International Journal of Social Economics

Technology for Islamic microfinance’s disbursement and repayment system

Nabilah Rozzani, Intan Salwani Mohamed, Sharifah Norzehan Syed Yusuf,
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Nabilah Rozzani, Intan Salwani Mohamed, Sharifah Norzehan Syed Yusuf, (2016) "Technology
for Islamic microfinance’s disbursement and repayment system", International Journal of Social
Economics, Vol. 43 Issue: 12, pp.1271-1283, https://doi.org/10.1108/IJSE-05-2015-0115
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Technology for Islamic Islamic

microfinance’s
microfinance’s disbursement disbursement
and repayment system
Nabilah Rozzani, Intan Salwani Mohamed and 1271
Sharifah Norzehan Syed Yusuf Received 5 May 2015
Accounting Research Institute, Universiti Teknologi MARA, Accepted 20 September 2015
Shah Alam, Malaysia

Abstract
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Purpose – The purpose of this paper is to explore the implementation of a mobile network system for
an Islamic microfinance institution, made in collaboration with a commercial bank in Malaysia. It also
intends to highlight any emerging issues pertaining to the implementation of technology into the
disbursement and repayment system of an Islamic microfinance institution from their clients’
perspectives. As Islamic microfinance industry is still growing in Malaysia, findings gathered
throughout the course of study are also intended to boost further knowledge relating to this area.
Design/methodology/approach – By using a case study method, interview sessions were
conducted separately with clients of the Islamic microfinance institution. The purpose of interview
sessions is to identify the benefits and problem that surrounds the usage of mobile banking into the
repayment system for Islamic microfinance products. Data triangulation with various public
documents was conducted to enhance the credibility and reliability of data, also to support the claims
that were made by the respondents.
Findings – It was found that clients are quite satisfied with the disbursement process through a mobile
solution. However, the same cannot be said with the repayment process. The difficulties in using the
mobile solution pose a major threat to its success. As most clients are not born to be technological savvy,
the lack of easiness in methods for the usage of a mobile solution for their transactions pushes them away
from further exploring the benefits that can be brought in by the function. Other risks which were
highlighted include concerns towards breach of trust and risks of robbery. Clients of the case study, on
the other hand, are concerned that the transfer of cash between their meeting venues to the bank would
expose them to the public who might try to take advantage from the situation.
Research limitations/implications – As the current study had only focusses on mobile banking
aspect of the repayment system for one Islamic microfinance institution, a multiple case study could be
adapted to investigate various banking channels being implemented by different Islamic microfinance
institutions in Malaysia and their current success.
Practical implications – By highlighting several issues through this study, it is hoped that this
Islamic microfinance institution would consider applying other means of payment that are available in
the market that is not only cost-efficient, but also beneficial for clients of the institution.
Originality/value – This study highlights the setbacks in the usage of technology by clients of
Islamic microfinance institution in Malaysia. Although many approved to the diffusion of innovation
in Malaysian banking sector, the same has yet to be achieved in the Islamic microfinance industry,
which clients are mostly technology illiterate.
Keywords Technology, Islamic microfinance, Disbursement, Repayment
Paper type Research paper

