scholarly journals CAN ISLAMIC MICROFINANCE ALLEVIATES POVERTY IN INDONESIA? AN INVESTIGATION FROM THE PERSPECTIVE OF THE MICROFINANCE INSTITUTIONS

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Adhitya Ginanjar ◽  
Salina Kassim
Keyword(s):  
Decision Making ◽  
Poverty Alleviation ◽  
Financial Inclusion ◽  
Survey Questionnaire ◽  
Model Design ◽  
Microfinance Institutions ◽  
The Poor ◽  
Depth Interview ◽  
Islamic Microfinance

This study examines the poverty alleviation efforts undertaken by the Islamic microfinance institutions (IMFIs) in Indonesia. We focused on the role played by the IMFIs in view of their direct involvements in the process of dealing with the borrowers, and their better understanding about the financial inclusion agenda as well as the financial guidelines and regulations issued by the relevant authorities. In methodology, a total of 34 managers of Baitul Maal wat Tamwil (BMTs) were taken as respondents from the Jakarta, Bogor, Depok, Tangerang and Bekasi (JABODETABEK) areas. A two-step approach was adopted in arriving at enriching findings: first, a survey questionnaire was distributed to the respondents, and subsequently, an in-depth interview was conducted to outline data related to the model design. The findings of this study highlight specific dimensions to improve financial inclusion among the poor. Apart from providing important inputs for better decision-making for the BMTs to further enhance its role in poverty alleviation, this study suggests a variety of strategies to warrant success of poverty alleviation efforts by BMT.

scholarly journals Alleviating Poverty Through Islamic Microfinance: Factors and Measures of Financial Performance, and Roles of Islamic Values and Financial Policies

2019 ◽  
pp. 1266-1273
Author(s):  
Adhitya Ginanjar ◽  
Salina Kassim
Keyword(s):  
Financial Services ◽  
Poverty Alleviation ◽  
Financial Education ◽  
Financial Inclusion ◽  
Microfinance Institutions ◽  
Financial Policies ◽  
The Poor ◽  
Depth Interview ◽  
Rich Information ◽  
Islamic Microfinance

Indonesia has a strong presence of microfinance sector with the number of Islamic Microfinance Institutions (IMFIs) estimated to be around 5,000 currently. Microfinance is an effective tool in alleviating poverty in Indonesia due to the limited access to financial services by the poor who accounted for approximately 96 million Indonesians (or 37% of the total population), living on less than USD 1.90 a day. In the absence of collateral and steady income, the poor are considered too risky to be given credit facilities by the formal financial services providers and living in remote areas has also limited their access to formal financial services. This study aims to examine the poverty alleviation efforts from the perspective of the IMFIs in view of their direct involvement in the process and having rich information about financial issues facing the borrowers. The managers also understand about financial inclusion agenda as well as financial guidelines and regulations issued by the relevant authorities. A total of 34 managers of Baitulmaal Wa Tamwil (BMTs), which registered under the Sharia Cooperative Centre (INKOPSYAH) are taken as respondents from the Jakarta, Bogor, Depok, Tangerang and Bekasi (JABODETABEK) areas. The first instrument was a survey questionnaire, and the second one was an in-depth interview to outline data related to the model design. The findings of this research are expected to contribute to better decision-making for the BMTs to further enhance its role in alleviating poverty. The findings also elaborate several dimensions to improving financial inclusion among the poor including providing financial services, implementing Islamic principles, significant policies, community-based framework concept and training financial education. This research highlights the need for a variety of strategies to warrant success of poverty alleviation efforts by BMT.

scholarly journals Roles of Islamic Microfinance Institutions in Improving Financial Inclusion in Indonesia: Empirical Evidence from Baitulmaal wa Tamwil

2021 ◽  
Vol 13 (1) ◽  
Author(s):  
Adhitya Ginanjar ◽  
Salina Hj Kassim
Keyword(s):  
Qualitative Method ◽  
Financial Inclusion ◽  
Decision Makers ◽  
Clear Understanding ◽  
Model Design ◽  
Microfinance Institutions ◽  
Policy Makers ◽  
Regulatory Changes ◽  
Depth Interview ◽  
Islamic Microfinance

