THE IMPLEMENTATION OF GOVERNANCE PRINCIPLES IN ISLAMIC MICROFINANCE: A COMPARATIVE ANALYSIS BETWEEN TÜRKİYE AND INDONESIA

Abstract

This study compares implementing the governance principles in Islamic microfinance with a social objective in Türkiye and Indonesia. The relevance of this study is to investigate the best practices to apply governance concepts to Islamic microfinance to achieve IKSAR and BMT MUDA’s social goals. Governance principles in two organizations were studied in this qualitative comparative case study. As for the selection research site, IKSAR and BMT MUDA both have an adequate report until 2021 on their website. The study found that both IKSAR and BMT MUDA tried to realize the governing principles, which meet ethical duty in some areas, namely their top management trying to fulfill SharÊ‘ah compliance by SharÊ‘ah experts, responsibility in their human resources, fairness decision-making, understanding the importance of transparency and accountability to report and disclose to stakeholder, including the public, through their website. BMT MUDA appears to disclose more information than IKSAR, which is relatively new, has less funding, and is staffed by volunteers. However, they can use human resources with their current technology and report more regularly. It would increase their transparency, attract contributors, and build public trust, hence boosting their long-term social impact.