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Internal control system for Islamic micro financing: An exploratory study of Baitul Maal wat Tamwil in the City of Yogyakarta Indonesia

  • Sartini Wardiwiyono
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    Purpose – This paper aims to contribute to literature on managing Islamic micro financing by formulating and evaluating the implementation of internal control system for Islamic micro financing. It also aims to investigate the implementation of an internal control system for financing activities practiced by Baitul Maal wat Tamwil (BMT), a special micro finance organization, in Indonesia. Design/methodology/approach – First, the paper introduces the concept of internal control system. Second, an internal control system for Islamic financing is formulated. Primary data that relate to the implementation of an internal control system for financing activities are obtained through a direct survey using questionnaires. The data are then analyzed using descriptive statistic and qualitative analysis to find the implementations of the internal control system. Findings – BMTs in Indonesia have implemented an internal control system for their financing activities. The rank of the implementation is: information and communication; monitoring; control environment; risk assessment; and control activities. This study also indicates that the implementation of authorization and consultation to the Shariah Supervisory Board was low. Research limitations/implications – The respondents of this study are small in number. However, the findings are valid and reliable. Originality/value – To the author's knowledge, there is a lack of scholars' attention on the implementation of internal control especially for Islamic micro financing. Therefore, this study will provide insight to the literature on how to manage Islamic micro financing efficiently and effectively.

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    Article provided by Emerald Group Publishing in its journal International Journal of Islamic and Middle Eastern Finance and Management.

    Volume (Year): 5 (2012)
    Issue (Month): 4 (December)
    Pages: 340-352

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    Handle: RePEc:eme:imefpp:v:5:y:2012:i:4:pp:340-352
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