Examining the Outreach of Islamic Charity Based Microfinance Programs: Empirical Evidence From Indonesia

Yumna, Aimatul; Clarke, Matthew

doi:10.21098/jimf.v5i4.1111

Cited by 5 publications

(7 citation statements)

References 4 publications

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“…QH funds can also be taken from waqf . Waqf is defined as “holding certain physical assets and preserving it to the long term benefit for the society” (Yumna and Clarke, 2009). Aside from ZIS funds, banks can therefore maximise the receipt and use of waqf .…”

Section: Discussionmentioning

confidence: 99%

The optimisation of Qardhul Hasan management in Islamic banking: enhancing its role in empowering the community

Nugraheni

Muhammad

2023

JEC

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Purpose Qardhul Hasan (QH) is a type of Islamic contract that prioritises benevolent aspects between beneficiaries and the fund provider. The effective management and distribution of QH can contribute to overcoming economic problems in society. This study aims to explore the potential to enlarge the sources of QH funding and QH financing in Indonesian Islamic banks. The paper proposes a framework for QH management in Islamic banks by identifying the sources of QH funds as well as the management and potential allocations of QH funds. Design/methodology/approach This study uses a descriptive analysis method with a framework-based review to discuss the strategy of optimising the sources, financing and management of QH in Islamic banks. The implementation of QH in the Islamic banking industry is described based on the previous literature and current phenomena. Findings To positively impact economic development, Islamic banks can collaborate with parties that are more focused on charitable activities and have greater resources to channel and use QH funds. This study also formulates a framework of QH funds management that prioritises efforts to multiply benefits for both the fund provider and the beneficiaries. Research limitations/implications The descriptive method used in this paper comprises preliminary research to analyse the current phenomena and potential strategies that can be implemented. Future studies may use empirical data to strengthen the analysis. Practical implications The recommendations of this paper can be used by relevant social fund management institutions in collaboration with Islamic banking. Social implications QH reflects not only the social aspects of Islamic banks and extends beyond their corporate social responsibility activities, its effective management will make a greater contribution to reducing the level of unemployment, poverty alleviation and supporting the country’s economic development. Originality/value This paper provides a framework that integrates financial institutions in maximising QH fund management to encourage greater benefits for the community. Although previous studies have mentioned the important role of QH, relatively few have considered how Islamic banks maximise its management.

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Section: Discussionmentioning

confidence: 99%

The optimisation of Qardhul Hasan management in Islamic banking: enhancing its role in empowering the community

Nugraheni

Muhammad

2023

JEC

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“…There are numerous studies that have shown positive benefits of microfinance provision for the poor in both rural and urban contexts in the developing world [30], and a broad consensus has emerged which suggests that microfinance projects have helped alleviate poverty [31]. However, their usefulness in development terms, at least in some contexts, has been questioned [11,32]. The main issue behind this criticism is that given severe limitations on cash availability, relatively few people in a community can obtain credit, the amounts received by any one person are typically small and those that do obtain credit may not make the best use of it [4,16,17,29,31,32].…”

Section: Impacts Of Microfinancementioning

confidence: 99%

“…However, their usefulness in development terms, at least in some contexts, has been questioned [11,32]. The main issue behind this criticism is that given severe limitations on cash availability, relatively few people in a community can obtain credit, the amounts received by any one person are typically small and those that do obtain credit may not make the best use of it [4,16,17,29,31,32]. Hence microfinance can end up benefiting those in society who are better off as they are able to borrow relatively more and may also make better use of the credit than the poorest in society [4,16,17].…”

Section: Impacts Of Microfinancementioning

confidence: 99%

“…In a few countries, there are laws which require Zakah payments to go to the government, but for most countries with significant Muslim populations, there are structures in place (mosques, NGOs) outside of the government which can handle the payments and distribute them to those in need. Working via structures such as mosques can have its own issues as some people may find it an intimidating space [32]. Indeed, even within a single country, there can be regional differences in terms of the legal frameworks in place to support the collection and use of Zakah and Wakf contributions [102].…”

