This document summarizes a study on risk management practices at Islamic microfinance institutions (Islamic-MFIs) in Indonesia. It provides background on Islamic-MFIs and risk management in Indonesia. The study aims to investigate risk management practices at Islamic-MFIs and identify the types of risks they face. A literature review discusses previous related studies on risk management practices at banks. The methodology involves distributing questionnaires to Islamic-MFIs to determine their risk management practices.
Trust Fund: A Product Combining Waqf, Zakah and Sadaqah for Socio-Economic A...Islamic_Finance
This paper introduces Waqf, Zakah and Sadaqah, which are currently being mobilised by the non-Financial Institutions (non-FIs) such as charitable organisations and Non-Governmental Organisations (NGOs) as additional components of Islamic finance industry, to complement the efforts of financial intermediaries as a contributor to key socio-economic development. The paper presents various aspects of a case study regarding the use of Trust Fund Instrument by the Islamic Development Bank (IDB) for socio-economic development in its member countries including a project run with the co-operation of Bill & Melinda Gates Foundation (Gates Foundation) for polio eradication in Pakistan as part of the Global Polio Eradication Initiative (GPEI).
The Challenges of Bad Debt Monitoring Practices in Islamic Micro BankingMercu Buana University
The study aims to assess and compare the monitoring procedures in two Bank Syariah Mandiri (BSM) branches located in Cengkareng and Duri Kosambi of West Jakarta city. The research implemented qualitative data analysis tools that consisted in to develop Focus group discussion (FDG) to obtain reliable and depth data related to monitoring practices among loan officers. Meanwhile, interviews were designed to the branch managers of each institution to determine their role in the NPF management. The study results divide into two parts: On the one hand, it highlights the standard monitoring procedures for the Non-performing financing (NPF) in Islamic micro banking and the main differences between conventional and Islamic in NPF management. On the other hand, the second result exposes three main key findings: First one, it confirms the importance of count on proper risk management for Islamic micro banking and harnessing of the sharia principles to maintain the quality of the portfolio. Second, the study reveals a correlation that exists among screening, monitoring, and enforcement, thus how a proper testing and supervision practices may affect in the following steps of the loan cycle. Finally the third one, it shows the impact of real leadership from the head manager in the performance of the institution.
Trust Fund: A Product Combining Waqf, Zakah and Sadaqah for Socio-Economic A...Islamic_Finance
This paper introduces Waqf, Zakah and Sadaqah, which are currently being mobilised by the non-Financial Institutions (non-FIs) such as charitable organisations and Non-Governmental Organisations (NGOs) as additional components of Islamic finance industry, to complement the efforts of financial intermediaries as a contributor to key socio-economic development. The paper presents various aspects of a case study regarding the use of Trust Fund Instrument by the Islamic Development Bank (IDB) for socio-economic development in its member countries including a project run with the co-operation of Bill & Melinda Gates Foundation (Gates Foundation) for polio eradication in Pakistan as part of the Global Polio Eradication Initiative (GPEI).
The Challenges of Bad Debt Monitoring Practices in Islamic Micro BankingMercu Buana University
The study aims to assess and compare the monitoring procedures in two Bank Syariah Mandiri (BSM) branches located in Cengkareng and Duri Kosambi of West Jakarta city. The research implemented qualitative data analysis tools that consisted in to develop Focus group discussion (FDG) to obtain reliable and depth data related to monitoring practices among loan officers. Meanwhile, interviews were designed to the branch managers of each institution to determine their role in the NPF management. The study results divide into two parts: On the one hand, it highlights the standard monitoring procedures for the Non-performing financing (NPF) in Islamic micro banking and the main differences between conventional and Islamic in NPF management. On the other hand, the second result exposes three main key findings: First one, it confirms the importance of count on proper risk management for Islamic micro banking and harnessing of the sharia principles to maintain the quality of the portfolio. Second, the study reveals a correlation that exists among screening, monitoring, and enforcement, thus how a proper testing and supervision practices may affect in the following steps of the loan cycle. Finally the third one, it shows the impact of real leadership from the head manager in the performance of the institution.