1. Introduction
International Journal of Social
Today’s social environment has been largely focussed towards the advancement of Economics
technology. Across the globe, people are connected through social media, hence making Vol. 43 No. 12, 2016
pp. 1271-1283
the world different from how it was a decade ago. Similarly, the financial services © Emerald Group Publishing Limited
0306-8293
industry is also proliferating with the introduction of credit and debit cards; also DOI 10.1108/IJSE-05-2015-0115
 IJSE internet and mobile banking. People were used to be dependent towards on-the-counter
43,12 transactions to facilitate their money flow. After that, automated teller machines and
cash deposit machines were introduced, and people get intrigued with handling those
machines on their own. They are slowly making further transition towards being more
independent by making their own transactions through mobile and internet banking.
Similarly, banks are trying to compete with each other by introducing new and
1272 sophisticated banking solutions that are both user-friendly and cost-effective to these
financial institutions.
Realising these benefits, microfinance institutions too are intrigued to start
focussing on adopting innovative solutions as an effort to optimise efficiency.
The success of M-Pesa, which had been able to have an outreach of almost 40 per cent
of the adult population in Kenya after only two years of operation, adds to this
excitement ( Jack and Suri, 2011). There are several microfinance institutions across
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the globe which are already engaged with automated teller machine networks, smart
card operations and advanced technology; where these innovations had helped
respective institutions to increase their operation’s efficiency and clients’ satisfaction
(Dary and Issahaku, 2013). The usage of mobile banking on microfinance services
was also suggested by Reeves and Sabharwal (2013), with little interference of human
touch. However, not all of these institutions are succeeding in this move. There were
also evidences of microfinance institutions that refuse to diffuse new innovation into
their operation system, and preferred to stay with their pre-technology methods
(Campion and Halpern, 2001). When an institution chooses to adapt technology, it
means the management of the institution is open to accept possibilities that
innovation has to offer, with an objective to provide win-win situation to both the
providers and clients of microfinance services. Therefore, there is a need to
investigate why Islamic microfinance institutions are not following their competitors’
footsteps in fully integrating innovation in their payment system. While many
microfinance providers across the globe are switching to the usage of innovative
payment system, Islamic microfinance institutions in Malaysia are still using
cash-based payment method for their clients.
The main research question for this study is what are the types of risk that restrict
the implementation of technology in Islamic microfinance institutions in Malaysia?
To answer this, the current study applies a qualitative approach, which specifies on
interviews, in revealing the underlying risks experienced by both Islamic
microfinance clients in using technology for their repayment procedure. Interviews
are chosen as the main source of data collection as interviews provides rich data by
respondents and also give an alternative of gathering quality information (Creswell,
2012). In-depth interviews were conducted as an effort to study on clients’ insight
towards using technology to better manage their repayment process and to identify
issues that has been restricting them from using these technologies, despite its
advancement in Malaysia.
Hence, this study intends to explore the implementation of technology in the Islamic
microfinance industry, especially in Malaysia. It provides the findings of a preliminary
study on the factors that influence client’s acceptance towards the adoption of
technology. This study contributes to the ready literature with the usage of a
qualitative method in identifying factors which influences the usage of technology by
Islamic microfinance clients. The current paper starts with a literature review on the
industry of microfinance, emergence of Islamic microfinance and the diffusion of
technology into microfinance institution around the world. This is followed with a
 description of methodology used for the purpose of study. Subsequently, detailed Islamic
explanations on findings obtained from interview sessions were discussed. An analysis microfinance’s
of findings is then provided, where managerial implications are then suggested in
concluding the current paper.
disbursement

