Article Sidebar

Download
Full text PDF
Statistic
Read Counter : 261 Download : 334

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose – Despite its potential advantages, poverty interferes with economic progress in developing countries, obstructing small and medium-sized businesses from obtaining external financial assistance via Islamic microfinance. This study explores the problems related to asymmetric information in the context of funding microbusinesses in Baitul Maal wa Tamwil (BMT), with the goal of improving our understanding of the risks associated with financing in Islamic microfinance institutions, namely BMTs.
Methodology – This research utilized a qualitative approach and content analysis to study BMTs in Indonesia, involving academics, practitioners, and voluntary participants. The sample size was adequate for achieving data saturation.
Finding – This study demonstrates that there might be asymmetric information during the execution of contracts, leading to deviant behavior by BMT management and partners. The study additionally identified the risk characteristics present in Islamic MFIs, emphasizing the necessity for implementing novel lending mechanisms, such as group lending and individual collateralized loans.
Implication – This study underscores the importance of resolving the substantial administrative overheads associated with these institutions. It is advisable to utilize additional research methods such as interviews, observations, and documentation to augment the depth of the research and engage a varied array of individuals for a comprehensive collection of information.
Originality – Studies of Islamic microfinance in Indonesia have examined its performance, obstacles, and experience. However, empirical data on agency problems such as moral hazard and asymmetric knowledge are lacking. For optimal BMT operating efficiency and Shariah compliance, it is essential to comprehend these challenges.

Keywords

Asymmetric information micro- enterprise financing microfinance Baitul Mwa Tamwil SMEs

Article Details

License

Copyright (c) 2024 Andri Martiana, Salina Kassim, Habeebullah Zakariyah

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
Author Biography

Andri Martiana, Sharia Economics Department, Faculty Islamic Studies, Universitas Muhammadiyah Yogyakarta, Indonesia

PhD Candidate of Institute Islamic Banking and Finance, International Islamic University Malaysia, Malaysia

How to Cite
Martiana, A., Kassim, S., & Zakariyah, H. (2024). Asymmetric information issues in micro-business financing of Baitul Maal wa Tamwil. Jurnal Ekonomi & Keuangan Islam, 10(1), 57–71. https://doi.org/10.20885/JEKI.vol10.iss1.art5
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX
Crossref
Scopus
Google Scholar
Europe PMC

