Baitul Maal Wat-Tamwil (BMT) and

Koperasi Syariah

The Practice of
Islamic Microfinance
in Indonesia
Presented by Farokhah
Muzayinatun Niswah, S.EI., M.Si

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

Masters's Degree:
Middle East and Islamic Studies (Focus
Study in Islamic Economics and Finance) at
University of Indonesia | 2018 – 2020

Bachelor's Degree:
Islamic Economics at Universitas
Airlangga | 2013 – 2017 Farokhah Muzayinatun
Niswah, S.EI., M.Si
Islamic Economics
ISLAMIC ECONOMICS 2022 Department

INTERNATIONAL SUMMER COURSE UMLA

2020 - Now
Lecturer Universitas Muhammadiyah Lamongan
[Islamic Economics Department]
2021- Now
Researcher at Waqf Center for Indonesian
Development & Studies (WaCIDS)
2019-2020
Facilitator of Financial Management Training
Farokhah Muzayinatun
at Wise Me Life Experts Jakarta
Niswah, S.EI., M.Si
Islamic Economics
ISLAMIC ECONOMICS 2022 Department

INTERNATIONAL SUMMER COURSE UMLA

 Today's Topic

01 INTRODUCTION

02 ISLAMIC MICROFINANCE IN INDONESIA

03 BAITUL MAAL WAT-TAMWIL (BMT)

04 ISLAMIC COOPERATIVE [KOPERASI SYARIAH]

05 DISCUSSION

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 INTRODUCTION

Islamic Financial Institutions

BANK NON-BANK

Islamic Commercial Banks (BUS) Sharia Business Unit (UUS)

Sharia Rural Banks (BPRS) Baitul Mall Wat Tanwil (BMT)
Islamic Cooperative

Indonesia has become the country with the largest

Islamic microfinance in the world with 22.000 Islamic
Cooperatives and Baitul Maal Wat Tanwil (BMT).

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE GOAL OF MICROFINANCE

Microfinance helps people, especially those financially excluded, to get access to

the formal financial system and institutions.

FIRST SECOND THIRD

Strengthening financial Job creation at low Increasing small firms’

and technical assistance capital cost access to financial and
institutions that should technical services
serve SMEs

Moreover, the core purpose of microfinance is to enable microenterprises to

develop their businesses; this presupposes that the common business cycle will
clearly take shape in terms of receiving a loan, investing, receiving an income, and
repaying the loan.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 ISLAMIC MICROFINANCE
IN INDONESIA
IMFs

The contribution of Islamic microfinance

to the total microfinance in Indonesia is
higher than that of the main Islamic
finance sectors, i.e. Islamic banks, capital
Based on the data in 2017, it
markets, and non-bank financial
is estimated that the total
institutions.
amount of financing
The main market player provided by all
1. Islamic rural banks (Bank Pembiayaan microfinance institutions
Rakyat Syariah/BPRS), reaches IDR 37.34 trillion.
2. Islamic savings and loan cooperatives
(Koperasi Simpan Pinjam Pembiayaan
Syariah/KSPPS or also known as BMTs). KSPPS or BMTs
contributed the biggest
share, amounting to 61.88 %.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 BAITUL MAAL WAT-TAMWIL (BMT)

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 WHAT IS BAITUL MAAL WAT-TAMWIL (BMT)?

BMT stands for Baitul Maal wat Tamwil, which is the concept of merging between
Baitul Maal and Baitul Tamwil. Conceptually, BMT is an institution that includes
two types of activities at once: social empowerment (Maal) &
productive economic empowerment (Tamwil)

BAITUL MAAL BAITUL TAMWIL

Maal, which means public wealth, Tamwil means wealth

is any wealth belonging to the creation, the use of
society, collected from zakat, wealth for commercial
infaq, sadaqah, or wakaf which purposes.
should be managed for public
prosperity.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE GOALS OF BMT

1 Build and develop the potential and capabilities of member economies in

particular and society in general to improve the economic and social welfare

2 Participate actively in efforts to enhance the quality of human life and society

3 Strengthen the economy of the people as the basis of the strength and
resilience of the national economy with the Cooperative as pillar;

4 Effort to create and develop the national economy is a joint effort based on the
principle of kinship and economic democracy

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF BMT
LAW

Most of the transformed BMTs are under the legal umbrella of the
Ministry of Cooperatives and SMEs through Law no. 25 of 1992
concerning Cooperatives. Mostly under the Ministry of Cooperatives and
SMEs known as Sharia Savings and Loans Cooperatives/Sharia Financing
Savings and Loans Unit (KSPPS/USPPS).
Another small part of BMT is under the legal umbrella of the Financial
Services Authority (OJK) through Law no. 1 of 2013 concerning
Microfinance Institutions. BMTs which are under the regulation and
supervision of the OJK is known as Sharia Microfinance Institutions
(LKMS).

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF BMT

As institutions regulated by the Cooperative Act, most BMTs operate

based on the membership who own and control the cooperative,
accumulate savings and provide financing to members, and it has a
double bottom line mission: business function and social function.

They are likely to be like self-help groups with minimal support from the
government. Most of them are community-based institutions, as most of
BMTs established by community-initiated projects based on community
organizations, Islamic boarding schools, mosques, or professional
associations.

