationsSocial implications refer that rural women in Bangladesh are positively and subjectively motivated toward bounded rational intention and participation in RDS.Originality/valueThis research is based on the primary data collected from the participants in an Islamic microfinance institute called RDS. This paper draws on several insights about the participation behavior of the rural poor in Bangladesh.

Digitalization Of Baitul Maal Wa Tamwil: How Does Survival In Covid-19 Pandemic?

Covid-19 pandemic, economic activities have limitations and obstacles, including BMT trying and finding out scheme alternatives to survive in providing services. This study aims to find out the efforts of BMT to survive the Covid-19 pandemic.This study used a literature review with a descriptive approach and triangulation analysis techniques. The results showed characteristics of BMT in middle society still exist even in times of crisis. The level of public confidence in BMT providing alternative financing. Government policies have a focus on saving Islamic financial institutions. The BMT development policies prioritize liquidity, monitor DPK liquidity, and control lending or financing. This is an effort for BMT to survive in supporting liquidity, relaxation, and social safety nets. Also a task force for handling the impact of Covid-19 in the Islamic microfinance sector, guaranteeing deposits for microfinance institutions, effective supervision and reporting, and a digital business ecosystem through the human touch and technology. Thus, BMT's efforts survive by digital business application and information technology, government support, and management internalization.

SME Financial Governance and Access to Capital in Islamic Microfinance Institutions

Introduction: One of the obstacles faced by MSEs to achieve independence in entrepreneurship is limited working capital. The government through Bank Indonesia has required banks and microfinance institutions to provide working capital to SMEs. However, there are obstacles in its distribution, namely the fulfillment of the requirements for submitting financing related to MSE financial information. There are still many MSEs that cannot provide accurate financial information because they do not carry out financial management properly, such as making financial reports. Meanwhile, fund providers, including Islamic microfinance institutions, require financial information to analyze the customer's ability to repay the financing.
 Purpose: Knowing how the financial management of MSEs and the obstacles faced in making financial reports, and how MSEs provide financial information to obtain working capital from Islamic Microfinance Institutions.
 Methodology: This research was conducted with a descriptive qualitative method. The object of this research is the financial reporting of MSEs that are needed by Islamic Microfinance Institutions in making decisions to accept or reject the application for financing by MSEs. The data used are primary and secondary data obtained through interviews, documentation, and observation.
 Findings: The majority of UMK KSPPS BMT Niten customers do not perform financial management, especially in preparing financial reports. Constraints were faced due to the lack of awareness of MSEs on the importance of financial management, especially in preparing financial reporting, lack of knowledge about financial management, especially in preparing financial reporting, and limited time. KSPPS BMT Niten obtains financial information of prospective UMK customers or financial information of existing UMK customers through direct interviews.
 Paper Type: Research Article

Introducing an Islamic equity-based microfinance models for MSMEs in the State of Libya

PurposeThis study aims to propose and verify the suitability and applicability of Islamic equity-based microfinance models for financing micro, small and medium enterprises (MSMEs) in the State of Libya. The proposed models combine the unique features of social solidarity, cooperation “Ta’awan,” meeting religious requirements and providing financing more fairly and equitably.Design/methodology/approachA qualitative approach is applied in this study through semi-structured interviews with several Libyan experts, including Islamic bankers, Shariah scholars, MSMEs experts, Islamic microfinance experts and academicians. The data collected from 2019 to 2021 and thematic analysis by computer-based software NVivo is used to analyze the data.FindingsThe results indicate that the proposed Islamic equity-based microfinance models are suitable and applicable in Libya. This study also reveals that the proposed models have numerous potential benefits not only in meeting the financial needs of MSMEs but also in meeting the government objectives in economic divarication and socioeconomic development.Research limitations/implicationsFirst, the study proposes the applicability and suitability of Islamic equity-based models in financing MSMEs only, while large firms are excluded from the study. Second, the study only proposes and tests the applicability of Islamic equity-modes of financing contracts, namely, Musharakah and Mudarabah, while Islamic debt-based financing models are not included. Finally, as there is no practical evidence of using those models for financing MSMEs in Libya, this study lacks empirical evaluations of equity models’ real benefits on income, employment generation, living standards improvement and business growth and sustainability.Practical implicationsGiven the importance of the MSMEs sector for the State of Libya’s economic growth, it is expected that the findings of this study can be of assistance in formulating guidelines and implementing Islamic equity-based microfinance programs. Besides, it can be a valuable source of information for policymakers for improving the functions of the current microfinance programs in the country. Additionally, as studies concerning Islamic alternative models for financing MSMEs are scarce, the current study can also be a reference point for researchers, academicians, practitioners and other stakeholders.Social implicationsProviding capital support for the underfunded economy segment, attracting small savings, increasing investments and developing entrepreneurial skills could lead to improved economic productivity and growth.Originality/valueThe present study proposes the structure of Islamic equity-based microfinance models for MSMEs in Libya and verifies the suitability of those proposed models among Libyan experts. To the best of the authors’ knowledge, no study has been conducted on uncovering and exploring the potentials of Islamic equity-based microfinance models for financing MSMEs in Libya.