References

  1. Agustianto, M. A., & Alfafa, M. (2021). Problematika moral hazard pada pembiayaan mudharabah di BMT Maslahah Cabang Ngoro Kabupaten Mojokerto. JIES : Journal of Islamic Economics Studies, 2(3), 122–132. https://doi.org/10.1215/17432197-3436403
  2. Ahmed, H. (2014). Islamic banking and shari’ah compliance: A product development perspective. Journal of Islamic Finance, 3(2), 15–29. https://doi.org/10.12816/0025102
  3. Akerlof, G. A. (1970). The market for “lemons”: Quality uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), 488–500. https://doi.org/10.2307/1879431
  4. Alam, A., Sukmana, R., Fianto, B. A., & Izzuddin, A. (2022). Comparative analysis of murabahah and mudharabah financing risk from Islamic microfinance institutions perspective. Al-Muzara’Ah, 10(1), 79–92. https://doi.org/10.29244/jam.10.1.79-92
  5. Aminudin, S. (2020a). Optimalisasi skema bagi hasil pembiayaan akad musyarakah untuk mengatasi agency problem melalui incentive compatible constraints di BMT “Dana Mentari” Muhammadiyah Purwokerto, [Skripsi, Fakultas Ekonomi dan Bisnis Islam. IAIN Purwokerto]. https://repository.uinsaizu.ac.id/7979/1/COVER_BAB%20I_BAB%20V_DAFTAR%20PUSTAKA.pdf
  6. Anisykurlillah, I., Fachrurrozie, & Mukhibad, H. (2016). A financial report model for traditional market traders to increase mudharabah financing in baitul maal wattamwil (BMT). Review of Integrative Business and Economics Research, 5(1), 219–228. http://buscompress.com/journal-home.html
  7. Azeem, M., & Salfi, N. A. (2012). Usage of NVIVO software for qualitative data analysis. Academic Research International 2(1). 262-266 http://www.savap.org.pk/journals/ARInt./Vol.2(1)/2012(2.1-30).pdf
  8. Ibtissem, B., & Bouri, A. (2013). Credit risk management in microfinance: The conceptual framework. ACRN Journal of Finance and Risk Perspectives, 2(1), 9–24. https://doi.org/10.1057/9780230627581_5.
  9. Becchetti, L., & Conzo, P. (2011). Enhancing capabilities through credit access: Creditworthiness as a signal of trustworthiness under asymmetric information. Journal of Public Economics, 95(3–4), 265–278. https://doi.org/10.1016/j.jpubeco.2010.11.022
  10. Bharath, S. T., Dahiya, S., Saunders, A., & Srinivasan, A. (2011). Lending relationships and loan contract terms. Review of Financial Studies. 24(4), 1141-1203. https://doi.org/10.1093/rfs/hhp064
  11. DeFusco, A. A., Tang, H., & Yannelis, C. (2022). Measuring the welfare cost of asymmetric information in consumer credit markets. Journal of Financial Economics, 146(3), 821–840. https://doi.org/10.1016/j.jfineco.2022.09.001
  12. Drury, R., Homewood, K., & Randall, S. (2011). Less is more: The potential of qualitative approaches in conservation research. Animal Conservation, 14(1), 18–24. https://doi.org/10.1111/j.1469-1795.2010.00375.x
  13. Gunawan, J. (2015). Ensuring trustworthiness in qualitative research. Belitung Nursing Journal, 1(1), 10–11. https://doi.org/10.33546/bnj.4
  14. Hesse-Biber, S. (2010). Qualitative approaches to mixed methods practice. Qualitative Inquiry, 16(6), 455–468. https://doi.org/10.1177/1077800410364611
  15. Hsieh, H. F., & Shannon, S. E. (2005). Three approaches to qualitative content analysis. Qualitative Health Research, 15(9), 1277–1288. https://doi.org/10.1177/1049732305276687
  16. Ketefian, S. (2015). Ethical considerations in research. Focus on vulnerable groups. Investigacion y Educacion En Enfermeria, 33(1), 164–172. https://doi.org/10.17533/udea.iee.v33n1a19
  17. Khan, A. A. (2008). Islamic microfinance: Theory, policy and practice. Islamic Relief Worldwide
  18. Kurniawati, F. (2020). The role of Islamic financial institutions in social intermediary services : Evidence in Metro City. International Journal of Islamic Economics, 2(1), 80. https://doi.org/10.32332/ijie.v2i01.2309
  19. Liu, J. (2017). Analysis of the factors affecting the financing of small and micro enterprises based on credit scoring model. Acta Technica 62, 62(6), 75–86. http://journal.it.cas.cz/62(2017)-Michael/17020111.pdf
  20. Motta, V. (2020). Lack of access to external finance and SME labor productivity: does project quality matter? Small Business Economics, 54, 119–134. https://doi.org/10.1007/s11187-018-0082-9
  21. Mthuli, S. A., Ruffin, F., & Singh, N. (2022). ‘Define, explain, justify, apply’ (DEJA): An analytic tool for guiding qualitative research sample size. International Journal of Social Research Methodology, 25(6), 809–821. https://doi.org/10.1080/13645579.2021.1941646
  22. Muneer, F. (2018). Impact of access to credit on microenterprise. Working Paper No. 57, Institute for Inclusive Finance and Development (InM). https://inm.org.bd/wp-content/uploads/2018/09/Working-Paper-57.pdf
