Sustainability of BMT financing for Developing Micro-enterprises

Mislan Cokro, Widiyanto and Ismail, Abdul Ghafar (2008): Sustainability of BMT financing for Developing Micro-enterprises.

Abstract

The aim of this study is to analyze the sustainability of Islamic micro-financing for developing micro-enterprises (ME). We use the sample of Baitul Mal Wat Tamwil (BMT), as Islamic microfinance institution in Indonesia. Two approaches will be used to explore the sustainability, i.e., technical efficiency (using data envelopment analysis (DEA) and level of outreach. The results indicate that: first, generally the efficiency of BMTs is relatively low. Scale efficiency also indicates that BMTs are operated still far from optimal scale. The results suggest that there is gap in efficiency scores obtained from CCR and BCC models. This indicates that BMTs still face the managerial problems. Second, Islamic micro-financing is useful for developing micro-enterprises and contribute a great social benefits to the society in several ways. Although the profitability efficiency of BMTs is relatively low, since generally BMTs have made a profit and social benefit, Islamic financing can be predicted to be sustainable – able to provide viable Islamic financing.

• Item Type: MPRA Paper
• Language: English
• Keywords: Sustainability, technical efficiency of profitability efficiency, level of outreach
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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