Issues and challenges in financing the poor: case of Baitul Maal Wa Tamwil in Indonesia

Permata Wulandari, Salina Kassim

Research output: Contribution to journalArticlepeer-review

24 Citations (Scopus)


Purpose – The purpose of this paper is to highlight the issues and challenges in providing financing to the poor people based on the experience of Baitul Maal Wa Tamwil (BMT) in Indonesia. Design/methodology/approach – A series of structured interviews were conducted with the chairman and staff of the Central BMT (Induk Koperasi Syariah) in Jakarta which is the head-quarter of 382 BMTs throughout Indonesia, with additional chairman and shari’ah supervisory in Central BMT (Pusat Koperasi Syariah) in Makasar. Subsequently, the results from the structured interviews were analyzed using qualitative analysis to arrive at the model of the peculiarities of financing the poor in Indonesia. Findings – The findings show that the Central BMT has built specific products and empowerment mechanisms for the poor and has an ideal product to be applied in 382 BMT in Indonesia. There are two schemes of financing source in BMT, namely, social ministry (Kelompok Usaha Bersama) and private financing (national and international donor). Specifically, the peculiarities of financing given in BMT are not only in the term of capital but also in the term of providing infrastructure and training for the poor. Moreover, collateral must be provided as a screening process for the poor people to secure any form of financing. If there is no collateral, potential borrowers must opt for joint-liability financing. Furthermore, if the poor could not repay the financing, endowment coming from charity and compulsory Islamic tax (zakat, infaq and sadaqah) would play a vital role to cover for the financing default. Lastly, religious capacity building is also provided as a part of risk management aspect. Research limitations/implications – This study was only conducted in Indonesia which focussed on the peculiarities of financing for the poor people in Indonesia BMT. Despite this limitation, the findings of this study enable the construction of a model that highlights the issues and challenges that might arise in financing the poor in general. Originality/value – The paper adds to the literature on Islamic microfinance by enabling researchers and practitioners to understand the model of Islamic microfinance in Indonesia. It also contributes toward enriching the knowledge in the Islamic microfinance area.

Original languageEnglish
Pages (from-to)216-234
Number of pages19
JournalInternational Journal of Bank Marketing
Issue number2
Publication statusPublished - 4 Apr 2016


  • BMT
  • Financing
  • Issues and challenges
  • Peculiarities
  • Qualitative analysis


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