The financial structure of BMTs is dominated by members’ savings,

followed by capital and funding generated from linkage programs with
other institutions of government agencies.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF BMT
AKAD/PRODUCT

BMTs mostly offer three services: saving, financing, and social welfare
programs.

The unique characteristic of BMT is the product that is meant to perform a

social function as (Baitul Maal), ie products Qardl Hassan commonly known
as the "financing of virtue". A product specifically designed for the citizens
who are poor.

Commercial functions (Baitut Tamwil) in BMT can apply some agreement as

the basis for operations that basically two basic types of contract, the
profit and loss sharing contract, such as musyarakah and mudharabah
contract, or the sale and purchase contract such as murabahah.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF BMT
ORGANIZATIONAL STRUCTURE

The Organizational structure of BMTs is similar to credit unions or

cooperatives.

The Annual Member's Meeting occupies the highest position in the

structure and acts as the main decision-maker in terms of general policy.

The general manager is the person in charge of managing the BMT in its
day-to-day operations; while managers and members of staff provide direct
services to members.

BMT is supervised by a Shariah Supervisory Board appointed by the Annual

Members’ Meeting

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 ISLAMIC COOPERATIVE
[KOPERASI SYARIAH]

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 WHAT IS ISLAMIC COOPERATIVE?

A Cooperative is a joint effort made by the community to achieve the welfare

goals of all cooperative members.

CONSUMER PRODUCERS CREDIT

COOPERATIVE COOPERATIVE COOPERATIVE

is a cooperative which is a cooperative whose Credit Cooperative

scope of business is scope of business is (Savings and loan
providing the daily needs making or producing cooperative) is
of members. The need is goods. cooperatives that
for example groceries, provide assistance to its
clothing, home members who need
furnishings. capital. This type is the
most famous one in
Indonesia

Islamic cooperatives have a goal to improve the welfare of members and the
general public as well as play a role in building the nation's economic order
based on justice and sharia principles.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 ABOUT ISLAMIC COOPERATIVE

Composition of Liabilities and Equities of Savings and Loan Cooperatives,

(million rupiahs), 2019-2020

Numbers of Saving and Loan

Cooperative: Conventional
83,46% and 16,54% Profit
Sharing (the Ministry of
Cooperative and SMEs,
2020).
The average of each
cooperation had: 618
members, 561 debitors, and
28 debitors with the non-
performing loan (NPL).

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 ABOUT ISLAMIC COOPERATIVE

Initially, the cooperative focused on members-only in terms of savings

and loans. However, in subsequent business developments, there are
loan products specifically for members or non-members, but when
they want to borrow, the status is a prospective cooperative member.

What is the difference Islamic Cooperative based on sharia

between the Islamic & principles such as profit sharing and
cooperative margins based on sharia
Conventional Cooperative?
provisions.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF IC
LAW

The Islamic Cooperative's foundation

1. Based on and Based on Pancasila and the 1945 Constitution
2. Based on the principle of kinship
3. Business operations are carried out based on sharia principles, namely
Islamic legal principles based on the fatwa issued by the National Sharia
Board – Indonesia Council of Ulema (DSN-MUI)

Legally, the sharia cooperative business is covered by the Decree of the

Ministry of Cooperatives and SMEs of the Republic of Indonesia Number 91
of 2004 concerning Guidelines for the Implementation of Sharia Financial
Services Cooperative Business Activities.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF IC

From community, by community, and for community.

Ownership: cooperative is owned by their members.

Sources of funding for savings and loan cooperatives, apart from equity, also
come from member deposits and loans received by the cooperative.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF IC
ORGANIZATIONAL STRUCTURE

In the cooperative organizational structure, members have the highest

position. Cooperative members are owners and users of cooperative
services. In the organizational structure of the cooperative, the
management, supervisors, and employees (including managers) are
responsible for providing reports to members through the Members'
Meeting.

Administrators are those who are elected from and by the members of
the cooperative in the Meeting of Members. Administrators are the
holder's power of Member Meeting. The tenure of the administrators is
not more than 5 (five) years and they can be reelected.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF IC
ORGANIZATIONAL STRUCTURE

Supervisors are those who are elected from and by the members of the
cooperative in the Member's Meeting. The supervisor is responsible for the
Member's Meeting. The supervisor is in charge of supervising the implementation
of cooperative policy and making a written report about the results of their
supervision.

Managers and Employees are the people appointed and given authority and
power by the cooperative administrator to manage the business. The managers
and employees are responsible to the administrator.

Annual Members Meeting (RAT) is the highest authority in the cooperative, which
means a variety of issues concerning a cooperative are only set in the meeting of
members. Annual Member's Meeting (RAT) is held at least once a year, some are
held two times a year.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 THE PRACTICE OF IC
ORGANIZATIONAL STRUCTURE

Cooperative Net Profit (SHU) is cooperative income earned in a fiscal year

to be reduced by costs, depreciation, and other liabilities, including tax in
the fiscal year concerned. Cooperative Net Profit after reduced by the
reserve fund, distributed to members in a proportion of business services
performed by each member of the cooperative, and it is used for
cooperative educational purposes and other purposes of the
cooperative, in accordance with the decision of Member's Meeting.

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA

 Reach me out

fmniswah@gmail.com

farokhah

+62 85706333894

Islamic Economics Department,

Universitas Muhammadiyah Lamongan

ISLAMIC ECONOMICS 2022 INTERNATIONAL SUMMER COURSE UMLA