This research aims to answer and investigate the roles of Islamic microfinance institutions (IMFIs) in improving financial inclusion in Indonesia by taking three regions, namely, Jakarta, Bogor, Depok, Tangerang and Bekasi (JABODETABEK) area; Daerah Istimewa (DI) Yogyakarta area; and Nusa Tenggara Barat (NTB) area as samples. The results will demeanour the roles of IMFIS in improving financial inclusion. Only managers of the IMFIs are taken as respondents since they are the decision makers and have clear understanding of the mission of the IMFIs, thus are practically responsible for achieving IMFIs objectives by anticipating issues and regulatory changes. A complete of 481 managers of Baitulmaal Wa Tamwil (BMTs) which administered under the Sharia Cooperative Centre (INKOPSYAH) involved in the study. Qualitative method were approached in this research for determining the variables in advancing model.  Two mechanisms were developed in the data collection; the first mechanism involved a survey questionnaire, and the second mechanism involved in-depth interview so as to outline data related to the model design. The findings of this research occurred current issues and challenges in increasing the roles of IMFIs in improving financial inclusion. The results also highlight recommendations for BMTs and policy makers that simultaneously collaborate the regulations and the implementations for improving financial inclusion in Indonesia.

scholarly journals THE SOCIO-ECONOMIC BENEFITS OF MICROFINANCE: CONVENTIONAL VS. ISLAMIC

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Amela Trokic ◽  
Eldina Karamustafic ◽  
Velid Efendic
Keyword(s):  
Poverty Alleviation ◽  
Modern Society ◽  
Economic Benefits ◽  
Financial Inclusion ◽  
Microfinance Institutions ◽  
Client Characteristics ◽  
The Poor ◽  
Socio Economic Development ◽  
Islamic Microfinance ◽  
Socioeconomic Benefits

The reduction of poverty and socio-economic development has become a foremost issue in modern society. One approach to improving this was the establishment of microfinance, which has since become an important part of poverty alleviation strategies, but very few studies have considered its benefits based on characteristicsother than poverty. Therefore, this study aims to investigate and determine how different client characteristics affect the way people benefit from the financing provided by microfinance institutions. Data were gathered from the beneficiaries of both conventional and Islamic microfinance using a questionnaire, and then analysed using the Kruskal-Wallis and the Mann–Whitney U tests. The results show how MFI financing benefits clients differently based on certain characteristics, as well as how these socioeconomic benefits differ based on whether the financing is provided by a conventional or an Islamic MFI. Overall, conventional and Islamic MFIs have similar strategies when it comes to providing socio-economic benefits to their clients. However, where they diverge is when client gender is considered, as IMFIs are more likely to benefit women. This research will be beneficial to MFIs in terms of the development of their services, as it will help them identify the strengths and weaknesses of their offerings and how well these are able to assist them in fulfilling their purpose of providing benefit to the poorest of the poor, increasing financial inclusion and contributing to socio-economicdevelopment.

Financial inclusion of the poor: from microcredit to Islamic microfinancial services

Humanomics ◽  
2015 ◽  
Vol 31 (3) ◽  
pp. 354-371 ◽  
Author(s):  
Abul Hassan
Keyword(s):  
Small Businesses ◽  
Financial Inclusion ◽  
Microfinance Institutions ◽  
Content Type ◽  
Direct Discourse ◽  
Minority Community ◽  
Playing Field ◽  
The Poor ◽  
Wide Range ◽  
Islamic Microfinance

Purpose – The purpose of this paper is to initiate a direct discourse towards an Islamic microfinance focus agenda for the economic enlistment of the poor minority community and to allow poorer households in the financial inclusion. The issue of the Indian conventional microfinance institutions in failing to attract the poorest of the poor amongst Muslims is important for the purpose of this paper. This study explores a Shari’ah-compliant microfinance system which will create a level of playing-field with respect to the financial inclusion of the poor. Design/methodology/approach – The paper is a theoretical discussion on Islamic microfinancial services for financial inclusion of the poor. Therefore, there is little to say about “methodology” other than the conventional microfinance model is reviewed, and an alternative model of Islamic microfinancial service has been suggested to allow poorer households in the financial inclusion. Findings – The paper finds that there are some opportunities capable of improving the economic condition of the poor Muslim communities through some innovative approaches. To illustrate this finding, the paper emphasises on designing and delivering Islamic microfinancial products suitable for the poor based on the principle of Islamic solidarity. It argues that this service will help the poor and turn their savings into sums large enough to satisfy a wide range of personal, social and asset-building needs as well as needs relating to small businesses and consumption. Research limitations/implications – The paper’s findings are limited to the matter of financial inclusion of the poor through Islamic microfinancial services in India. Originality/value – Combining the Islamic social principle of solidarity for the less fortunate with the power of microfinance to provide financial access to the poor has the potential to reach out to millions more people. The ideas presented in this paper are designed to direct discourse towards an Islamic microfinance focus agenda for the economic enlistment of the poor Muslims in India.

