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Proposing New Islamic Microfinance Model for Sustainable Islamic Microfinance Institution

In: Islamic Finance and Sustainable Development

Author

Listed:
  • Ali Sakti

    (Bank Indonesia Institute)

Abstract

Financial technology (fintech) has invaded Islamic finance, including Islamic microfinance, which has affected Islamic microfinance institution (IMFI) in Indonesia, including Baitul Maal wat Tamwil (BMT), which has forced the IMFI/BMT to adapt to survive and sustain. This study aims to determine the characteristic of fintech needed and suitable for Islamic microfinance, and then propose new Islamic microfinance model, combining Islamic social finance and Islamic commercial finance, as well as embracing new fintech, called micro-fintech models, which could ensure the sustainability of IMFI/BMT in Indonesia. The results show that micro-fintech needed by IMFI/BMT includes crowdfunding P2P financing, Crowdfunding P2P social, payment, and digital banking. The micro-fintech model to be adopted includes private closed ecosystem of APEX/Association, limited open ecosystem of APEX/Association—Fintech Co., public closed ecosystem of APEX/Association, limited open ecosystem of IMFI/BMT—Fintech Co., and private closed ecosystem of IMFI/BMT. To be sustain, IMFI/BMT should adopt: (1) Wadiah Amanah for savings accounts; (2) Mudharabah Muqayyadah for investment account, if any; (3) collect cash waqf intensively to be placed as waqf long-term investment deposits or waqf equity; (4) adopt P2P financing intensively as source of commercial funding; and (5) adopt P2P social intensively to raise zakat-infaq-sadaqa-waqf (ZISWaf).

Suggested Citation

  • Ali Sakti, 2021. "Proposing New Islamic Microfinance Model for Sustainable Islamic Microfinance Institution," Springer Books, in: M. Kabir Hassan & Mehmet Saraç & Ashraf Khan (ed.), Islamic Finance and Sustainable Development, chapter 0, pages 349-378, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-76016-8_15
    DOI: 10.1007/978-3-030-76016-8_15
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