Impact of Company Strategy on Microfinance Institution Performance in IndonesiaIJASRD Journal
The development of industrial microfinance in Indonesia gained the appreciation and attention of various experts in the field of microfinance. Microfinance in Indonesia is considered to be one of the greatest in the world, and has undergone a shift in the service paradigm undertaken by Micro Finance Institutions in Indonesia. This paper seeks to uncover the role of management strategies in improving the performance of MFIs in Indonesia, in addition to internal and external factors of the MFI itself as an aspect that significantly affects performance. The literature review shows that management strategy plays a significant role in improving the performance of MFIs, in addition to internal factors of MFIs and the external conditions of MFIs in Indonesia.
Measures for Achieving Financial Inclusion in India and Its Inclusive Growthiosrjce
Financial Inclusion is the first and foremost policy option to fulfil social and financial needs across
the country. The primary responsibility, in any country, is providing financial services to vulnerable groups to
improve their standard of living. “Fifty six percent of adults in the world do not have access to formal financial
services” (Oya Pinar Ardic, 2011), whereas “in India 89.3 million farmers i.e., 72.7% of total population, are
excluded from formal sources of finance” (KabitaKumariSahu, 2013). The Reserve Bank of India directed
commercial banks to promote financial inclusion in India which in turn results in the development of
economically backward areas. Rajan&Zingales, (1998) indicates that “there is a positive relationship between
financial developments with growth in banking industry through financial inclusion”. Leeladhar, (2006) states
that liberalization of banking services at an affordable cost to vast sections of disadvantaged and low-income
groups is essential for sustainable growth of an economy. As per the directions of RBI, all commercial banks
have been taking assistance from various social and financial entities like Joint Liability Groups, Non-Banking
Finance Companies (NBFC), Self-help groups, co-operative Banks, and Regional Rural Banks (RRBs) to
improve financial inclusion.“Financial inclusion is a very important, complementary and incremental approach
for inclusive development and poverty reduction” (Michael Chibba, 2009).The main objective of the study is to
know the status of financial inclusion in India and to give appropriate suggestions for inclusive growth of an
economy.
Islamic insurance industry is experiencing a period of rapid growth in terms of its net contributions and profit, however, at the same time, the development of this industry is still faced with tough obstacles and constraints due to the Shar'iah issues in some certain aspects. Islamic insurance operations need to be fine-tuned to meet the Islamic direction and the needs of Muslims. There are many different operational models with various Islamic jurisdictions trying to meet the needs of Muslims in general as regard Islamic insurance in the global Islamic economy. The two challenging issues that are studied are the ownership of the Islamic insurance risk fund and the surplus distribution accumulated from the risk fund. The findings reviewed that insurance principles contribute substantially to Islamic insurance operation (β = 0.405) justification in terms of Islamic features and operator fees (β =0.925) and (β =0.255) respectively
Assessment of Credit Risk Management System in Ethiopian Bankinginventionjournals
The main objective of this study is to assess credit risk management system in Ethiopian banking industry of some private and government commercial banks. Selection of banks for the study was done based on two criteria; it involves only government and private commercial banks and two those banks that operate during the period 1999-2014. Seven commercial banks out of eighteen banks operating at 2000 G.C are selected. These banks are Commercial Bank of Ethiopia, Awash International Bank S.C, Dashen Bank S.C, Bank of Abyssinia S.C, Wegagen Bank S.C, United Bank S.C and NIB International Bank S.C. From these seven commercial banks with so many branches nationwide, it can be difficult to be managed by the researcher due to time and resource constraints. Therefore, the researcher purposely limits in selecting banks at the head office. In this study, the researcher will utilize purposive sampling technique in order to select participants of the study. For the purpose of this study, both primary and secondary data is used. Primary data is collected through questionnaires distributed to respondents that involve professional working in the banks such as Department Managers and Senior Officers working on loan processing. Finding of this study will assist in forwarding recommendations to improve the problems the present credit management situation prevailing in the banking sector in Ethiopia by assessing commercial banks credit management activity. In addition to this, based on the implication of the research findings, the research also recommended areas for future research.
Structuring Alternative Investment in Public Private Partnership Projects Using Islamic Financial Instruments
https://uijrt.com/articles/v1i5/UIJRTV1I50002.pdf
Do Islamic rural banks consider Islamic morality in assessing credit applicat...UniversitasGadjahMada
This study aims to investigate how moral issues are considered in Islamic rural banks credit application analysis. To examine what factors are to be considered, this study applies a mixed approach (qualitative and quantitative), using focus group discussions, analysis of documents, interviews, and survey methods. The findings of this study have shown some essential aspects that are considered in the financing analysis of Islamic Rural Banks (BPRS). The results also reveal that the managers of the BPRS have very similar perceptions of the importance of the 5Cs. As revealed in the findings, all BPRS concede that they are applying this model with a different level of significance. Most BPRS only focus on some key aspects that are considered more important than others.