2. Literature review
The industry of microfinance had been into the spotlight lately, with many success had 1273
been produced by microfinance institutions worldwide, especially Grameen Bank,
which is serving as a bank for the poor in Bangladesh. This branch of financial service
had been strongly developed with a promise in reaching a double bottom line of
financial viability and social impact (Allet, 2014). Hence, many researchers had
attempted to explore the essence of this industry, making sense on why it is so vital to
have microfinance products offered these days.
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Debt is associated to the difficulties faced by the poor. Therefore, the importance of
microfinance is especially important in developing and third world countries, where
social gap is still significant to the poor and needy. In essence, microfinance is the
provision of financial services which is to be extended to the poor and low-income
clients for business purposes, with an intention that they would grow as micro
enterprises. The targeted clients for this industry are individuals who previously are
unable to get access to formal financial services (Chua et al., 2000; Microfinance
Information eXchange, 2010). In practice, however, microfinance institutions are only
capable to concentrate on the urban poor, or simply individuals who are already above
the vulnerable level (Kaleem and Ahmed, 2010). The extreme poor could not be taken
up as microfinance clients because this category of individuals will only be pressured
further into more debts, leading them to worse levels of poverty due to their
incompetence in repaying debts (Burney, 2007).
Through an Islamic point of view, there is a need for the society to help eliminate
the difficulty of the poor (Shahinpoor, 2009). This is to reduce the socioeconomic
gap between the rich and the poor. Islam supports the concept of brotherhood
among believers, where the sacred book of Islam, the Quran says that, “Surely all
believers are brothers. So make peace between your brothers and fear Allah that
mercy may be shown to you” (Quran 49:10). The rich and high-income earners are
encouraged to make contributions towards the welfare of the poor as an effort
to seek for God’s blessings, with no intention to insult. In the Holy Quran, it was
mentioned that, “And worship Allah and associate naught with Him, and show
kindness to parents, and the kindred, and orphans, and to needy, and to the
neighbour who is a kinsman and the neighbour who is a stranger, and the companion
by your side, and the wayfarer, and those whom your right hands possess. Surely
Allah loves not the arrogant and the boastful” (Quran 4:36). This is why the concepts
of Zakat (obligatory charity) and Sadaqah (voluntary charity) are important to
Muslims. One type of response which could contribute to this is through Islamic
microfinance, where loans are made available to the poor. Further, being in line with
Shariah (Islamic law), loans provided through Islamic microfinance providers are free
of interest and collateral.
However, in a realistic environment, the risk is inherent towards Islamic
microfinance institutions, which practically allows loans to be made without any
assurance in return to the institution. This would in turn pose a sustainability threat to
these institutions. One of these risks is posed on the repayment system of Islamic
microfinance institutions. Islamic microfinance institutions are not involved directly in
 IJSE the payment system for their clients. They had to outsource in order to have the system
43,12 running adequately, hence making the repayment risk even broader to the institution.
The possibility for clients not to pay, robbery and fraud to take place is there. In a study
by Masyita and Ahmed (2011), payment method is a leading factor for a client, where
the easiness in process was their main priority in choosing to obtain loan from a
microfinance institution. This element was lacking Islamic microfinance institutions in
1274 Indonesia, making its growth rather slow as compared to their conventional
counterpart. The outcomes from discussions in 2012s State of the Microcredit Summit
had also emphasised at the importance of having a structure that would best to support
the payment system of Islamic microfinance institutions (Maes and Reed, 2012).
Experts had come to this conclusion after looking at various microfinance crises in
Andhra Pradesh. Hence, proper collaboration and coordination of Islamic microfinance
institutions with commercial banking institutions or governmental institutions in
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payment system technology is therefore important to reduce risk towards the Islamic
microfinance institution. An interesting success was found in the Mali-North Program
of the German cooperation project (Segrado, 2005). Being a multi-cultured country, the
people in Mali could only agree in Islamic traits for whatever projects that are desired
to be brought into the country. By offering Islamic microfinance through Azaouad
Finances plc., herdsmen in Mali were able to expand their businesses and obtain
business dealings with customers from other Islamic countries such as Dubai. Realising
this situation, administrators of this programme had further collaborated with Banque
Nationale de Développement Agricole, which is the main bank in Tunisia, to set up
links in providing SWIFT international payments system for its clients in Mali.
By SWIFT transfer, herdsmen were able to deposit the earnings from the business
dealings in Abidjian or Dubai directly into their account to assist with their loan
repayment in Mali.

3. The case study

A single exploratory case study was conducted for the purpose of exploring the risk
vulnerability in the repayment system of an Islamic microfinance institution. The case
study was selected with reference to a suggestion made by Ritchie and Lewis (2003),
where it was argued that a unit for sample is chosen based on its characteristic which is
expected or known to have an outgrowth to the subject matter under study, or simply
have a “symbolic representation” towards the study’s subject matter.
The case institution, Institution Z, is a microfinance institution in Malaysia
which bears proof that the implementation of microfinance programmes in
Malaysia has been a powerful mechanism in alleviating poverty and subsequently
generates employment. It is a non-governmental organisation which serves as an
Islamic microfinance institution, where most of its products have been applying
Shariah-approved scheme, through the contract of Qard Hassan, which is a
benevolent loan that is interest-free. This is where the institution’s clients do not have
to pay interest rates to the loan that they acquire. Instead, they would be paying a
percentage from the product that clients apply for, as service charge (Ujrah) to the
institution, along with the intensive supervision, skills training, human capital
development and consultation that are provided by the institution’s staffs. The clients
of Institution Z will also be provided with training relating to financial management
and business development by staffs. Adapting the concept of Grameen Bank in
Bangladesh, clients will form into groups of five, where there will be about 12 groups
formed in a centre. In order to the staffs to keep track of their clients’ performances,
 weekly meetings are held, mostly on Tuesdays. Previously, one of the purposes of Islamic
this meeting is to collect the weekly cash repayment from the clients. However, a microfinance’s
mobile banking solution was introduced in 2010 to ease the disbursement and
repayment process between Institution Z and its clients.
disbursement