Challenges Hindering Islamic Microfinance Banks’ Sustainable Financial Inclusion: A Case of Al-Hayat Microfinance Bank in Ogun State, Nigeria

Microfinance is regarded as an effective technique of poverty alleviation since it provides access to financial resources that can assist in poverty reduction by increasing financial involvement and empowerment. However, despite the fact that microfinance banks account for the vast bulk of the market in Nigeria, with over 800, their contribution to the country’s economy is less than 1%. Additionally, the primary objective of poverty eradication has not been accomplished. Thus, existing research has positioned Islamic microfinance institutions as a viable tool for poverty alleviation in Nigeria. However, Islamic microfinance banks in Nigeria continue to witness minimal development. This research investigates the challenges hindering the development of Islamic microfinance banks in Nigeria. Semi-structured interviews were used to collect data for this study. In addition, data reduction, coding, integration, and visualisation steps are implemented to analyse data effectively. The finding shows that several regulatory issues, such as licence procedures requiring paid-up capital, are some challenges. Likewise, awareness, misconceptions, and acceptance remain significant hindrances faced by IMFBs in Nigeria. Additionally, IMFBs face some in-house challenges, such as a lack of Islamic fintech, convenient access to the unbanked community, and human capital. Consequently, the study recommends that stakeholders in the Nigerian financial system launch public awareness campaigns about the significance of Islamic microfinance banks in promoting financial inclusion and reducing poverty.

Joint and Several Liability sebagai Bentuk Mitigasi Risiko pada Bank Wakaf Mikro di Era Pandemi Covid-19

The Covid-19 pandemic has harmed the global economy, Indonesia and Islamic microfinance institutions are also inseparable from the impact of the pandemic. Bank Wakaf Mikro (BWM) is a sharia microfinance institution registered and supervised by the Financial Services Authority (OJK). BWM represents financial institutions, government, and pesantren as the economic base of Indonesian Muslims. The purpose of the existence of BWM is to be able to alleviate poverty by providing financing to the productive poor through a routine assistance program whose target is the poor who cannot access formal financial institutions to assist the capital aspect of small businesses. This study aims to explore the risk of BWM financing in the Covid-19 pandemic era. By using a single case research method at BWM Sinar Sukses Bersama An-Nur II Al-Murtadlo Bululawang, Malang Regency. BWM is believed to be able to increase financial inclusion, especially for the community and Micro, Small, and Medium Enterprises (MSMEs) for easy access to capital. And it was found that Joint and Several Liability was a form of risk mitigation in the Covid-19 pandemic era. This research has implications for increasing the scientific repertoire of risk management, especially the systemic risks faced by Islamic microfinance institutions, while the managerial implications of this research are to become a reference in managing BWM to become a healthy Islamic microfinance institution. From the results of this study, it is hoped that there will be further multi-case studies or quantitative methods to confirm the results of this study.