Smooth functioning a bank depends on the stability of stream of returns that it gets from its financing decision. This study is an attempt to showcase the reason for idling or shortage of funds and the factors for the case of Islamic banking. This effort will determine the strategy which can boost the financing in the economy, for this, this study has used the panel data of full-fledged Islamic banks from countries Pakistan and Malaysia, spanning to several years and based on several banks. Based on the analysis of internal and external factors of Islamic banks, it can be seen that increase in the market rate leads to decrease in demand of financing while the increase in deposits and equity do not show a proportional increase in financing which hints that there is excess liquidity available in the Islamic banks. On the positive side, it is evident that increase in the economic activity boosts the demand for Islamic financing.
The present study discussed and analyzed a number of issues concerning the operational risk faced by Islamic Financial Services, for example concepts of operational risks, risk management approaches and risk mitigation techniques and standards as these exist in the financial industry, unique operational risks of the Islamic Financial Services industry and the perceptions of Islamic Financial Services about these risks, regulatory concerns with respect to operational risks and their management, and Shari’ah related challenges concerning risk management has been identified and discussed. This study is an exploratory study therefore, based on the literature review relating to operational risk, risk management approaches and risk mitigation techniques. Guidelines on Stress Testing, issued by State Bank of Pakistan including sensitivity analysis and scenario analysis were also studied. The major part of the data consisting of secondary source was collected through research journals, internet and relevant books. Citation and literature discussion have been the major approach of this study. Banks should aim to develop a framework for operational risk management particularly for collecting operational loss data. In respect of designing operational risk stress tests, key indicators, like human errors, frauds, or failure to perform in timely manner, breaching limits, failure of information technology systems or events such as major fires or other disasters may be identified against the business lines. Shocks may be given to these risk events, their frequency and severity of losses. Once the operational loss events are identified, the level of shocks may be designed by looking into both the historical as well as hypothetical level of losses under those risk events.
Interaction of islamic banking sector with indonesian economic growth for 200...An Nisbah
Abstract: This paper aims to analyze the dinamics interaction of islamic banking sector with Indonesian economic growth for 2000-2010. The methode of analyze used in this research is granger causality and Vector Error Correction Model (VECM). Besides that we use stationary test to chek wether the data have unit root or not. We use time series data of total islamic bank fnancing, fxed invesstment, trade and gross
domestic product. We found that in the short run there is evidence of
bidirectional relationship between fnancing of islamic bank, fxed
investment, trade and economi growth. Where as in the long run
there is relationship between islamic banking with economic growth
on Indonesian economy. To improve the role of islamic banking on
Indonesian economy, Bank Indonesia must push islamic banking to
expand their activity on riil sector and rural area.
Keywords: Islamic Banking sector, Financial Intermediary, Economic
Growth, Vector Error Corrrection Model
The purpose of this study is to determine the factors that influence risk management, capital, GCG,
and efficiency on the financial performance of Islamic commercial banks in Indonesia. The population in this
study were Islamic commercial banks in Indonesia and selected by purposive sampling and selected 10 Islamic
commercial banks.
Impact of Company Strategy on Microfinance Institution Performance in IndonesiaIJASRD Journal
The development of industrial microfinance in Indonesia gained the appreciation and attention of various experts in the field of microfinance. Microfinance in Indonesia is considered to be one of the greatest in the world, and has undergone a shift in the service paradigm undertaken by Micro Finance Institutions in Indonesia. This paper seeks to uncover the role of management strategies in improving the performance of MFIs in Indonesia, in addition to internal and external factors of the MFI itself as an aspect that significantly affects performance. The literature review shows that management strategy plays a significant role in improving the performance of MFIs, in addition to internal factors of MFIs and the external conditions of MFIs in Indonesia.
