Stages in the Islamic Social and Commercial Financing for Microfinancing

Anisa Fitria Wulaningtyas, Zuliani Dalimunthe, Yusuf Wibisono

Research output: Contribution to conferencePaperpeer-review

Abstract

Zakah, shadaqah, and waqf are among the Islamic social funds work as instruments for poverty alleviation. Islamic social funds in Indonesia collect through authorized zakah institutions. This study analyzes how zakah institutions provide micro financing in several stages to develop micro-business. We interviewed three zakat institutions in Indonesia. We found that micro-business financing through zakat institutions provided in three stages. Each stage has different schemes and provisions. At the first stage, the fund granted to individuals without an obligation to pay the fund back. It is a zakah fund distributed according to a transfer payment scheme. In the second stage, financing provided to individuals or business groups with interest-free repayment. It is a non-zakat social fund used to finance a micro business with 0% interest, lower than the market rate for micro-financing. Moreover, the repayment at this stage is not to the zakat institution, but rather to the group, either become revolving fund among group members or become group-owned resources. The third stage is commercial financing using murabaha or profit sharing scheme.
Original languageEnglish
Publication statusPublished - 2018
EventProceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy. - ID, Bandung, Indonesia
Duration: 1 Jan 2018 → …

Conference

ConferenceProceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy.
CountryIndonesia
CityBandung
Period1/01/18 → …

Keywords

  • Staged Financing, Islamic Microfinance, Zakah Management Institution, Islamic Social Funds

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