Potential Solutions to Financing Problems among the Poor: A Case of Baitul Maal Wa Tamwil (BMT) in Indonesia

Abstract

Many people in the poor category do not have access to most financial services, especially from formal banking institutions. For example, in Indonesia, as of 2020, there are approximately 91.3 million Indonesians who still do not have access to financial or banking services in the country. Given the difficulties to access financing to undertake their economic activities, the poor have been economically unproductive and remains in poverty. There is a need for non-banking financial institutions (NBFIs) to play a role in reaching people who are still disconnected with the banking system. Several models of NBFIs can be engaged to solve the problem. Indonesia, as a country with the largest Muslim population in the world, has a very well-known NBIFI, namely Baitul Maal wa Tamwil (BMT). With a business model that focuses on the lower-middle-class economy and the MSME sector, it is hoped that BMT is able to provide a solution to the problem of access to financial services for the poor. This study aims to determine the issues and challenges of BMT in providing financial service solutions to the poor in Indonesia. In addition, this study provides alternative solutions to the problems faced by BMT in their efforts to improve financial inclusion in Indonesia. The study adopted a qualitative method based on a review of literature from research journals and other types of publications. The study hopes to provide enriching inputs in the development of the Islamic microfinance industry in Indonesia and other countries.