Measures for Achieving Financial Inclusion in India and Its Inclusive Growthiosrjce
Financial Inclusion is the first and foremost policy option to fulfil social and financial needs across
the country. The primary responsibility, in any country, is providing financial services to vulnerable groups to
improve their standard of living. “Fifty six percent of adults in the world do not have access to formal financial
services” (Oya Pinar Ardic, 2011), whereas “in India 89.3 million farmers i.e., 72.7% of total population, are
excluded from formal sources of finance” (KabitaKumariSahu, 2013). The Reserve Bank of India directed
commercial banks to promote financial inclusion in India which in turn results in the development of
economically backward areas. Rajan&Zingales, (1998) indicates that “there is a positive relationship between
financial developments with growth in banking industry through financial inclusion”. Leeladhar, (2006) states
that liberalization of banking services at an affordable cost to vast sections of disadvantaged and low-income
groups is essential for sustainable growth of an economy. As per the directions of RBI, all commercial banks
have been taking assistance from various social and financial entities like Joint Liability Groups, Non-Banking
Finance Companies (NBFC), Self-help groups, co-operative Banks, and Regional Rural Banks (RRBs) to
improve financial inclusion.“Financial inclusion is a very important, complementary and incremental approach
for inclusive development and poverty reduction” (Michael Chibba, 2009).The main objective of the study is to
know the status of financial inclusion in India and to give appropriate suggestions for inclusive growth of an
economy.
Islamic insurance industry is experiencing a period of rapid growth in terms of its net contributions and profit, however, at the same time, the development of this industry is still faced with tough obstacles and constraints due to the Shar'iah issues in some certain aspects. Islamic insurance operations need to be fine-tuned to meet the Islamic direction and the needs of Muslims. There are many different operational models with various Islamic jurisdictions trying to meet the needs of Muslims in general as regard Islamic insurance in the global Islamic economy. The two challenging issues that are studied are the ownership of the Islamic insurance risk fund and the surplus distribution accumulated from the risk fund. The findings reviewed that insurance principles contribute substantially to Islamic insurance operation (β = 0.405) justification in terms of Islamic features and operator fees (β =0.925) and (β =0.255) respectively
Assessment of Credit Risk Management System in Ethiopian Bankinginventionjournals
The main objective of this study is to assess credit risk management system in Ethiopian banking industry of some private and government commercial banks. Selection of banks for the study was done based on two criteria; it involves only government and private commercial banks and two those banks that operate during the period 1999-2014. Seven commercial banks out of eighteen banks operating at 2000 G.C are selected. These banks are Commercial Bank of Ethiopia, Awash International Bank S.C, Dashen Bank S.C, Bank of Abyssinia S.C, Wegagen Bank S.C, United Bank S.C and NIB International Bank S.C. From these seven commercial banks with so many branches nationwide, it can be difficult to be managed by the researcher due to time and resource constraints. Therefore, the researcher purposely limits in selecting banks at the head office. In this study, the researcher will utilize purposive sampling technique in order to select participants of the study. For the purpose of this study, both primary and secondary data is used. Primary data is collected through questionnaires distributed to respondents that involve professional working in the banks such as Department Managers and Senior Officers working on loan processing. Finding of this study will assist in forwarding recommendations to improve the problems the present credit management situation prevailing in the banking sector in Ethiopia by assessing commercial banks credit management activity. In addition to this, based on the implication of the research findings, the research also recommended areas for future research.
Structuring Alternative Investment in Public Private Partnership Projects Using Islamic Financial Instruments
https://uijrt.com/articles/v1i5/UIJRTV1I50002.pdf
Do Islamic rural banks consider Islamic morality in assessing credit applicat...UniversitasGadjahMada
This study aims to investigate how moral issues are considered in Islamic rural banks credit application analysis. To examine what factors are to be considered, this study applies a mixed approach (qualitative and quantitative), using focus group discussions, analysis of documents, interviews, and survey methods. The findings of this study have shown some essential aspects that are considered in the financing analysis of Islamic Rural Banks (BPRS). The results also reveal that the managers of the BPRS have very similar perceptions of the importance of the 5Cs. As revealed in the findings, all BPRS concede that they are applying this model with a different level of significance. Most BPRS only focus on some key aspects that are considered more important than others.