  23. Nuansyah, M. P. (2022). Efektifitas relationship marketing dalam menyelesaikan pembiayaan mudharabah bermasalah di baitul mal wat tamwil fajar kota Metro. Business and Enterpreneurship Journal (BEJ), 3(2), 46–55. http://jurnal.umitra.ac.id/index.php/bej/article/view/884%0Ahttp://jurnal.umitra.ac.id/index.php/bej/article/viewFile/884/750
  24. Olivera, D. D. S. (2018). The role of microfinance in development of SMEs in republic of Serbia. XV(2), 56–66. http://ebooks.ien.bg.ac.rs/1484/1/djuricin%2C%20jovanovic%2C%20eric.pdf
  25. Purwono, R., Nugroho, R. Y. Y., & Mubin, M. K. (2019). Response on new credit program in Indonesia: An asymmetric information perspective. Journal of Asian Finance, Economics and Business, 6(2), 33–44. https://doi.org/10.13106/jafeb.2019.vol6.no2.33
  26. Rahman, A. R. A. (2010). Islamic microfinance: An ethical alternative to poverty alleviation. Humanomics, 26(4), 284–295. https://doi.org/10.1108/08288661011090884
  27. Robinson, O. C. (2014). Sampling in interview-based qualitative research : A theoretical and practical guide. Qualitative Research in Psychology, 11(1), 25–41. https://dx.doi.org/10.1080/14780887.2013.801543
  28. Sa’diyah, M., & Huda, N. (2018). Strategi penanganan agency problem pada pembiayaan mudharabah di BMT. JEBI; Jurnal Ekonomi dan Bisnis Islam, 3(2), 171. https://doi.org/10.15548/jebi.v3i2.176
  29. Satar, N., & Kassim, S. (2020). Issues and challenges in financing the poor: Lessons learned from islamic microfinance institutions. European Journal of Islamic Finance, 15. https://doi.org/10.13135/2421-2172/2832
  30. Shenton, A. K. (2004). Strategies for ensuring trustworthiness in qualitative research projects. Education for Information, 22(2), 63–75. https://doi.org/10.3233/EFI-2004-22201
  31. Siswanto. (2018). The implementation of islamic spirituality and islamic social responsibility on islamic banking employees, its implication towards workplace deviance. Management and Economics Journal, 3(2), 105–123. http://ejournal.uin-malang.ac.id/index.php/mec/article/view/5222/pdf.
  32. Ssembajjwe, B. (2021). Pragmatic policy recommendations to the challenges of micro finance institutions in Uganda : A case of selected districts in Uganda. 17(3), 78–88. https://dj.univ-danubius.ro/index.php/AUDOE/article/view/913
  33. Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The American Economic Review, 71(3), 393–410. https://www.jstor.org/stable/1802787
  34. Su, L., & Spindler, M. (2013). Nonparametric testing for asymmetric information. Journal of Business and Economic Statistics. 31(2), 208-225. https://ink.library.smu.edu.sg/soe_research/1556
  35. Suryanto, T., & Ridwansyah, R. (2016). The Shariah financial accounting standards: How they prevent fraud in Islamic banking. European Research Studies Journal, 19(4), 140–157. https://doi.org/10.35808/ersj/587
  36. Thaker, M.A.B.M.T., Thaker, H.B.M.T, Pitchay, A.B.A., Amin, M.F. B., & Khaliq, A.B. (2020). Leveraging Islamic banking and finance for small businesses: exploring the conceptual and practical dimensions. ADBI Working Paper Series, Islamic Development Bank Institute. 1156. https://www.adb.org/sites/default/files/publication/616791/adbi-wp1156.pdf
  37. Vaismoradi, M., Turunen, H., & Bondas, T. (2013). Content analysis and thematic analysis: Implications for conducting a qualitative descriptive study. Nursing and Health Sciences, 15(3), 398–405. https://doi.org/10.1111/nhs.12048
  38. Wang, Y. (2022). Three Essays on Asymmetric Information in SME Finance and Microfinance. [Dizertační práce, vedoucí Drábek, Zdenek]. Praha: Univerzita Karlova, Fakulta sociálních věd, Institut ekonomických studií. http://hdl.handle.net/20.500.11956/173849
  39. Wijaya, T., Nasuka, M., & Hidayat, A. (2022). Salesperson ethics behavior as antecedent of Islamic banking customer loyalty. Journal of Islamic Marketing, 13(7), 1535–1550. https://doi.org/10.1108/JIMA-04-2020-0100
  40. Wulandari, P., & Kassim, S. (2016). Issues and challenges in financing the poor: Case of baitul maal wa tamwil in Indonesia. International Journal of Bank Marketing, 34(2), 216–234. https://doi.org/10.1108/IJBM-01-2015-0007
  41. Wulandari, P., & Prijadi, R. (2021). A review of risk rationing practice in islamic microfinance to achieve sustainable development goals in term of poverty in Indonesia. IOP Conference Series: Earth and Environmental Science, 716(1). https://doi.org/10.1088/1755-1315/716/1/012107
  42. Wulandari, P., Prijadi, R., & Desiana, P. M. (2021, October 10-14). Price rationing in Islamic Cooperatives Institutions (challenges and solutions to poverty reduction in Indonesia). IOP Conference Series: Earth and Environmental Science, 716(1), 1-10. https://doi.org/10.1088/1755-1315/716/1/012059
  43. Yusuf, M. B. O. (2019). Islamic microfinance as a tool for poverty reduction, enterprise creation and expansion: A conceptual analysis. Al-Hikmah Management Review, 4(1), 107-120 https://www.alhikmah.edu.ng/amr/index.php/amr/article/view/30