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

Abstract

Indonesian Islamic Microfinance Institutions (IMFIs) are estimated to be 5000—an effective poverty alleviation tool for approximately 22.8 million Indonesians or 8.77% of the 260 million population (National Statistic Board, 2018), living on less than USD 1.90/day. Without collateral and steady income, the poor are considered risky by formal financial service providers. Living in remote areas also limits their access to formal financial services. This study examines poverty alleviation from the perspective of the IMFIs in view of their direct involvement, access to information on borrowers’ financial issues, understanding of financial inclusion agenda, guidelines and regulations. Thirty-four Baitulmaal Wa Tamwil (BMT) (registered under the Sharia Cooperative Centre (INKOPSYAH)) managers from Jakarta, Bogor, Depok, Tangerang and Bekasi (JABODETABEK) were taken through a questionnaire survey and in-depth interviews. The findings are expected to contribute to better BMT decision-making and elaborate dimensions/strategies for improving financial inclusion of the poor, thus cementing BMT role in poverty alleviation.