scholarly journals The Role of Islamic Microfinance for Poverty Alleviation in Mogadishu, Somalia: An Exploratory Study

2019 ◽  
Vol 6 (4) ◽  
pp. 355-365
Author(s):  
Mohamed Abdi Elmi Xalane ◽  
Marhanum Che Mohd Salleh
Keyword(s):  
Poverty Alleviation ◽  
Poverty Reduction ◽  
Current Practice ◽  
Descriptive Analysis ◽  
Quantitative Methodology ◽  
Microfinance Institutions ◽  
The Poor ◽  
Standards Of Living ◽  
Islamic Microfinance

This research aims to investigate the current practice of Islamic microfinance in Mogadishu, Somalia and to examine the effectiveness of Islamic microfinance institutions in Somalia on poverty reduction. In total, 65 microfinance recipients participated in the survey. This research adopts a quantitative methodology, using a survey and descriptive analysis. Findings show that the current practice of Islamic microfinance in Mogadishu is serving the poor and that these microfinance activities are effective in terms of obtaining loans, enhancement of standards of living and usefulness of the system. Nonetheless, there is a low level of awareness among the locals regarding the availability of Islamic microfinance.

scholarly journals Unique aspects of the Islamic microfinance financing process

Humanomics ◽  
2016 ◽  
Vol 32 (3) ◽  
pp. 230-247 ◽  
Author(s):  
Permata Wulandari ◽  
Salina Kassim ◽  
Liyu Adhi Kasari Sulung ◽  
Niken Iwani Surya Putri
Keyword(s):  
Content Analysis ◽  
Cultural Influences ◽  
Poor People ◽  
Policy Makers ◽  
Content Type ◽  
The Poor ◽  
Proposed Model ◽  
Depth Interview ◽  
Islamic Principle ◽  
Islamic Microfinance

Purpose This paper aims to highlight on the unique aspects of Islamic microfinance based on the experience of Baitul Maal Wa Tamwil (BMT) in Indonesia. Design/methodology/approach It adopts the content analysis approach and focuses on three phases of financing, namely, pre-financing, financing and post-financing using coding and model buildings. Data are collected through in-depth interview with a sample of representatives of BMTs that offer product based on Islamic principle for the poor located in Jakarta, Bogor, Depok, Tanggerang and Bekasi (JABODETABEK), Sulawesi Selatan, Yogyakarta and Nusa Tenggara Barat (sample chosen based on the most concentrated areas of Islamic microfinance that offered product based on Islamic principles). Ultimately, a model based on the unique features of Islamic microfinance will be developed based on the findings of the content analysis. Findings The proposed model incorporates the peculiarities of the poor people in pre-financing, financing and post-financing activities of micro-financing products to serve as a reference for policy makers. The paper also found that each region has unique product preferences depending on the poor’s characteristics. Research limitations/implications This study is only conducted in four areas with BMT representation, namely, Jakarta, Bogor, Depok, Tangerang, Bekasi (often abbreviated as JABODETABEK), Sulawesi Selatan, Yogyakarta and Nusa Tenggara Barat) in Indonesia. Despite the limited scope, the findings have wide applications to the Islamic microfinancing in general. Originality/value The paper adds value to the literature on Islamic microfinance by enabling researchers and practitioners to understand the model of three step financing (pre-financing, financing and post-financing) in Islamic microfinance in Indonesia. Although not a new issue, the paper provides the practice of pre-financing, financing and post-financing processes which may differ from the practices of Islamic microfinance in other settings because of different cultural influences unique to every region.

