‘Kopontren and Baitul Maal Wat Tamwil: Islamic Cooperative Institutions in Indonesia

Kurniawan Saefullah () and Nury Effendi
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Kurniawan Saefullah: Universitas Padjadjaran
Nury Effendi: Universitas Padjadjaran

Chapter Chapter 13 in Integrated Community-Managed Development, 2019, pp 293-303 from Springer

Abstract: Abstract This Chapter describes the dual financial system in Indonesia which allows both the conventional or mainstream system, as well as the Islamic financial system. Based on the Islamic cosmology of the majority of the people in Indonesia, the Koperasi Pondok Pesantren (‘Kopontren’) and Baitul Maal wat Tamwil (‘BMT’) are two Islamic cooperative institutions, which integrate two financial institutions based on Islamic values, involving the daily practices of Muslim Indonesians. While the Kopontren was a unique institution in Indonesia, the BMT was an adapted form of the Baitul Maal institution which evolved during the Islamic expansion of the 6th century, with an additional role of Tamwil (‘Investment’). This Chapter documents that both institutions have contributed to the development of Indonesia, particularly in the Muslim communities, and describes the history and development of both institutions. According to Islamic law, the operation of Kopontren and BMT should follow the ideal of the social order of brotherhood and solidarity. It should also follow mutually beneficial partnerships between depositors-investors, and financial institutions with their staff and owners, including borrower-investors, who all share the risks and benefits in various ways. Speculative transactions and other morally hazardous activities are prohibited by Islamic values. The chapter highlights the fact that Islamic cooperative institutions in Indonesia, in particular Kopontren and BMT, are characterised by their shared obligation to help the poor. Unfortunately, the significant role of both of these institutions in supporting poverty alleviation programmes has so far largely been left outside the development policies and programmes, and despite some imperfections of the BMT, such as mismanagement and the inability of clients to comply with their agreements, a reorientation towards the integration of these institutions in future financial development policies is promoted with a view to contributing to effective poverty reduction programmes in the near future.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:comchp:978-3-030-05423-6_13

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DOI: 10.1007/978-3-030-05423-6_13

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