THE DETERMINANTS INFLUENCING ISLAMIC MICROFINANCE INSTITUTIONS IN IMPROVING FINANCIAL INCLUSION IN INDONESIA
Salina Kassim and Adhitya Ginanjar
Institute of Islamic Banking and Finance International Islamic University Malaysia
Abstract
Abstract: Financial inclusion has implemented by Financial Services Authorities (OJK) since 2014 in Indonesia by starting with 6 public banks and become 18 conventional banks and 2 Islamic banks in 2016. On the other hand, roles of Islamic Microfinance Institutions (IMFIs) more likely in implementing financial inclusion. More than 56.5 million Micro Small Medium Enterprises (MSME) contributed greater than 50% of Gross Domestic Product (GDP) and 23.551 microfinance institution are be able to deliver financial access to the poor in rural area. Financial inclusion has agenda in alleviating poverty, creating wealth and maintaining sustainability of financial services. This study purposes to observe the determinants influencing IMFIs in improving financial inclusion from the perspective of the IMFIs in view of their direct contribution in the process and having rich information about financial issues facing the borrowers. The managers also understand about financial inclusion agenda as well as financial guidelines and regulations issued by the relevant authorities. A total of 362 managers of Baitulmaal Wa Tamwil (BMTs), which registered under the Sharia Cooperative Centre (INKOPSYAH) are taken as respondents that representative of entire Indonesia cooperative from the Jakarta, Bogor, Depok, Tangerang, Bekasi (JABODETABEK), West Java, Middle Java, East Java, DI Yogyakarta and Lampung areas. The first instrument was a survey questionnaire, and the second one was an in-depth interview to outline data related to the model design. The findings of this research are expected to contribute to better decision-making for the policy makers especially Financial Services Authorities (OJK) to further develop IMFIs role in improving financial inclusion. The findings also elaborate several dimensions to improving financial inclusion among BMTs environment including consumption in term of financing, adopting well management, accepting subsidize, expanding businesses, implementing internal BMTs policies, enhancing community development and training financial education. This research highpoints the need for a variety of strategies to license success of improving financial inclusion by BMT.
Keywords: Financial Inclusion; Islamic Microfinance Institutions; Baitulmaal Wa Tamwil, Islamic finance
Topic: Islamic Micro finance