Risk management of Islamic microfinance institutions: unique practices at crucial risks

Sholeh Wafi and Helmi Muhammad
Additional contact information
Sholeh Wafi: UIN Maulana Malik Ibrahim, Jl. Raya Ir. Soekarno No. 34 Batu, Jawa Timur 65324, Indonesia
Helmi Muhammad: Department of Sharia Economics, Faculty of Economics and Business, Universitas Islam Raden Rahmat, Jl. Raya Mojosari No. 2 Kepanjen Malang, Jawa Timur, 65163, Indonesia

International Journal of Business Ecosystem & Strategy (2687-2293), 2023, vol. 5, issue 3, 42-50

Abstract: The objective of this study is to gain a better understanding of risk management and control practices at BMT UGT Nusantara, an Islamic microfinance institution in Indonesia, with a particular emphasis on financing risk, liquidity risk, and Sharia compliance risk. These three risks are said to occur frequently and have a direct impact on performance. Because of the uniqueness of the site, the design of this qualitative research is descriptive and exploratory with a holistic single-case approach. In-depth interviews, field observations, focus group discussions, and a review of supporting documents were used to collect data. Because the interactive cycle process includes data collection, data reduction, data presentation, and data withdrawal, data analysis employs an interactive model. The data was validated using the criteria of credibility, transferability, dependability, and confirmability. The study's findings show that BMT UGT Nusantara, an Islamic microfinance institution in Indonesia, employs traditional-partial risk management on financing risk, liquidity risk, and Sharia compliance risk. Risk management is carried out by integrating "macul bumi", or outward efforts based on sincerity, and "macul langit", or spiritual efforts. Furthermore, it employs information systems that play an important role in risk management in order to improve organizational performance and competitive advantage.

Keywords: Risk Management; Islamic Microfinance Institutions; Financing Risk; Liquidity Risk; Sharia Compliance Risk (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://bussecon.com/ojs/index.php/ijbes/article/view/417/219 (application/pdf)
https://doi.org/10.36096/ijbes.v5i3.417 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:adi:ijbess:v:5:y:2023:i:3:p:42-50

Access Statistics for this article

International Journal of Business Ecosystem & Strategy (2687-2293) is currently edited by Umit Hacioglu

More articles in International Journal of Business Ecosystem & Strategy (2687-2293) from Bussecon International Academy Bussecon International Academy, School of Business, IHU, Ordu cad. F-05 Blok No 3, 34480 Basaksehir, Istanbul, Turkey. Contact information at EDIRC.
Bibliographic data for series maintained by Umit Hacioglu ().