Alleviating Poverty through Islamic Microfinance: Outreach and Efficiency (Study on BMT and Islamic Cooperatives in Indonesia)

Authors

  • Purwanto Purwanto President University
  • Ina Primiana Padjadjaran University
  • Dian Masyita Padjadjaran University
  • Erie Febrian Padjadjaran University

DOI:

https://doi.org/10.17059/ekon.reg.2020-4-24

Keywords:

cost, economic efficiency, social efficiency, average loan instalment, number of offices, age, profit orientation, fund collection, amount and type of financing, amount and type of savings, cost per borrower, Islamic Microfinance Institution

Abstract

The involvement of Islamic Microfinance Institutions (IMFI) in building the national economy is paramount to help the poor. However, provision of access and services to lower-level households can potentially conflict with the sustainability of the institutions. This study analyses the social outreach factors that determine financial and social efficiencies. To reach the set goal and solve this issue, we used mixed methodology combining quantitative (statistical instruments, such as Data Envelopment Analysis (DEA) and multivariate analysis) and qualitative approaches (interviews to clarify or deepen the existing information). The assessment of the dependent variables is influenced by proxies of depth, breadth, length, scope, and cost. The results showed that the average loan instalments and the number of offices and branches significantly influence financial and social efficiency. The age of the institution only has an effect on financial efficiency. Simultaneously, profit orientation, the amount and type of financing and the amount and type of savings only have a high impact on social efficiency, whereas the impact of fund collection and cost per borrower is insignificant. There is a strong positive correlation between the two dependent variables. The influence of independent variables on financial and social efficiency is significant with the coefficient of determination 23.1274 % and 53.2941 %, respectively.

Author Biographies

Purwanto Purwanto, President University

PhD in Islamic Finance, Senior Researcher, Director of Students Affair, Alumni and Counceling, Management Study Program, School of Business, President University; Scopus Author ID: 57196194532 (Jababeka Education Park, Jl. Ki Hajar Dewantara, Kota Jababeka, Bekasi, 17550, West Java, Indonesia; e-mail: purwanto@president.ac.id).

Ina Primiana, Padjadjaran University

Doctor of Industrial Management Engineering, Professor, Chair of the Focus Group SME’s Indonesian Association of Bachelor of Economics, Chairman of the West Java Economic Forum Expert Council, Expert Team of the National Defense Council, Faculty of Economics and Business at Padjadjaran University; Scopus Author ID: 55437876800 (46 A, Dipati Ukur St., Bandung 40132, West Java, Indonesia; e-mail: ina.sagir@fe.unpad.ac.id).

Dian Masyita, Padjadjaran University

Doctor of Islamic Finance, Professor; Assessor of National Tertiary Accreditation Institutions for Islamic Economics, Sharia Business Management and Sharia Banking Study Programs; Reviewer of the Indonesian Ministry of Finance’s Educational Fund Management Institution, Faculty of Economics and Business at Padjadjaran University; Scopus Author ID: 56820137900 (46 A, Dipati Ukur St., Bandung 40132, West Java, Indonesia; e-mail: dian.masyita@fe.unpad.ac.id).

Erie Febrian, Padjadjaran University

Doctor in Islamic Bank Risk Management, Associate Professor, Deputy Director at the Doctorate School of Management & Business, Researcher, Management Institute of the Faculty of Economics (LMFE), Faculty of Economics and Business, Padjadjaran University; Scopus Author ID: 36815840700 (46 A, Dipati Ukur St., Bandung 40132, West Java, Indonesia; e-mail: erie_febrian@fe.unpad.ac.id).

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Published

29.12.2020

How to Cite

Purwanto, P., Primiana, I., Masyita, D., & Febrian, E. (2020). Alleviating Poverty through Islamic Microfinance: Outreach and Efficiency (Study on BMT and Islamic Cooperatives in Indonesia). Economy of Regions, 16(4), 1362–1376. https://doi.org/10.17059/ekon.reg.2020-4-24

Issue

Vol. 16 No. 4 (2020)

Section

Articles

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Copyright (c) 2020 Purwanto, Ina Primiana, Erie Febrian, Dian Masyita

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