The Margin of Islamic Microfinance Institution: To What Extent Does Capital Structure Matter

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

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THE ROLE OF INTEGRATED ISLAMIC COMMERCIAL AND SOCIAL FINANCE IN REDUCING INCOME INEQUALITY IN INDONESIA

Journal of Islamic Monetary Economics and Finance ◽

10.21098/jimf.v5i2.1063 ◽

2019 ◽

Vol 5 (2) ◽

Author(s):

Arif Widodo

Keyword(s):

Income Inequality ◽

Method Of Moments ◽

Wealth Distribution ◽

Generalized Method Of Moments ◽

Advanced Economies ◽

The Social ◽

Microfinance Institution ◽

Islamic Microfinance ◽

Commercial Finance

Recent years saw the heated debates among prominent economists on the growinginequality in advanced economies, and accordingly, many solutions to this seriousproblem have been put forward. Among the practical-cum-workable solution isprogressive taxation for wealth and income, especially the top one percent. Such asolution, however, has been implemented in Islamic perspective what so-called, zakahwhich is now referred to as social finance. In this paper, using the Gini coefficient datacovering 34 provinces in Indonesia over a decade, we examine whether the role ofsocial finance in tandem with commercial finance can adequately solve the problemof wealth distribution in Indonesia, one of the largest Democratic-Muslim countriesin the world. Using the Generalized Method of Moments (GMM) model, the resultsdemonstrated that Islamic commercial finance solely is proven statistically incapable oftackling inequality while the social finance (zakah) is performing very well in this matterover all specifications. Most importantly, when both are incorporated in a model, theresult showed a significant reduction in income inequality implying that the integratedIslamic finance which can be implemented in both Islamic microfinance institution andIslamic banking is more capable, as opposed to when both are separated, of helpingaddress the income inequality problem in Indonesia.

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Islamic microfinance institution: Survey data from Indonesia

Data in Brief ◽

10.1016/j.dib.2019.104911 ◽

2020 ◽

Vol 28 ◽

pp. 104911

Author(s):

Bayu Arie Fianto

Keyword(s):

Survey Data ◽

Microfinance Institution ◽

Islamic Microfinance

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Akad Tijarah Dalam Praktek Di Lembaga Keuangan Mikro Syariah - BMT

SERAMBI: Jurnal Ekonomi Manajemen dan Bisnis Islam ◽

10.36407/serambi.v2i1.142 ◽

2020 ◽

Vol 2 (1) ◽

pp. 15-28

Author(s):

Nandang Ihwanudin ◽

Handri Handri ◽

Deden Gandana Madjakusumah ◽

M Munir Asrori

Keyword(s):

Case Studies ◽

Trade Agreement ◽

Profit Sharing ◽

Business Practices ◽

Microfinance Institutions ◽

Literature Reviews ◽

Microfinance Institution ◽

Islamic Microfinance

Purpose- Akad tijarah as a form of trade agreement has several types, in which needs to be adjusted to each necessity. It is important for related parties to understand what and how akad ijarah works. This article analyses how far the contribution of an Islamic microfinance institution (LKMS) nowadays, considering there are nash (Al-Qur’an and Al-Hadits) and also fatwa the national sharia council (DSN) MUI. Methods- Case studies and literature reviews are used to evaluate sharia business practices in BMT. Findings- Sharia microfinance institutions, in this case, BMT TUMANG, have carried out sharia principles in practice, especially for tijarah agreements with documents in the form of SOM and SOP as well as financing contracts (agreements), both in the principle of sale and profit-sharing. Implications/Limitations- This study is limited to one branch of the BMT so it cannot describe the overall practice carried out in other regions.

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The Accountability of Islamic Microfinance Institution: Evidence from Indonesia

The Winners ◽

10.21512/tw.v9i1.728 ◽

2008 ◽

Vol 9 (1) ◽

pp. 22 ◽

Cited By ~ 1

Author(s):

Ersa Tri Wahyuni

Keyword(s):

Confidence Level ◽

Statistical Estimation ◽

Supervisory Board ◽

Financial Statements ◽

Financial Statement ◽

Estimation Technique ◽

Microfinance Institution ◽

Sample Proportion ◽

Islamic Microfinance

The article aims to provide current condition’s information on the accountability of Baitul Maal wat Tamwil (BMT) in Indonesia. Lack of supervisory board and low demand for audited financial statements provide little incentive for BMT managers to make their financial statement audited by independent auditor. Statistical estimation technique about one sample proportion, give an estimation with 95% confidence level that only 7-20% of BMT is audited by independent auditor. Most of the reason for BMT not being audited are because they feel they do not need an audit and the price for audit is relatively expensive.

