TY - JOUR
T1 - The effectiveness of linkage programs
T2 - Case study of bmts in indonesia
AU - Fitriasari, Triani
AU - Dalimunthe, Zuliani
N1 - Funding Information:
This research was conducted with the support of Universitas Indonesia through the PITTA program 2017. We thank all the contributing parties who assisted in the completion of this research.
Publisher Copyright:
© 2019, Universiti Malaysia Sarawak. All rights reserved.
PY - 2019
Y1 - 2019
N2 - Despite the importance of microfinancing as a tool for alleviating poverty, formal financial institutions, such as banks, are reluctant to provide this type of financing. There is, therefore, a need to provide financing indirectly through linkage programs. Launched by Bank Indonesia on January 9, 2004, the linkage program is the first pillar of the Indonesian Banking Architecture, and serves as a comprehensive framework for the development of the Indonesian banking industry. The program provides financing through cooperatives to their members operating microbusinesses. This study was conducted to evaluate the effectiveness of linkage pro-grams provided by Islamic banks for microfinancing through Islamic cooperatives known as houses of charity (baitul maal wa tamwil, BMT). This research was conducted by using a mixed qualitative and quantitative approach. Qualitative information was collected using in-depth interviews with the management and author-ized officers from five BMTs that are knowledgeable about such cooperatives. The quantitative research was conducted by analyzing the cooperatives’ financial statements and conducting a direct survey of the recipients of financing. The effectiveness of a microfinancing program is commonly measured by three aspects, known as the “the triangle of microfinance.” These aspects are the extent to which the financing provides for the poor (outreach), whether it increases the income or assets of the target population (impact), and the business sur-vival of institutions managing the financing (institution sustainability). We found that linkage programs had a positive impact, especially on improving the affordability of outreach in small and medium-sized but not in the large BMTs. We suggest that the Indonesian Bank or Indonesian Financial Service Authority should specifically encourage medium-sized cooperatives or BMTs to employ this program by providing more incentives for banks or reducing the barriers for BMTs to participate.
AB - Despite the importance of microfinancing as a tool for alleviating poverty, formal financial institutions, such as banks, are reluctant to provide this type of financing. There is, therefore, a need to provide financing indirectly through linkage programs. Launched by Bank Indonesia on January 9, 2004, the linkage program is the first pillar of the Indonesian Banking Architecture, and serves as a comprehensive framework for the development of the Indonesian banking industry. The program provides financing through cooperatives to their members operating microbusinesses. This study was conducted to evaluate the effectiveness of linkage pro-grams provided by Islamic banks for microfinancing through Islamic cooperatives known as houses of charity (baitul maal wa tamwil, BMT). This research was conducted by using a mixed qualitative and quantitative approach. Qualitative information was collected using in-depth interviews with the management and author-ized officers from five BMTs that are knowledgeable about such cooperatives. The quantitative research was conducted by analyzing the cooperatives’ financial statements and conducting a direct survey of the recipients of financing. The effectiveness of a microfinancing program is commonly measured by three aspects, known as the “the triangle of microfinance.” These aspects are the extent to which the financing provides for the poor (outreach), whether it increases the income or assets of the target population (impact), and the business sur-vival of institutions managing the financing (institution sustainability). We found that linkage programs had a positive impact, especially on improving the affordability of outreach in small and medium-sized but not in the large BMTs. We suggest that the Indonesian Bank or Indonesian Financial Service Authority should specifically encourage medium-sized cooperatives or BMTs to employ this program by providing more incentives for banks or reducing the barriers for BMTs to participate.
KW - Cooperatives
KW - Islamic microfinance institution
KW - Linkage program
KW - Triangle of microfinance
UR - http://www.scopus.com/inward/record.url?scp=85065927878&partnerID=8YFLogxK
M3 - Article
AN - SCOPUS:85065927878
SN - 1511-6670
VL - 20
SP - 210
EP - 220
JO - International Journal of Business and Society
JF - International Journal of Business and Society
IS - S1
ER -