Applicability of Mudarabah and Musharakah as Islamic Micro-equity Finance to Underprivileged Women in Malaysia

Islam, Reazul; Ahmad, Rubi

doi:10.1057/s41287-019-00225-3

Cited by 21 publications

(20 citation statements)

References 40 publications

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“…Seperti bunga yang dilarang dalam Pembiayaan syariah. Hasil penelitian (Ahmad et al, 2020) menunjukkan praktik pembiayaan oleh LKM syariah, seperti bentuk keuangan bebas bunga, juga memungkinkan penjangkauan yang lebih besar tetapi membutuhkan lebih banyak sumber daya untuk dikelola.…”

Section: Hasil Dan Pembahasanunclassified

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Studi Literatur Skema Pembiayaan Lembaga Keuangan Mikro Syariah

Murizal¹,

Soemitra²

2022

ajeks

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Financing schemes carried out by Islamic microfinance institutions continue to face challenges with the development of these institutions. A unique financing scheme with a prohibition on interest-based financing. The literature study used in this study used data in the form of Scopus indexed articles. Data containing content related to financing schemes for Islamic financial institutions was selected with a total of 18 articles. Furthermore, the stages of research are carried out as described in the research methodology. The findings of this study describe two main financing schemes carried out by Islamic financial institutions, namely: The first scheme is Profit and Loss Sharing (PLS) with mudharabah, musyarakah, muzara'ah and muzaqat contracts. The second scheme is non-PLS, which includes murabahah, bai' salam, ijarah and qard al-hasanah. Other findings in this study describe Islamic MFI financing schemes in several countries such as: in Indonesia there are two financing principles in Islamic MFIs, namely equity financing using PLS mechanisms such as: mudharabah and musyarakah. The second principle is debt-based financing using a non-PLS mechanism. While in Bangladesh the Grameen Bank model was developed, but it is considered not to meet Islamic sharia because it still uses interest. Furthermore Kalanjiam financing scheme in India which is quite successful. Finally, in Latin America and Africa, the village bank model has been successfully implemented in accordance with sharia in Jabal al Hoss, Syria. Keywords: LKMS, Financing, Literature Study

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Section: Hasil Dan Pembahasanunclassified

“…Dalam perjanjian ini, lembaga pembiayaan memberikan kompensasi atas kerusakan aset yang mungkin terjadi selama masa leasing. Skema pembiayaan keuangan mikro syariah semacam itu memberikan jaminan modal gratis kepada masyarakat miskin, terutama untuk menjalankan usaha mikro (Islam & Ahmad, 2020).…”

Section: Hasil Dan Pembahasanunclassified

Studi Literatur Skema Pembiayaan Lembaga Keuangan Mikro Syariah

Murizal¹,

Soemitra²

2022

ajeks

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“…There are several studies attempted to discuss Islamic equity financing in microfinance, among them study by Islam (2020) on applicability of Mudarabah and Musharakah as Islamic Micro-equity Finance to underprivileged women in Malaysia, this study focused on woman entrepreneurs preference in term of type of scheme, the study found that women entrepreneurs prefer those Shariah principles that seem easy to comprehend and preserve their interests. This study successfully obtained the views of entrepreneurs on their choice but does not focus on risk issue.…”

Section: Islamic Equity Financingmentioning

confidence: 99%

Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia

et al. 2021

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Islamic Microfinance institution (MFI) funded either by government or private financial institutions are playing an instrumental role in discharging business fund to the eligible micro entrepreneurs (ME). The potential of micro entrepreneurs to succeed in their business is always becoming a central issue, this is due to the ability to manage the business strategy in a sustainable manner. The fund transacted in micro financing industry is small in term of quantity, therefore it also generates small profit to both parties MFI and ME, it may not be profitable in the eye of financial institution such as bank or Microfinance institution such as Baitul Mal wa Tamwil, moreover the financing risk is always high because some of the financing given without proper risk mitigation could lead into financial failure. The above reasons have influenced most of the MFIs’s decision to abstain from providing equity-based financing, where the concept very much suitable and workable to bring out the groups of MEs from poverty list in comparison to debt-based financing. Equity-based financing require bigger commitment and intervention from MFI in business in term of coaching, training and managing cash flow of the business. Islamic equity-based financing is about profit and loss sharing (PLS) financing. Where both parties have to bear financial consequences in the event of business failure. The failure in business would cause non-performing financing (NPF) to the financial institution and could effect the financial position for that particular year of report. The continuous NPF to the MFI can risk the company future plan. Thus, this study aimed to explore the mechanism of risk mitigation for equity-based financing which can be adopted by Islamic microfinance institutions around the would. The mechanism used to suggest in area of governance, selection of entreprenuer, financing arrangement, payment system and business business sectors. The study applied content analysis to collect the history data of equity-based financing as offered by BMT and MFIs in Indonesia, the data informed researcher on the success and failure story, the study also applied structured interview with managers who are responsible on risk mitigation. The study found that BMT and MFIs in Indonesia are well-organized, the governance and selection of entreprenuer are palying significant role while the payment system which includes the collatoral against any negligence posits an effective way in mircofinance mitigation model.

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“…Still, in operation, it is somehow a way of emulating conventional structure due to a sensitive situation in competing with their conventional counterpart. Surprisingly, the equity-based financing model's practice is either absent or low in the Islamic finance industry; for instance, in Malaysia, no microfinance institution offer equity-based contacts, Musharakah and Mudarabah (Islam & Ahmad, 2020). Meanwhile, according to Ariffina et al (2015), Musharakah Muthanaqisoh is been applied as an equity financing mode by a very few Islamic banks in Malaysia as the banks are reluctant of practicing the equity financing modes due to complexity of their nature compared to conventional financing modes even though the respondents of the study believe that the equity-based financing constitutes the real ecosystem of Islamic banking.…”

Section: Islamic Financial System and Financing Modelsmentioning

confidence: 99%

Debt-Based Versus Equity-Based Financing: A Comparative Analysis on Efficiency of Islamic Financial System

Maikabara

Maulida

Aderemi

2020

IJIEFB

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Introduction to The Problem: The financial system, as a subset of economics, plays a prominent role in solidifying the socio-economic development and wellbeing of people of a society. However, debt-based and equity-based financing are the main models employed by Islamic financial institutions to help small and medium enterprises (SMEs) that need funding to facilitate their businesses' projects. Operationally, debt-based financing seems to be the prominent financing model than equity-based financing, which only accounts for either zero or small scale in Islamic financial institutions.Objective Study: This study explores the rightful financing model that can contribute much better to the efficiency of the Islamic financial system in achieving socio-economic development.Methodology: To achieve the study's purpose, a literature-based method and secondary data collection technique are adopted as related previous studies from articles, books, conferences, and working papers are reviewed and analyzed.Findings: Equity-based model as a partnership model is somewhat more productive in contributing to socio-economic development than debt-based financing, but not being widely applied due to specific issues such as high risk, agency problem, costumer’s awareness, and sensitivity, and others more. It is recommended that researchers empirically investigate the suitable financing model between debt-based and equity-based financing models to ensure the achievement of sustainable socio-economic development.

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Applicability of Mudarabah and Musharakah as Islamic Micro-equity Finance to Underprivileged Women in Malaysia

Cited by 21 publications

References 40 publications

Studi Literatur Skema Pembiayaan Lembaga Keuangan Mikro Syariah

Studi Literatur Skema Pembiayaan Lembaga Keuangan Mikro Syariah

Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia

Debt-Based Versus Equity-Based Financing: A Comparative Analysis on Efficiency of Islamic Financial System

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