Studi komparasi kualitas pelayanan pada lembaga keuangan mikro syariah di Trenggalek Jawa Timur

Service quality is an advantage factor of institutions engaged in services. Each financial institution has different services from the others based on their respective characteristics. Service quality is created to meet all the needs and desires of members in accordance with their expectations. The research aims to find the ideal service quality that can be applied to Islamic microfinance institutions through a comparative study between Islamic microfinance institutions in Trenggalek. The approach used is a qualitative method with data collection techniques through observation, interviews, and documentation. This research was conducted by interviewing 10 informants consisting of managers, employee, and three members of KSPPS MPS and BMT Berkah. This interview was conducted during the working hours of the two sharia micro institutions. The results of this study indicate that from the aspect of reliability, assurance, tangible, empathy, and responsiveness, KSPPS MPS has fulfilled these five aspects. BMT Berkah still does not fulfill these five aspects, especially in terms of reliability and tangibles

Examining Islamic microfinance as a mechanism of Takaful in high-risk countries: case study of Palestine

PurposeThis paper aims to identify the intersection between Islamic microfinance (MF) (IsMF) and Takaful in high-risk economies and propose a model for the sustainable application of IsMF. The word Takaful, although used to refer to Islamic insurance, means solidarity and is used as such in this paper.Design/methodology/approachThe paper used a descriptive and analytical method to present findings derived from secondary data collected from the Palestinian Central Bureau of Statistics and primary data from semi-structured interviews.FindingsNeed in the Palestinian household is very high, and the performance of Palestinian MF institutions (MFI) was found to have deviated from the spirit of MF. A significant shortcoming by MFI lies in the Palestinian law that focuses on organizing MFI’s operations as financial institutions only. With a deviated purpose and generalized laws, the paper proposed a model of IMF. The model consists of three stages covering mission and market-based financing for the economically incapable and those better off. Finally, enacting laws to protect micro-enterprises and cooperation between institutions that operate at each stage is necessary.Originality/valueThis research contributes to the literature on MF and IsMF, especially in high-risk countries. Furthermore, this study proposes a model for IsMF best practices based on the spirit of MF where it is most needed.

Islamic Microfinance as a Poverty Reduction Tool in Terms of Islamic Finance: An Analysis of the Islami Bank Microfinance Scheme in Bangladesh

Although Microfinance is one of the essential parts of poverty reduction, however, there are so ‎many microfinance schemes that provided financial help under the various organization models ‎in the world. But a Muslim is not able to benefit from these schemes since most of the time, ‎microfinance schemes are provided into a conventional microfinance system which includes the ‎‎“interest (Riba)” that is strictly prohibited for Muslims. Nevertheless, this study constitutes a ‎linkage between Islamic Finance and IBBL Islamic microfinance scheme, whether it works for alleviating poverty in ‎Bangladesh. As it is known that Islami Bank Bangladesh Limited (IBBL) focused Shariah ‎compliance disclosure by establishing its reputation and differentiating itself from conventional ‎microfinance systems. Accordingly, this article will point out how Islamic microfinance follows ‎the Islamic Shari’ah in its operation and helps clients to improve their moral and ethical values ‎through Rural Development Scheme (RDS), which allows the rural Muslims in Bangladesh to ‎involve in the Islamic microfinance schemes. Applying performance analysis techniques, this ‎article analyzes the status of Rural Development Schemes (RDS) offered by Islami ‎Bank Bangladesh Limited, Bangladesh, where the specific objectives of this study include ‎analyzing the allocation efficiency of RDS, and financial performance (Risk and Return ratios) ‎of RDS of Islami Bank Bangladesh Limited and how it works as an alternative tool for poverty ‎reduction through their various investment models. With this method, this article mainly argues ‎whether Islamic microfinance provides an alternative to poverty reduction. ‎

Analysis of Financing Risk Management Implementation at Baitul Maal Wat Tamwil

AbstractPurpose - This study aims to analyze the implementation of financing risk management in Sharia Cooperatives at BMT UAS Pamotan.Method - The method uses a qualitative approach, using primary data from interviews with the finance staff and reading from various references.Result - The implementation of financing risk management at BMT UAS Pamotan is through two approaches, namely internal and external. Internal approach by anticipating various possible risks, namely through management audits and evaluations. Meanwhile, externally through service maximization, and tightening 5C (Character, Capacity, Capital, Collateral, and Conditions).Implication - There needs to be a closer method between the BMT and partners (customers) so that the possibility of financing risks arising can be minimized.Originality- Analyzing qualitatively related to existing financing in Islamic microfinance institutions.