Smooth functioning a bank depends on the stability of stream of returns that it gets from its financing decision. This study is an attempt to showcase the reason for idling or shortage of funds and the factors for the case of Islamic banking. This effort will determine the strategy which can boost the financing in the economy, for this, this study has used the panel data of full-fledged Islamic banks from countries Pakistan and Malaysia, spanning to several years and based on several banks. Based on the analysis of internal and external factors of Islamic banks, it can be seen that increase in the market rate leads to decrease in demand of financing while the increase in deposits and equity do not show a proportional increase in financing which hints that there is excess liquidity available in the Islamic banks. On the positive side, it is evident that increase in the economic activity boosts the demand for Islamic financing.
The present study discussed and analyzed a number of issues concerning the operational risk faced by Islamic Financial Services, for example concepts of operational risks, risk management approaches and risk mitigation techniques and standards as these exist in the financial industry, unique operational risks of the Islamic Financial Services industry and the perceptions of Islamic Financial Services about these risks, regulatory concerns with respect to operational risks and their management, and Shari’ah related challenges concerning risk management has been identified and discussed. This study is an exploratory study therefore, based on the literature review relating to operational risk, risk management approaches and risk mitigation techniques. Guidelines on Stress Testing, issued by State Bank of Pakistan including sensitivity analysis and scenario analysis were also studied. The major part of the data consisting of secondary source was collected through research journals, internet and relevant books. Citation and literature discussion have been the major approach of this study. Banks should aim to develop a framework for operational risk management particularly for collecting operational loss data. In respect of designing operational risk stress tests, key indicators, like human errors, frauds, or failure to perform in timely manner, breaching limits, failure of information technology systems or events such as major fires or other disasters may be identified against the business lines. Shocks may be given to these risk events, their frequency and severity of losses. Once the operational loss events are identified, the level of shocks may be designed by looking into both the historical as well as hypothetical level of losses under those risk events.
Interaction of islamic banking sector with indonesian economic growth for 200...An Nisbah
Abstract: This paper aims to analyze the dinamics interaction of islamic banking sector with Indonesian economic growth for 2000-2010. The methode of analyze used in this research is granger causality and Vector Error Correction Model (VECM). Besides that we use stationary test to chek wether the data have unit root or not. We use time series data of total islamic bank fnancing, fxed invesstment, trade and gross
domestic product. We found that in the short run there is evidence of
bidirectional relationship between fnancing of islamic bank, fxed
investment, trade and economi growth. Where as in the long run
there is relationship between islamic banking with economic growth
on Indonesian economy. To improve the role of islamic banking on
Indonesian economy, Bank Indonesia must push islamic banking to
expand their activity on riil sector and rural area.
Keywords: Islamic Banking sector, Financial Intermediary, Economic
Growth, Vector Error Corrrection Model
The purpose of this study is to determine the factors that influence risk management, capital, GCG,
and efficiency on the financial performance of Islamic commercial banks in Indonesia. The population in this
study were Islamic commercial banks in Indonesia and selected by purposive sampling and selected 10 Islamic
commercial banks.
A SERVICE QUALITY OF ISLAMIC MICROFINANCE IN INDONESIA: AN IMPORTANCE-PERFORM...Iwan Kurniawan Subagja
The rapid growth of financial system in Indonesia creates an intensive competition between Conventional and Islamic financial institutions. The study aims to evaluate the service quality of Islamic Microfinance Institution in Indonesia. The survey was carried out to acquire data from 136 respondents. Descriptive statistics and importance performance analysis (IPA) was used to analyze the data. The finding show that attributes plotted in quadrant “keep up the good work” are providing prompt service, and helpful response to customer requests, Ability in providing services to the customer as needed, prompt service on financial counselling, Ability of staff in giving proper explanation to the customer, Ability to keep the transaction process secure, and Shariah compliance banking products. Meanwhile, the attributes plotted in quadrant “concentrate here” are accessible of location of ATM, easy to access the location, ability to navigate customer to find what they intend, ability to maintain accuracy of bank statement, and ability in providing after sale services. To the best of author’s knowledge, it is the first study that measuring the service quality of Islamic microfinance from customer perspective using importance-performance approach.
Relationship between Risk Committee Existence and Financial Performance of Co...Dr. Amarjeet Singh
Performance of some banks in Kenya has been
declining leading to their collapse or receivership. This may be
attributed to many factors such as risk exposure. In bid to
protect the financial sector, Central Bank of Kenya therefore
directed all the banks to manage risks. One of the mechanisms
used by the banks to manage risks is risk committee. Some
banks established risk committees while others did not. There
is limited knowledge on the relationship between this risks
committee and financial performance in commercial banks.