3.1 Introduction of mobile banking solution

Institution Z had collaborated with Bank A, a local Islamic bank for purposes of 1275
strategic alliance since 2010 with the implementation of the bank’s mobile banking
solution into the disbursement and repayment system of Institution Z. Through the
introduction of the mobile banking solution, Institution Z had strived to promote
cashless and paperless transactions between the institution and its clients by creating a
platform in order to simplify the institution’s daily operations and its weekly financing
repayment from recipients through an enhancement of data processing using
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information technology tools.

Figure 1 depicts a simplified workflow of the mobile banking solution between
Institution Z, Bank A and Institution Z’s clients. The process of a mobile banking
solution is a synchronisation between Institution Z and Bank A, where the clients who
make payment to the institution need to have set up a savings account with Bank A.
Afterwards, the client will have to opt to register for the mobile banking solution, where
this option will be synchronised in Bank A’s database (REG 1). The database would
then update its server (REG 2), and the client would receive a chip as an extension to the
SIM card in his or her mobile phone (REG 3). The client would also receive a passcode
to access the mobile banking solution. For the purpose of loan disbursement to
Institution Z’s clients, the institution’s database would provide an update regarding its
clients to be matched with the clients’ account numbers which are already saved in
Bank A’s server (DIS 1). Institution Z’s system would identify its clients through its
information and training database, where upon obtaining approval from checking the
institution’s Know Your Customer policy; the recipient’s reference number,
phone number, bank account number would be synchronised to both the institution
and bank’s databases. Institution Z’s database would then send payment instruction to
Bank A’s server with the amount of loan approved for each client (DIS 2).

Bank A’s Database

RE
G Bank A’s Server
1

2
G
RE

REP 3
DIS 2 DIS 1

Client Institution Z’s Database

2

RE
P
RE

P
G

1 Figure 1.
RE

Mobile banking
solution framework
for institution Z
Client’s Mobile Phone
 IJSE During weekly repayment process, clients would have to first ensure that there are
43,12 sufficient amount of cash available in their bank account in order to proceed with their
repayment process via mobile banking. If not, the client will have to first deposit cash
into their account before proceeding (REP 1). Clients will then use their mobile phone to
send money transfer instruction to Bank A’s server using the necessary information,
such as the client’s registration number with Institution Z and Institution Z’s bank
1276 account number (REP 2). Bank A would process the payments through its server to
update the recipient’s bank statement while Institution Z would make an update on
cash balance to produce a verification report (REP 3). These documents would then be
cross-checked before client database, collection sheet and payment report could be
updated and generated. In the entire process of mobile banking solution, all updates
would be informed to clients through short message services (SMS).
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4. Research design
This study follows an approach described by Yin (2003), which is a single case study.
The analysis of data follows a social constructionist approach as described by Creswell
(2007), where data should be analysed interpretively to make sense of the meaning that
others have about the phenomena being studied. This supports the study of Scapens
(2006), who argued that the best method in understanding the practice in organisation
is not only to analyse the different practices adopted by an organisation, but also to
make sense of the adopted practices. The main focus of this study is aimed to
understand the application of technology into the repayment system of Islamic
microfinance products and also to understand the implications in this application
towards the success of the technology extension provided to assist the operation of
Islamic microfinance products of the institution. Hence, in order to acquire deeper
understanding of issues from a Malaysian perspective, this research is conducted as a
qualitative single case study. The usage of a qualitative approach would provide for
richer analysis, which allows for better understanding of problems arising and to allow
for good identification of phenomena, attitudes and influences (Creswell, 2007).
The qualitative research consisted of observations and also face-to-face, in-depth
interviews which were conducted with clients of Institution Z. Observations were made
during both clients’ weekly meetings and interview sessions, which were conducted right
after the centre meeting. Interviews were conducted with a semi-structured format, where
respondents will be provided with freedom to introduce materials that were not
anticipated by the interviewer, and which combine a correct mix of descriptive,
evaluative and non-specific questions (Whyte, 1984). The interviews were conducted
mainly in Bahasa Malaysia, their first language. These interviews were conducted within
a timeframe of 20 minutes to one hour, where they are recorded with the consent of
respondents. The interviews were then transcribed for analysis, following the grounded
theory principles (Strauss and Corbin, 1998) to identify common themes that leads to the
temporary failure of the mobile banking solution in Institution Z. As the interview
sessions were conducted mainly in Bahasa Malaysia, quotes included for findings and
discussion was translated to English to better suit the presentation of finding for the
current paper. Subsequently, narrative analysis was conducted to understand the
experience of Institution Z’s clients in using mobile banking solution as a mechanism to
assist their repayment process to Institution Z. The combinations of methods provide a
methodological triangulation to the current study.
The current study also utilised both archival data and qualitative data as an effort to
provide data triangulation to its findings. Various publications by Institution Z, such as
 annual reports; bulletin; and other publications including brochures and presentation Islamic
slides, were examined to gather relevant data and information with regards to the microfinance’s
application and performance of the technological solution which were introduced by
Institution Z to ease the repayment structure of the institution. Data that were not
disbursement
published by the institution was requested through a research collaboration agreement.
This type of data, which consisted of most office records gathered in this research, was
private and confidential in nature. Hence, the presentation of findings is restricted only 1277
to the ones allowed for publication by the management of Institution Z.

