Developing BMT as a loss-profit sharing-based microfinance: an Indonesian experience

Abstract

This article would like to discuss an Indonesian experience in developing Baitul Mal wat Tamwil (BMT) since 1990’s as an alternative microfinance which based on loss and profit sharing schema that realized a more just economic system. This research is conducted by both bibliographical overviews and empirical investigations. This paper would like to elaborate more on how BMT developed and maintained its capacity and efforts, in providing a more just alternative model instead of interest system which had shown negative spread and pseudo economic growth. This, however, requires emphasizing the main differences between both systems (sharing and interest). It also discusses on how BMT upgraded competitively various attractive products which based on loss and profit sharing. The establishment of BMT in Indonesia could not be separated from the emergence of “creative minority” and “enlightened group” in some campuses in Indonesia to build BMT since 1984, which later followed and developed by Indonesian Muslim Intellectual Association (Ikatan Cendekiawan Muslim Indonesia/ ICMI) since 1991. The research findings showed that the schema which is used by BMT on loss and profit sharing is a real practical effort which then has successfully developed, massively contributed and largely triggered Indonesian economic in the real sector, especially for the small and medium economic scale enterprises (SMES) in order to poverty alleviation. It also reflected as an experiment of early steps in recognizing Islamic economy in Indonesia. BMT also still could survive, even when a huge economic crisis struck Indonesia particularly and South East Asia generally in 1997.

The role of developing and institutionalization of Qardul Hasan in poverty alleviation in Afghanistan

“…[10] In the meantime, Qard is demarcated by the Shafi' Ulama as property ownership that will be repaid in the future because the lender cut off a portion of his property to the borrower. [11] Some Ulama said, According to Fiqh the Qardul Hasan is considered as a contract that gives the property and the responsibility to one and returns certain assets and liabilities as a type of Tabarru and Taqrrub to Allah S.W. [12] In modern economic world, Qardul Hasan is considering benevolent loans; therefore, a loan given on the ground of a mere social duty, in which case the borrower is not obligated to repay anything except loans.…”

The Impacts of BMT Empowerment Program to MSMes Development: A Case Study in Magelang

“…In the Indonesian economy, MSMEs are a business group that has the largest number of workers and has been proven to be resistant to the economic crisis (Mubarrak, 2018). Based on article 6 of Law Number 20 of 2008 concerning Micro, Small, and Medium Enterprises, there are several criteria used to define Micro, Small, and Medium Enterprises.…”

“…The revitalization of the Baitul Maal concept is very important because there are unlimited donor funds. According to Mubarrak (2018), Qardhul Hasan financing that is distributed by BMT has the potential to be used as a solution to poverty alleviation. In addition, through Qardhul Hasan financing, it allows MSMEs to be sustainable because they do not only depend on donations.…”

“…Another obstacle is that BMT has the responsibility to increase the capacity to serve members in all aspects. The most obvious challenge and obstacle is that the presence of BMTs can be a competitor for conventional microfinance institutions which always have a comprehensive commitment to Islamic principles (Mubarrak, 2018).…”

“…The role of BMT in developing UMKM has been analyzed by previous researchers, which includes several aspects such as the role of BMT, MSME development programs through profit-sharing agreements, MSME financing risks, and the effectiveness of MSME development through BMT (Fahrial, Maryunani, Ashar, & Kaluge, 2015;Hasanah & Yusuf, 2013;Mohamed Asmy & Mohammed, 2013;Mubarrak, 2018;Nur Yahya, 2018;Yuniar, 2015). Although research on the role of BMTs for the development of MSMEs has been done a lot, there are not many studies that analyze the MSME empowerment through the BMT program in Magelang.…”