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Determinants of capital structure: Evidence from Sidama credit and saving microfinance institution

Jurnal Perspektif Pembiayaan dan Pembangunan Daerah ◽

10.22437/ppd.v9i3.12221 ◽

2021 ◽

Vol 9 (3) ◽

pp. 289-300

Author(s):

Alemayehu Taddese

Keyword(s):

Regression Analysis ◽

Capital Structure ◽

Quantitative Research ◽

Secondary Data ◽

Current Status ◽

Research Approach ◽

Microfinance Institutions ◽

Analysis Model ◽

Explanatory Variables ◽

Microfinance Institution

Different industry-specific and macro-economic factors influence the capital structure of microfinance institutions (MFI). So, the objective of this study is to identify industry-specific determinants of capital structure with the selected branch of Sidama MFI, Sidama region, Ethiopia. To this end, the researcher employed a quantitative research approach with an explanatory research design where the effect caused by the independent variable on the dependent variable is observed through regression analysis. The secondary data were collected from Sidama MFIs consolidated and audited financial statements from 2009 to 2019 G.C. Then, both descriptive and inferential statistical analysis has been done. The researcher employed a regression analysis model to identify the effect of five explanatory variables on capital structure measured through debt to equity ratio. Thus, the result of regression analysis showed that out of five independent variables incorporated in the model, all five variables such as growth (negative), profitability (positive), firm size (positive), earning volatility (positive), and asset tangibility (positive) and statistically significant respectively. This study recommends that the microfinance institutions at all company levels improve debt capacity in proportion to asset tangibility more than the current status.

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The Circular Economy of the Islamic Group Lending Model: Lending Money for Garbage in Return

International Journal of Islamic Economics ◽

10.32332/ijie.v2i2.2580 ◽

2021 ◽

Vol 2 (2) ◽

pp. 110

Author(s):

Yaser Taufik Syamlan

Keyword(s):

Circular Economy ◽

Added Value ◽

Islamic Finance ◽

Operational Cost ◽

Group Lending ◽

The World ◽

Microfinance Institution ◽

The Media ◽

Islamic Microfinance ◽

The Needy

The Model of Group Lending has been flourishing in the Microfinance Industry. This model has been used widely in the world to serve the needy and un-bankable group of people by lending money plus interest addition. In Islamic finance also embrace this model by omitting the interest and applying the Qardul Hassan to finance the members so that they can fulfill their daily need. The problem of this divine scheme is the sustainability of the microfinance since they have a burden to bare the operational cost due to the non – interest feature of the financing. This paper tries to solve this problem by utilizing the household garbage as the media to repay the Qardul Hassan financing to the Islamic Microfinance Institution (IMFI) so that it can be processed by the IMFI to create more added value product, selling it to get more income and achieving the organization sustainability.

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Impact of using Islamic Microfinance Products on Mauritanian Microentrepreneurs’ Income: Evidence from PROCAPEC- Nouakchot

TURKISH JOURNAL OF ISLAMIC ECONOMICS ◽

10.26414/a2371 ◽

2021 ◽

Vol 8 (Special Issue) ◽

pp. 219-238

Author(s):

Vatimetou Mokhtar Maouloud ◽

Anwar Hasan Abdullah Othman

Keyword(s):

Structural Equation ◽

Income Level ◽

Equation Modeling ◽

Design Data ◽

Cross Sectional ◽

Moderator Effect ◽

Microfinance Institution ◽

Islamic Microfinance ◽

The Impact ◽

The Relationship

This study examines the impact of using Islamic microfinance products on the Mauritanian microentrepreneurs’ income level. The study is purely quantitative, and it uses cross-sectional design data, which was gathered through a questionnaire from a sample of 381 beneficiaries of an Islamic microfinance institution (PROCAPEC). It uses Structural Equation Modeling (SEM) to determine the effectiveness of using Islamic microfinance products on the beneficiaries’ income as well as to test the moderator effect of gender on the relationship in the model. The research found out that the use of Islamic microfinance products has increased the beneficiaries’ income; however, gender has no moderator effect on the relationship between the usage of Islamic microfinance products and income level. These findings help the policymakers and managers of Islamic microfinance consider the factors increasing Islamic microfinance products’ usage to reduce poverty in the country. This study is among the pioneer in the field of Islamic microfinance in Mauritania due to the scarcity of studies in the geographical context.

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Sharia Hybrid Contract Compliance of Islamic Microfinance Institutions in Jepara Regency

EkBis Jurnal Ekonomi dan Bisnis ◽

10.14421/ekbis.2020.4.2.1272 ◽

2020 ◽

Vol 4 (2) ◽

pp. 441

Author(s):

Mahmudatus Sa’diyah ◽

Asep Gugun Gumilar ◽

Edi Susilo

Keyword(s):

Content Analysis ◽

Field Research ◽

Analysis Approach ◽

Microfinance Institutions ◽

Hybrid Products ◽

Contract Compliance ◽

Microfinance Institution ◽

Islamic Microfinance

The purpose of this study was to examine the sharia compliance of the Hybrid Contract of the Syriah Microfinance Institution (LKMS) in Jepara Regency. This type of research is a Field Research, using a content analysis approach; to interpret data not as a series of physical events, but as symbolic symptoms to reveal the meaning contained in a text, and the understanding of the message presented. The research object selected was BMT in Jepara Regency which applies contract and unique hybrid products, namely BMT Mitra Muamalah (Mitramu) which has the product "Gold Pawn" and BMT Harapan Bersama (HARBER) which has a Musyarakah Mutanaqishah (MMq) product. The results showed that the Musyarakah Mutanaqishah (MMq) financing agreement at BMT Harapan Bersama (HARBER) Jepara was in accordance with the DSN-MUI fatwa NO: 73 / DSN-MUI / XI / 2008. Rahn's contract which is run by BMT Mitra Muamalah Jepara is in accordance with the DSN-MUI Fatwa Number: 25 / DSN-MUI / III / 2002, and Fatwa DSN-MUI Number: 26 / DSN-MUI / III / 2002.. Weak internal and external supervision at Cooperative entities, the implementation of hybrid contracts in the field is prone to deviations and falling to "Riba".

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