5. Findings and discussion

Since its inception in 2010, the mobile banking solution had always been tested as a
pilot project of Institution Z, as only a few branches of the Islamic microfinance
institution that fully implements this system to its clients’ repayment routine.
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Up to the time of study, the project had to stay as it is, without further expansion to
the number of branches applying mobile banking as an alternate repayment channel,
as clients from the pilot project were starting to reject this method of payment.
Since its pilot implementation to 33 centres in 2011, the performance of the mobile
banking solution had shown to be positive. This is whereby in 2011 and 2012, there
was an increment of 100 per cent on the client’s usage of the mobile payment function
in all respective centres. However, in its third year of inception, the performance of
mobile banking usage among clients of Institution Z dropped significantly.
This is where almost 80 per cent of clients were rejecting the usage of mobile banking
and started to demand for a re-instatement of the institution’s cash-based
disbursement and repayment system. Many risk factors had been found to be
prevalent to this drop. The clients had been found to be highly vulnerable to
these risks, which made the mobile banking solution a struggling extension for
Institution Z’s products.

5.1 Disbursement and repayment system of institution Z: a client’s perspective

Through interview session, it was found that most clients who were interviewed
showed satisfaction towards the disbursement system made by Institution Z to
them, which were done through electronic transfer directly into their respective
bank accounts. They already had a bank account, which made cash disbursement
almost impossible to clients who obtained microfinance products from Institution Z.
There are some existences of the kind of cases, but not in all groups of clients.
A respondent was quoted:
There are clients who make a five thousand Ringgit loan, and there’s money. There’s cash
money given to her. But not here. There’s just no request for that kind of transactions to be
done here. Not anymore.
Other respondents even gave an impression as if all clients would already have a bank
account even before applying for microfinance product from Institution Z. They said:
[…] the loan money will always go into our bank accounts. There’s no need for cash money.
There’s no more request from us for transactions (cash disbursement) like that.
The effectiveness of mobile banking solution towards the disbursement of loan
was also welcomed by clients of Institution Z. They were satisfied when their loan is
disbursed into account, they would receive a text message via SMS indicating that a
 IJSE large amount has been deposited into their accounts in Bank A. Through the
43,12 mobile application also, clients are able to check their account balance anytime.
To quote a respondent:
[…] similar to other clients who gets the loan. When the money cashes in they (Bank A) would
send a message through the mobile banking solution. It’s similar. Got a message saying that
the cash is in.
1278
However, the implementation of mobile banking solution for clients’ repayment process
to Institution Z had seemed to have brought a slightly negative impression to clients.
It can be seen through observations that many clients are rather hesitant to be using
the mobile payment function through their mobile phone. This is evident in their centre
meetings, as they only allow one or two members of the group to be in charge during a
slot which deals with the mobile banking function. It was further found through
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interviews that clients chose to settle their loans in groups for a collective repayment
using the mobile payment function. This collective repayment done by clients hence
diverts from the original purpose of the mobile payment function, which was supposed
to cater for clients’ individual repayments into Institution Z’s account. However, as
clients of Institution Z are not technology literate, they are not keen to use the
supplication of mobile banking on their own and would instead resort to elect a
representative to manage their repayment process via mobile banking collectively.
Respondents were quoted, saying:
Supposedly […] Some of the other groups don’t use representatives. Supposedly, everybody has
to do it themselves. They have to go to the bank, do the mobile payment function themselves.
But they don’t want it in this group. They want it easy, just send out a representative.
It should be done individually, but some of us does not want to do that. Burdensome, they say.

