THE ROLE OF DEPOSIT INSURANCE IN SUPPORTING ISLAMIC MICROFINANCE INSTITUTIONS:INSIGHTS FROM INDONESIA

Bayu Arie Fianto (), Bagus Aryo (), Syed Alamdar Ali Shah (), Muhammad Ubaidillah Al Mustofa (), Ade Intan Ismi Nur Anisha () and Rafiatul Adlin Hj Mohd Ruslan ()
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Bayu Arie Fianto: Universitas Airlangga, Indonesia
Bagus Aryo: Universitas Indonesia, Indonesia
Syed Alamdar Ali Shah: A Chartered University, Pakistan
Muhammad Ubaidillah Al Mustofa: Institut Teknologi Sepuluh Nopember, Indonesia
Ade Intan Ismi Nur Anisha: Birmingham Business School, United Kingdom
Rafiatul Adlin Hj Mohd Ruslan: Universiti Teknologi MARA, Malaysia

Journal of Islamic Monetary Economics and Finance, 2025, vol. 11, issue 1, 7-34

Abstract: This study assesses the necessity of a Deposit Insurance System (DIS) for Islamic Microfinance Institutions (IMFIs). It first identifies key factors influencing knowledge of DIS among stakeholders and then proceeds to evaluate the social impact of IMFIs and examine the urgency for a DIS and respondents’ willingness to pay deposit insurance premiums. Conducting survey using purposive sampling, we obtain required data for the analysis from 405 respondents. Applying the logistic regressions, we find reveal that education, work experience, and financial behaviors influence DIS awareness. The findings underscore the urgency of implementing DIS to bolster stakeholder trust and financial system stability, with respondents expressing willingness to contribute premiums. These insights contribute to designing a Shariah-compliant DIS that aligns with the unique operational characteristics of IMFIs, supports sustainable industrialization, and advances SDG-9 goals. The study highlights actionable pathways for policymakers, regulatory bodies, and IMFI managers to foster a resilient and inclusive financial ecosystem.

Keywords: Islamic microfinance; Deposit insurance; Economic growth; SDG-9; Indonesia (search for similar items in EconPapers)
JEL-codes: G21 G28 O16 P43 Q14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:idn:jimfjn:v:11:y:2025:i:1b:p:7-34

DOI: 10.21098/jimf.v11i1.2476

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