Section: Islamic Fbdosmentioning

confidence: 99%

“…There have been various published studies designed to explore the use and potential of Zakah and Waqf for socio-economic development, including providing microfinance [31,32,52,99,[104][105][106]. Zakah and Waqf could provide the funding required for microfinance to avoid the need to charge compulsory interest on credit [32,56,106], although there could still be a requirement for borrowers to repay capital and borrowers can make voluntary payments. Some authors have argued that the payment of an 'administration fee' or 'service charge' for credit transactions is not against Islamic principles [52], and this could also provide a source of income.…”

Section: Islamic Fbdosmentioning

confidence: 99%

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Giving and Receiving: Faith and the Sustainability of Institutions Providing Microfinance Services for Development

Morse

2024

Sustainability

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Topic: This review explores the important issue of the ‘institutional sustainability’ (IS) of faith-based development organizations (FBDOs) providing microfinance services to the poor in the developing world. IS has often been equated with the financial self-reliance of microfinance service providers, with income from credit charged on loans as well as other fees being used to pay for the service. While the approaches and tensions inherent in the attainment of IS by microfinance providers seeking to help the poorest in society have been well explored in the literature, there has been no specific analysis of FBDO providers and the special challenges they may face. Methodology: This paper is based on a review of the literature using a combination of search terms such as ‘microfinance’, ‘development’, ‘institutional sustainability’, ‘financial self-reliance’ and ‘faith’, with a special emphasis on the literature published between the 1990s and 2023. Results: One of the main findings is that Christian and Hindu FBDOs providing microfinance largely follow the financial self-reliance conceptualization of IS applied by secular providers and apply much the same set of responses regarding the setting of interest rates and other charges and the management of repayment amongst their client base. However, FBDOs of the Islamic faith take a broader perspective on IS and include the need for spirituality and religious development amongst their clients. Future directions: This paper makes a number of suggestions for future research, including (1) the reasons why religious development and spirituality do not appear to be strong issues for Christian and Hindu FBDOs relative to their Islamic counterparts; (2) the potential for inter-faith collaboration between FBDOs and secular providers, between FBDOs of different faiths as well as FBDOs from versions of the same faith (e.g., Protestant and Catholic); and (3) whether FBDOs are more naturally predisposed and able to engage and collaborate with the informal microfinance sector than secular microfinance providers.

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The impact of waqf-based microfinance program on clients’ well-being during COVID-19 pandemic: empirical evidence from Indonesia

Yumna,

Marta,

Yanuarta Re

2024

JIABR

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Purpose The purpose of this study was to evaluate the impact of a waqf-based microfinance program on clients’ well-being during the COVID-19 pandemic. Design/methodology/approach This study obtained primary data from a survey distributed to 282 respondents, consisting of 150 clients and 132 nonclients of the Bank Wakaf Mikro (BWM) Al Kausar in Indonesia. This study constructed a well-being index (WBI) and compared clients’ and nonclients’ WBI before and during the pandemic using the difference-in-differences (DID) method. DID measures the effect of a treatment in a “treatment group” versus a “control group” using data from two periods. Findings This study found that clients and nonclients alike experienced an increase in well-being throughout the pandemic, but the increase was greater for clients than for nonclients. This study argues that the waqf-based microfinance program run by Bank Waqf Mikro model can assist their clients – as more vulnerable groups in society – to maintain their well-being during the pandemic. Research limitations/implications To ensure the effectiveness of waqf-based microfinance programs in diverse settings, this study should include more respondents from different institutions. Practical implications This research has several practical recommendations, particularly for integrating Islamic charity for microfinance. The findings of this study suggest that the BWM model, which combines three institutions – the government, zakat groups and Islamic boarding schools (pesantrens) – can play a substantial role in enhancing the welfare of its members during the pandemic. Originality/value This study contributes to the body of knowledge on Islamic microfinance by providing empirical evidence of the importance of waqf-based microfinance in reducing the pandemic’s impact on clients well-being.

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Examining the Outreach of Islamic Charity Based Microfinance Programs: Empirical Evidence From Indonesia

Cited by 5 publications

References 4 publications

The optimisation of Qardhul Hasan management in Islamic banking: enhancing its role in empowering the community

The optimisation of Qardhul Hasan management in Islamic banking: enhancing its role in empowering the community

Giving and Receiving: Faith and the Sustainability of Institutions Providing Microfinance Services for Development

The impact of waqf-based microfinance program on clients’ well-being during COVID-19 pandemic: empirical evidence from Indonesia

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