During a visit to client’s centre meeting, a representative made a demonstration of how

she would be sending instructions for the mobile payment function on behalf of her
centre. Basically, the mobile payment function is quite similar to normal cash transfer
using mobile banking. The representative would first have to access their account
using the mobile payment function provided by Bank A through a chip which is
already pre-installed with the client’s SIM card when they first register for the mobile
banking solution. After having access to their account, the representative would then
transfer the total amount that was due for the members of her centre directly to
Institution Z’s bank account in Bank A. Figure 2 depicts the overall steps involved in a
process for the mobile payment function that would be completed by a representative
of the clients every week.
This function would have been perfect for individual account, as money would just
flow out from one account to another. The presence of cash would be close to none
in ideal circumstances. However, this is not the case for clients in Institution Z.
One representative would still need to collect cash from each client, and this cash
money would afterwards be transferred into the centre leader’s account before the
leader could perform transaction in the mobile payment function to Institution Z.
A respondent was quoted to have its reason being:
[…] most of the time, clients won’t even have exceed balance in their bank accounts.

This is true, as most clients would take out the whole amount of loan granted to start
purchasing items for their business. Also, as they manage their businesses on their
 Cash
Islamic
Collection
Bank A Mobile Application Institution Z microfinance’s
Step Menu Command disbursement
1 Select ‘‘Bank B’’
2 Insert four-digit PIN number
Press OK
3 Select ‘‘Bill Payment’’ 1279
4 Select ‘‘Open Bill Payment’’
5 Insert client’s unique code
6 Insert Institution Z’s account
number
7 Insert payment amount
8 Check transaction details Figure 2.
9 Insert passcode Repayment process
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10 Select ‘‘Send’’ or ‘‘Send and Save’’

for clients using
11 Press OK
mobile payment
function

own, there are times where they gain profit, and some other time they face monetary
losses. Therefore, the times when their bank accounts are having extra balance is
uncertain. However, from the tone of some respondents, it is sensed that not all are
genuine enough to share the amount of money remaining in their bank account to other
individuals, not even to the members of her centre. This is a defensive measure they
take, to avoid from being selected as representative in case that the centre unanimously
wants a representative to complete their collective repayment through mobile banking.
As implied by a respondent:
It is as if some of them lie in the face. They say they don’t have enough balance in account.
Another reason for having a representative to complete a transaction using mobile
banking mechanism is because interbank transactions for banks in Malaysia would be
charged with additional cost. To do a transaction through mobile banking individually
is hence costly as compared to having only one person to complete the transaction for
everyone. Cost is also incurred to pay for the transportation of the elected
representative from their home to the bank. Their mode of transportation to the bank is
another issue they need to think about, especially with the representatives carrying a
large amount of cash. This happens when Bank A is not accessible to the clients, and
they had to deposit the collected money into the nearest bank first before transferring
to their account in Bank A. Quoting a representative:
20 cents will be deducted from our account. It’s unfair that Bank A takes 20 cents, 20 cents
(for every transaction). Back then it was 20 cents, now 10 cents only. We were pretty
upset, but I think of it as doing fardu kifayah (communal obligations) for the members of
my centre.
To add to that, it is a policy by Institution Z which only allows for mobile payment
function to be completed before Thursday, for every week which repayment has to be
made by clients. If the transaction is done solely through Bank A, it would have been
simple. Unfortunately, the accessibility of Bank A in rural areas is not similar to that in
urban areas. Therefore, there are times where representatives can only get access
to banks other than Bank A. Hence, she could only transfer the cash into the other bank
 IJSE account before making an interbank transfer to her savings account in Bank A.
43,12 That would take at least one day to clear out. To quote a respondent:
We need to cash in the total repayment amount in our Bank A account first. Then we will
have to wait for the cash to clear out, for it to be confirmed to have been deposited. That’s why
for the mobile payment function, we collect for next week’s repayment in the present week.
Because the transactions cannot be done later than Wednesday. Cannot be done on Thursday.
1280 Not even on 12 a.m., Thursday.

