Bismillaahirrahmaanirrahiim,
Assalamualaikum wr. wb.
Ladies and gentlemen, brothers and sisters in Islam blessed by Allah.
I feel very happy that today we can meet here in the Developing Eight forum, a forum where I can meet with Islamic economy fighters and humanitarian warriors who want a better future of humanity, a more just social landscape, a fair and humane mankind.
In this occasion I would like to thank the work team or forum committee for having given me an opportunity to present a more practical study on Islamic Microfinance in Indonesia. As a practitioner of Islamic microfinance, I have taken part in it for nearly 20 years. Why did I choose to take part in Islamic microfinance?
It is may be very personal. Maybe because when starting my own business, I was also part of the micro entrepreneurs. Every day after the class of my college, with IDR 90,000 (USD 25), I struggled with flour: kneading, boiling, drying and frying crackers to then be sold in Angkringan (a sidewalk stall serving snacks and other cheap foods for students in Yogyakarta) and in the school canteens. This experience makes me know very well the difficulty of micro-entrepreneurs in accessing the source of funds from financial institutions because there was no supply at all from such institutions at the time.
Basically, the reason for the establishment of Baitul Maal wat Tamwil (BMT), that grows as a microfinance institution since the early 90’s, is in response to the state of society and the spirit of its era. It is a state in which poverty and squalor were everywhere and social disparity between conglomerates and micro and small entrepreneurs who were by the new order regime termed as Pengusaha Golongan Ekonomi Lemah/ the weak economy entrepreneurs was wide. On one hand, the conglomerates got a very great privilege from government. On the other hand, small and micro entrepreneurs were barely glanced at by the government and no financial institution wanted to reach them and so they became a lucrative target of loan sharks, illegal banks, individual moneylenders or as such.
The socio-economic condition itself, at that time, was really pathetic, because many traders and moneylenders trapped people for many reasons, among others: first, the consumptive/wasteful lifestyle or attitude of the people as a result of having no wealth management; second, the absence of a culture of saving; third, the absence of institutions that would finance micro-businesses.
In connection with the use of sharia system and the implementation and internalization of sharia values, it was born because of the spirit of the era. The spirit to apply sharia mushroomed on college campuses and with the approval of the establishment of the Bank Muammalat as a Sharia-based bank in Indonesia,
Ladies and gentlement.
In order to make our discussion clear, it is necessary that we know the institutions that organize activities in micro-finance in Indonesia.
Broadly, Microfinance Institutions / MFIs in Indonesia are divided into two: banking and non banking institutions. Banks are regulated by the Central Bank, Bank Indonesia (BI). Non-bank institutions are divided into two, namely formal and informal institutions. The formal institutions consist of pawnshops and venture capital (in the regulation of the Ministry of Finance) and an institution licensed and regulated and supervised by the local Regents to assist their citizens’ activities, that is LDKP and the cooperatives (in the regulation of the Ministry of Cooperative) and BMT’s as part of cooperatives institution. On the other hand, there are some non-formal institutions existing such as community-based participation and self-reliance NGOs.
My brothers and sisters.
As we all know that BMT has two main functions: the first, as a Maal management institution that manages funds derived from Zakat, Infaq, Sadaqah and Waqaf (Baitul Maal) and the second, as the manager of public funds for business-oriented purpose (Baitut-tamweel). For the first function, BMT collects zakat, infaq, and shodaqoh to help the poor. As for the second function, BMT collects funds from members’ deposits and provides the linkage program funds from Islamic banking to be channeled in the form of financing for micro and small enterprises that are almost impossible to access banking. The two functions that can work together is something that becomes a uniqueness of BMT which combines the functions of social and business functions in one institution.
My brothers and sisters
Why BMT Adopt the costomer visit officer Method?
The BMT Customers, in general, do not have a culture of saving and know-how of the good financial planning. The visit to customers’ business location is, therefore, to educate them to have the culture while picking up the money.
The BMT Customers are the owners of the business and at the same time they act as salesperson, production manager, finance manager, marketing manager and administration manager. If the leave their business or store and go to the bank or financial institution office, the will lose the opportunity get a lot of money from their business.
The BMT’s Customers are under-bankable or un-bankable category, so they need some flexibility and “special” financial service treatment which normally deny their access to mainstream banking services.
It has been a common belief among us that poor people can not save, and this myth indirectly poisons the minds of the micro entrepreneurs. Therefore, when we go to them to invite them to save, and they can finally hold a savingbook, no matter how small the amount of their saving balance is (beginning balance of IDR 50,000 = USD 6), their blocks of being a poor man collapses because they now already have a saving, a symbol of the rich that they can finally get. For three months, we will study and monitor the pattern of their saving, business capacity, character, and other related aspects to assess them before they get financing services.
In relation to financial planning of BMT saving product, it is tailored to the needs of members so that they can manage large expenditures such as for a wedding party, circumcision ceremony, hajj pilgrimage etc. By having the saving, the members also have the power to face unexpected expenditures such as for illness, death or disaster. Their readiness towards such conditions may prevent them from borrowing to loan sharks.
Ladies and gentlemen, brothers and sisters blessed by Allah.
Small steps performed by BMT’s employees have proved a success. BMT grows into a microfinance institution funded largely by the savings of its members. Based on the achievement data of BMT collected from 150 BMTs, members of the Association of BMT Indonesia until the end of 2010, we can see a magnitude level of saving mobilization of BMT that has reached 2.1 trillion rupiahs with a growth of 33% of previous year. While the development of BMT financing to Members reached 2.2 trillion rupiahs, rising to 38% from previous year. For sectors that are financed, as much as 63% is in the trade sectors; followed by service sectors, 22%; and then Agricultural sectors, 7%; and Industrial sectors, 6%; and consumptive sectors, 2%. And based on this record, the growth of BMT’s asset has increased by 33% from previous year to 2.6 trillion rupiahs.
Alhamdulillah, 150 BMTs have not only shown us as an institution that sustains, but more than that, they have also booked profit.Sustainability Indicator of BMT can be seen from the total number of offices in the Association of BMT Indonesia Network which now has reached 550 branch, with the ability to employ as many as 6832 people, and the total number of members of as many as 866,750 people and recorded the profit of 94.4 billion rupiahs.
The success of BMT in improving the living standard and the volume of business of its members can be seen from the increase in their financial performance and growth rate of financing. As can be seen on some of existing member profiles on the handout,
As part of the efforts to continuous improvement, one of the very serious efforts we are doing is to improve the success indicators which previously were financial indicators and outreach and previously we formulate new success indicators, that is: a Maqasid syar’i based indicators, a welfare of family members, which includes the measurement of increased spirituality; education, social life; health and increased financial capabilities. This more comprehensive measurement is expected to seriously improve BMT’s performance by increasing the ability of micro-entrepreneurs to increase their income and help themselves and their families from poverty circles.
In conclusion, BMT is a financial institution that encourages people to save. BMT has managed to ward off such myths: (1) small business community especially micro enterprises (MSEs) can not save; (2) financing them is greatly risky, (3) micro-financing is always expensive, (4) microfinance business is more socially-oriented and not profitable. BMT has the vision, mission and a clear measure of success
Certainly, we do all this because of the belief that all measures that we do using sharia finance can lead us to Falah, that is: victory, success, and true happiness worldly and afterlife. Hopefully this simple presentation can be beneficial for me and for you all the participants of working group and hopefully we can truly become strong strengthening building, solid and established and that God always eases our steps, ameen. I apologize to you all if there is mistake or negligence. Thank you.
Billahittaufiq wal hidayah,
Wassalamuálaikum wr. wb.
Saat Suharto Amjad