Adopting Islamic microfinance as a mechanism of financing small and medium enterprises in Uganda

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ssemambo Hussein Kakembo ◽  
Muhamad Abduh ◽  
Pg Md Hasnol Alwee Pg Hj Md Salleh
Keyword(s):  
Financial Services ◽  
Small And Medium Enterprises ◽  
Skills Training ◽  
Microfinance Institutions ◽  
Alternative Scheme ◽  
Content Type ◽  
The Poor ◽  
Islamic Microfinance ◽  
Financial Challenges ◽  
Medium Enterprises

PurposeDespite the fact that small and medium enterprises (SMEs) play a crucial role in strengthening the financial sector within developing and emerging economies through providing employment opportunities to the rural and urban population, capacity building in the form of skills training and economic empowerment, they still face a plethora of challenges that continue to threaten their existence, performance and growth. Access to operational and administrative funds needed to execute their activities effectively is a significant challenge and detrimental to the growth of SMEs in Uganda. Conversely, Islamic microfinance has been noted as a panacea to the challenges of financial inaccessibility among SMEs, especially in developing countries. The purpose of this paper is therefore to investigate how the adoption of Islamic microfinance can play a fundamental role in enhancing the sustainability of microfinance institutions (MFIs) while meeting the financing challenges of SMEs in Uganda.Design/methodology/approachIn this study, a review of existing literature was carried out to critically examine relevant information (literature sources) and empirical studies on SMEs, their performance and challenges. The study being conceptual tries to understand how Islamic microfinance could be adopted as an alternative scheme of financing to bridge the gap and mitigate the financial challenges facing SMEs.FindingsThe study finds that the existing MFIs have failed to achieve their objectives of providing financial services to the poor and SMEs while remaining sustainable. This has left the majority of SMEs within Uganda's informal sector financially handicapped, thus leading to their failure in meeting their expectations and eventually collapsing even before celebrating their third or fourth birthdays. However, the enactment into law of the Financial Institutions Amendment Act 2016 that paved the way for the introduction of Islamic finance in Uganda, and the Tier 4 Microfinance Institutions and Money Lenders' Act, 2016 that incorporated the aspects of Islamic microfinance within the existing microfinance framework as seen and is perceived as a key factor in addressing the financial challenges faced by MFIs and the SMEs if fully adopted.Research limitations/implicationsThis study is conceptual with no empirical investigation and discussion of key theories. On the contrary, it will be imperative and useful when carrying out more extensive hypothetical studies by future researchers, specifically in the area of Islamic microfinance that is relatively new in Uganda.Practical implicationsPractically, this paper will serve as a guide to policymakers and practitioners in the field of microfinance by adding a flair that could enable in bridging the challenges associated with inadequate financing of SMEs in Uganda.Social implicationsSocially, the social aspects of charity (Zakah and Sadaqah) will help to improve the livelihood of the poorest of the poor who cannot engage in active business through meeting their basic needs of life without begging thereby preventing them from being social outcasts.Originality/valueThe study establishes Islamic microfinance (IMF) as a promising and unexplored viable option potentially needed in intensifying the financing needs of SMEs in Uganda. The paper provides an entirely new dimension in nature and way microfinance products should be structured with a view of ensuring that there is sustainable provision of financial services to SMEs. The paper adds real value to the existing conventional microfinance products and services in Uganda, given the ethical and moral attributes of Islamic microfinancing practices that are assumed to efficiently and effectively motivate SME owners and other small entrepreneurs to thrive.

Profitability vs Poverty alleviation: has banking logic influences Islamic microfinance institutions?

2019 ◽  
Vol 4 (2) ◽  
pp. 260-279
Author(s):  
Luqyan Tamanni ◽  
Mohd Hairul Azrin Haji Besar
Keyword(s):  
Mission Statements ◽  
Annual Reports ◽  
Microfinance Institutions ◽  
Local Data ◽  
Content Type ◽  
Related Information ◽  
The Poor ◽  
Islamic Microfinance ◽  
The Impact ◽  
Primary Mission