Even after that is done, the representative is not able to relax yet. The danger of this
dateline is that sometimes, telecommunication connection in rural areas can be disrupted.
If the telecommunication signal is perfectly functioning in her housing area, or when she
happens to be in urban area where the signal is better than what is provided in her
residential area, then only the representative dare to start completing her centre’s
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repayment process with M-Ringgit transaction. With such large responsibility of having
her friend’s cash, the representative is restless as she will only obtain a confirmation that
the repayment amount is safely deposited in Institution Z’s account during centre
meetings, with the presence of Institution Z’s staff who was assigned for the centre. After
the cash has been deposited into Institution Z’s account, the centre’s transaction history
will be updated into the system and the staffs who are in charge for the respective centre
will obtain a copy of report. Hence, the centre’s assigned staff would be the person who
can confirm that the centre’s transaction has been cleared and assured to have been
deposited into Institution Z’s bank account. If the transaction fails, the centre goes back
to their old ways of collecting cash for that week of repayment, quoting a respondent:
[…] If our transaction fails, we have to collect cash money right there and then (in the centre
meeting). We have had occasions of failure previously. I did it, two, three times I did, but
failed. After that, the staff asked why we did not do it. Because it (the repayment transaction)
did not appear in their report. I told them we did. It was disappointing. I gave up.

Another significant issue was also found, with regards to the safeguard of cash that are
collected in each centre meeting which are done weekly before transferring the cash to
banks in order to proceed with the process of the mobile payment function. The leader’s
safety while carrying cash to be deposited to Bank A is often questioned, more so with the
many cases of robbery being reported to the Institution Z. Previously, during the times of
total cash collection from clients, the staff-in-charge is the target for robbers as they keep the
money after centre meetings to be transferred to Institution Z’s headquarters. This time
around, it is the representatives. They are easy to be targeted, as centre meetings are often
conducted in open places such as a diner or open halls. They are also targeted as they would
be frequenting similar bank branch, carrying a large sum of money, at almost the same day
in a week. Hence, they are highly vulnerable. A few respondents raised this issue, stating:
It’s quite frightening sometimes, at the bank, people would be watching us without us knowing.
[…] I don’t mind that much in the beginning, going to the bank. But not anymore. Even to go
to the bank, I would bring along a friend to accompany me. Sometimes it is my husband.
If people ask, I always say that I am going out to meet a friend, never to the bank.
[…] I fear that in our circle of friends, not all are honest. I fear that stories are heard. I fear that
somebody would eventually mark us (for robbery).

Also, looking through the reports that are under investigation, there were also cases of
fraud and breach of trust being done by the person in charge of handling transactions
 through mobile banking. This is because there is a lack of control on how clients would Islamic
manage their transactions. As was observed previously, some of the centres would be microfinance’s
doing their repayment process individually, while some would do it collectively in
groups or by centre. Therefore, there is indeed an absence of coordination. To add to
disbursement
that, several representatives who volunteered in the beginning had been carrying on
the responsibilities for years. Hence, there is not segregation of duties among the
members of the group. Asking representatives about their experience in coordinating 1281
M-Ringgit transactions, they responded:
[…] if possible, I would want to switch with somebody else. It has been two years, I want to
quit next year and have someone else to replace me. I do not want the same person to be doing
the same thing for a long time. Robbers will aim at me, eventually. If I carry on to be doing the
same thing […].
[…] I would want somebody else to take on my responsibilities. I don’t want to be doing the
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same thing until eternity.