This study therefore aimed at determining the relationship
between risk committee existence and financial performance
of commercial banks. The target population was all
commercial banks operating in Kenya. The study adopted
longitudinal research design that covered a period of five
years (2013- 2017). The study used secondary data extracted
from annual consolidated and financial reports. Information
on specific financial performance indicator was RoA (return
on assets) and risk committee existence was extracted from
annual reports. Data was analyzed using SPSS by way of
regression analysis. The study found that there is a significant
positive relationship between risk committee existence and
financial performance where the coefficient was r=0.299. The
results showed that the model explained 9% (R2 = 0.09,
Adjusted R2
= 0.1084, F (1) = 17.301, p=0.000, p˂0.05). This
shows that 9 percent in the variations of RoA can be explained
by risk committee existence. From the results, it is evident that
risk committee existence and RoA have a significant positive
relationship. The study recommends that commercial banks
should fully implement risk committees in their operations.
This will help the commercial banks to manage risk exposure
and improve their financial performance.
Assessment of Credit Risk Management System in Ethiopian Bankinginventionjournals
The main objective of this study is to assess credit risk management system in Ethiopian banking industry of some private and government commercial banks. Selection of banks for the study was done based on two criteria; it involves only government and private commercial banks and two those banks that operate during the period 1999-2014. Seven commercial banks out of eighteen banks operating at 2000 G.C are selected. These banks are Commercial Bank of Ethiopia, Awash International Bank S.C, Dashen Bank S.C, Bank of Abyssinia S.C, Wegagen Bank S.C, United Bank S.C and NIB International Bank S.C. From these seven commercial banks with so many branches nationwide, it can be difficult to be managed by the researcher due to time and resource constraints. Therefore, the researcher purposely limits in selecting banks at the head office. In this study, the researcher will utilize purposive sampling technique in order to select participants of the study. For the purpose of this study, both primary and secondary data is used. Primary data is collected through questionnaires distributed to respondents that involve professional working in the banks such as Department Managers and Senior Officers working on loan processing. Finding of this study will assist in forwarding recommendations to improve the problems the present credit management situation prevailing in the banking sector in Ethiopia by assessing commercial banks credit management activity. In addition to this, based on the implication of the research findings, the research also recommended areas for future research.
Proposed topic of the res an emperical analysis on interest rate risk managem...tesfatsion tefera
Risk is defined as anything that can create hindrances in the way of achievement of certain objectives. It can be because of either internal factors or external factors, depending upon the type of risk that exists within a particular situation. Exposure to that risk can make a situation more critical. A better way to deal with such a situation; is to take certain proactive measures to identify any kind of risk that can result in undesirable outcomes. In simple terms, it can be said that managing a risk in advance is far better than waiting for its occurrence. Risk Management is a measure that is used for identifying, analyzing and then responding to a particular risk. It is a process that is continuous in nature and a helpful tool in decision making process. According to the Higher Education Funding Council for England (HEFCE), Risk Management is not just used for ensuring the reduction of the probability of bad happenings but it also covers the increase in likeliness of occurring good things. A model called “Prospect Theory” states that a person is more likely to take on the risk than to suffer a sure loss.
Effects of micro- finance institutions' services on sustainability of small e...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
This paper examines the ethical contributions of Islamic banks by assessing ethical values in their
financial reports, review of their ethical practices, investigation of reasons behind the ban of interest in their
procedures, and analysis of their investment guidelines. This research acknowledges the ethical practices of
Islamic banks
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Journal will bring together leading researchers, engineers and scientists in the domain of interest from around the world. Topics of interest for submission include, but are not limited to
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how can i use my minded pi coins I need some funds.DOT TECH
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The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
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Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
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Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Card
Klibel5 acc 34_
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HAVE ISLAMIC MICROFINANCE INSTITUTIONS IN INDONESIA IMPLEMENT RISK
MANAGEMENT?
