ISLAMINOMICS: JOURNAL OF ISLAMIC ECONOMICS, BUSINESS AND FINANCE

EFFICIENCY OF BAITUL MAAL WA TAMWIL (BMT) AS ISLAMIC MICROFINANCE INSTITUTION IN INDONESIA: AN APPLICATION OF DATA ENVELOPMENT ANALYSIS

Atiqi Chollisni Nasution

Keywords: microfinance, efficiency, DEA, BMT

Abstract

The primary objectives of most microfinance program is
alleviating the poverty by assisting the poor to be economically
independent. Different with conventional microfinance that offers
the financing scheme based on interest (read: riba), Islamic
microfinance offers the financing scheme based on shariah
principles to enhance the business development of
microentrepreneurs. Furthermore, Islamic microfinance assists
the microentrepreneurs to applicate the Islamic ethics in daily
life that effects to press the number default of payment. Recently,
there are around 4,000 Baitul Maal Wa Tamwil (BMTs) operate
and have enhanced thousand poor people life in Indonesia. They
are Islamic Microfinance Institutions (Islamic MFIs) that
responsible in collecting, managing and distributing the funds
either for charity (e.g for the poorest) or providing financial
services for the microentrepreneurs. In addition, measuring
efficiency of microfinance program is important to enable the
microfinance institutions (MFIs) to strengthen the management,
generate sufficient profits and maintain efficient operations to
ensure its sustainability. The main aim of the paper is to examine
the efficiency of BMTs as Islamic microfinance institutions in
Indonesia. Data Envelopment Analysis (DEA) is used to examine
the relative efficiency of the selected BMTs. DEA is a nonparametric method which utilize the linear programming method
to measure technical (technological) efficiency and requires
inputs and outputs data. Twelve large size BMTs are chosen as
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ISLAMINOMIC JURNAL Jurnal Ekonomi dan Perbankan Syariah
the sample of the study and they have operated in the provinces
of Indonesia with the highest number of poor people live. The
study indicated that financing and human resources are the bases
of inefficiency in BMTs. Inefficient BMTs are expected to
optimize its operations by emulating the input minimization and
output maximization practices adopted by efficient BMTs. The
findings are not only relevant and applicable to Indonesia but
also to other muslim countries and would be useful for further
empirical research in this area.