However, not all is bad with the implementation of mobile banking to Institution Z’s
clients. With the implementation of the mobile banking solution, it was observed
that weekly centre meetings are conducted faster than before. The efficiency of loan
collection with clients who use the mobile banking solution was indeed faster than
those who are still standing still with the traditional cash collection methodology.
Time is rather important to these clients, as they still need to continue with their
business during the weekly centre meetings. Most of the clients are managing their
businesses on their own. This means that although they own the business, they also
function as the seller or cook for the business as they are unable to hire workers.
Therefore, by finishing the meeting faster, the clients will have more time to monitor
their businesses. To add to that, it was acknowledged by most clients that the mobile
banking solution helps to manage their monthly obligations, such as utility bills and
payment to suppliers. In responding to whether the mobile banking solution is just
being a burden to them, they said:
[…] Actually it is good. It does not only pay for Institution Z. You can pay for television
network billing, there’s plenty that can be done with it.
[…] It is easier, actually. You no longer have to get into long queues at the post office to pay
Institution Z. You can pay bills, you can transfer money […].
[…] Really, there’s a lot that can be done with the mobile banking solution […].
However, this statement can only be applied to clients who are already familiar and
understand the application concept of the mobile banking solution. Otherwise, it is just
the same with the old cash-basis transactions.

6. Conclusion
The study had identified several issues that led to the temporary downfall to the newly
introduced mobile banking solution for Institution Z. The main concern for the clients
was found to be the lack of easiness in methods of conducting transactions using
mobile banking, which is caused by the clients being resistant towards change and
subsequently, the diffusion of a mobile payment function into their repayment process.
The complex process of the mobile payment function made these clients to feel
uncomfortable in using the technology, hence passing it over to selected
representatives to manage their repayment process every week. Additional cost
 IJSE incurred in acquiring a mode of transportation to reach the bank was also adding into
43,12 the rejection of technology diffusion. This lack of easiness had made clients lose
interest towards the new mobile technology; hence they lack confidence and are
hesitant to be conducting the transaction on their own. Other risks which were
highlighted include the client’s breach of trust and the risk of carrying cash.
Based from the findings of this study, it is important for Institution Z to start
1282 improving on this methodology or improve other means of payment to clients. This is
because the need of being cashless is extremely important in this day, even more with
technology being highly advanced in most aspects of life. Banking technology has a
vast potential of being transformational. There are many other options available for the
institution to take into account, for example direct debit and internet banking. Choosing
the best technology for clients should take into account its cost, as Institution Z’s clients
are not people who can afford expensive technology. It is just enough that they are able
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to have easier access to repay their debt. On top of that, Islamic microfinance
institutions should also start collaborating with local banking institutions who have
established themselves in their microfinancing products, at least in technology sharing.
This is important so that the institution would not be left behind the vast technology
that is being offered by competitors. Despite Institution Z being a non-governmental
institution, this institution still needs to keep up with banking advancement so that
they are able to provide their clients with reliable services. The institution have a
potential to flourish, therefore it should not neglect its need for improvement.

7. Limitation and future research

This study has made an exploration towards the issue, with a specific focus on a single
case study. Hence, generalisation of the findings would be rather difficult due to the
limitation of scope in this study. However, the richness provided by descriptions of data
should be sufficient to counter this limitation. As the research paper is written with
in-depth detail on the findings from interview sessions, the rich and thick descriptions
provided in report would allow reader to make decisions regarding transferability
(Riege, 2003). On top of that, the study only focusses on mobile banking aspect of the
repayment system for Islamic microfinance institution, where there is still more
technology that could be explored. This is because Institution Z is only focussing on
this branch of banking innovation. For future researches, a multiple case study could
be adapted to investigate various banking channels being implemented by different
Islamic microfinance institutions in Malaysia and their current success.

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Corresponding author
Nabilah Rozzani can be contacted at: nabilah.rozzani@gmail.com

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