Purpose The purpose of this paper is to shed some lights on the process of mission drifting or abandoning poverty objective by Islamic microfinance institutions (IMFs). The paper investigates whether the extensive use of banking logic changes IMFs, from focusing on both development and financial objectives to only considering sustainability as their primary mission. Design/methodology/approach This paper adopts mixed methods by analyzing 7,200 microfinance data from Microfinance Exchange Market and reviewing annual reports and websites of 25 IMFs to examine their vision and mission statements and other related information. Findings The finding shows Islamic microfinance has not changed, despite increasing adoption of financial or banking performance measures. However, size and age of the institutions may affect the outcome in the future. The authors find that smaller microfinance institutions maintain genuine objective to serve the poor, as the grow larger they would be more inclined toward sustainability objectives. Research limitations/implications The research is limited on the sample size as data on Islamic microfinance globally is limited. However, the paper looked at the global data rather than local data to compensate for this limitation. Future study would be further taking the study through qualitative methods to support the study. Originality/value This paper aims to shed some lights on the process of mission drifting or abandoning poverty objective by IMFIs. The paper investigates how has the extensive use of financing logic has changed IMFIs from focusing on both development and financial objectives to only considering sustainability as their primary mission. Arun and Hulme (2009) argued that the interaction of multiple logic within microfinance institutions, i.e. financial vs social, could pose some serious management dilemmas within microfinance institutions. Further, commercialization puts pressure on the field staffs to achieve financial targets and often neglect their poverty outreach mission to the poor. The well-known crisis in Andhra Pradesh, India where clients of microfinance institutions committed suicide after being shamed by field officers who tried to collect payments of loans (Mader, 2013; Taylor, 2011), provides a powerful case of the impact of financialization to microfinance clients.

scholarly journals The Intersection of Islamic Microfinance and Women’s Empowerment: A Case Study of Baitul Maal Wat Tamwil in Indonesia

2020 ◽  
Vol 8 (2) ◽  
pp. 37 ◽  
Author(s):  
Ninik Sri Rahayu
Keyword(s):  
Gender Inequality ◽  
Poverty Alleviation ◽  
Local Governments ◽  
Women's Empowerment ◽  
Women’S Empowerment ◽  
Critical Groups ◽  
Microfinance Institutions ◽  
Organizational Vision ◽  
Islamic Microfinance

It is largely assumed that Islamic microfinance institutions (IMFIs) deal with family empowerment instead of women’s empowerment. However, women are the main beneficiaries of Baitul Maal Wat Tamwil (BMT), Indonesia’s first IMFIs. This paper aims to explore the origins, the initiators, and the visions of BMTs and the extent to which they intersect with women’s empowerment. Employing a qualitative approach, this study selected four BMTs in Yogyakarta as a case study. It found that four critical groups that have a significant role in the development of Indonesian BMTs: ICMI (Association of Indonesian Muslim Intellectual), Islamic mass organizations, NGOs, and local governments. The issues of loan sharks and poverty alleviation were the primary factors driving the inception of BMTs. Despite women being crucial clients, none of the studied BMTs explicitly invoked women’s empowerment in their organizational vision. To conclude, the BMTs’ preference for women is not based on an understanding of gender inequality, but rather motivated by pragmatic business considerations, particularly the self-sustainability paradigm that underpins their practices.

scholarly journals Impact of Financial Inclusion on Poverty Through Islamic Microfinance in Mauritania

2021 ◽  
pp. 296-307
Author(s):  
Vatimetou Mokhtar Maouloud ◽  
Salina Kassim ◽  
Anwar Hasan Abdullah Othman
Keyword(s):  
Sustainable Development ◽  
United Nations ◽  
Financial Inclusion ◽  
Theoretical Discussion ◽  
Microfinance Institutions ◽  
Severe Problem ◽  
Vulnerable People ◽  
Development Goals ◽  
Conceptual Paper ◽  
Islamic Microfinance

Poverty is a severe problem, particularly in third world countries. Since reducing poverty is the first goal of Sustainable Development Goals of the United Nations, it is the concern of numerous organizations and governments. This chapter is a conceptual paper that discusses the effectiveness of microfinance in eradicating poverty. The main purpose of this chapter is to present the current situation of poverty in Mauritania and the prospect to alleviate it through Islamic microfinance and financial inclusion. It also attempts to propose new suggestions for the Mauritanian government to alleviate poverty and increase people's wellbeing. It has been concluded that Islamic microfinance can reduce poverty in Mauritania. Thus, this research recommends policymakers and managers of Islamic microfinance to enhance the outreach of microfinance institutions to reach a large segment of vulnerable people. This study is among the pioneers in the field of Islamic microfinance in Mauritania, so it fills up this gap in the literature and adds new theoretical discussion to the topic worldwide.

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