Muh Juan Suam Toro
Center of Islamic Economics Study
Universitas Sebelas Maret, Surakarta, Indonesia
Email: mjuanst@yahoo.com
Arum Setyowati
Center of Islamic Economics Study
Universitas Sebelas Maret, Surakarta, Indonesia
Email: arumsetyowati@yahoo.com
Arifuddin
Center of Islamic Economics Study
Universitas Sebelas Maret, Surakarta, Indonesia
Email: arifarifin81@gmail.com
ABSTRACT
Banking in Indonesia is highly regulated by Bank Indonesia as the central bank with the aim to prevent the failure of
the banking system and to guarantee the public funds are in the safe hands. At the micro level, there are many
financial institutions that serves as intermediary institution that operates like a bank, but not under the supervision of
the central bank. In addition, the rapid increase in the number of Islamic microfinance institutions (Islamic-MFI) in
response to the desire of the majority moslem population of Indonesia raised the question whether they apply the
principles of prudential banking. This study aimed to identify the risk management practices applied by Islamic
microfinance institutions and examines how the impact of these practices on financial performance. The population of
this research is Islamic-MFI. The sample of this research is Islamic microfinance institutions in the form of Baitul
Maal wal-Tamwil (BMT) and the Koperasi Jasa Keuangan Syariah (KJKS) in the area of Regency of Klaten,
Sukoharjo, Boyolali, and Karanganyar, Jawa Tengah Province. Descriptive analysis and regression analysis were used
to meet the research objectives. Descriptive analysis is used to describe the extent to which forms of risk management
practices carried out by Islamic microfinance institutions and regression analysis were used to analyze the relationship
between risk management’s understanding, identification, assessment, and monitoring and risk management practices
in Islamic-MFIs. The result showed that Islamic-MFIs have understood, able to measure, and monitor risk
management, but the ability to perform risk identification are still weak. The second result showed that Islamic-MFIs
have implemented risk management practices and credit analysis. There are relationships between ability to
understand, carry out assessment, and monitoring of risk management and risk management practices, but no
relationships for risk identification. Risks type faced by Islamic-MFI are credit risk, debt risk, liquidity risk, reputation
risk, and interest rate risk.
Keywords: risk management, Islamic microfinance institution, financial performance
BACKGROUND
The study of the microfinance industry has recently become interesting to study because of the fact that
microfinance institution (MFI) have some role in stimulating the economy through support for small and medium
enterprises (SMEs) and improve the welfare of society. MFI is described to overcome poverty through capital funding
for businesses organized by low-income communities. By MFI, the growth of micro/society business will be able to
survive and continue to grow.
In Indonesia, the MFI is usually found in the form of cooperative institution. Cooperative is an entity that
consists of a single person or a legal entity with the bases of cooperative activities based on the principles of
cooperation as well as economic movement based on the familyhood principle. Some types of MFIs in Indonesia are:
1. Saving and load cooperative
2. Savings and Loan Unit
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3. Community’s Funds and Credit Institution
4. Sharia Cooperative
5. Credit Cooperatives or Non Goverment Organizations
Baitul Maal wat-Tamwil (BMT) is a type of MFIs that implement the collection and distribution of funds on
the principles of Islam (sharia principle) basis. BMT legal entities are Sharia cooperative called Koperasi Jasa
Keuangan Syariah (KJKS). In this study, BMT hereinafter referred to Islamic microfinance institution (Islamic-MFI).
According to data from the financial services authority in Indonesia, called Otoritas Jasa Keuangan (OJK), Islamic-
MFI currently is estimated more than 500,000 cooperatives with total assets size in trillions. Until now, only about
200,000 cooperatives with total assets of more than 125 trillion recorded in the Department Of Cooperatives.
As commercial banks, Islamic-MFI has a goal of collecting and distributing funds from surplus
people/organization to the deficit people/organization. This business mechanism functions encourage Islamic-MFI to
give attention to risk management in its operational activities. Risk is the potential loss due to the occurrence of a
specific event (events). Risk management is a set of methodologies and procedures, which is used to identify,
measure, monitor, and controlling risk arising from the operations of the Bank (Bank Indonesia, 2009).
As has been mentioned earlier that the collection and distribution of funds from Islamic-MFI has
considerable exposure to risk, then Islamic-MFI should also do risk management practices for the purpose of securing
funds for its clients, in other word, securing the society’s fund. Bank Indonesia has required commercial banks and
Islamic business units to implement risk management practices at all operations. Types of risks that must be managed
include: Credit Risk, Market Risk, Liquidity Risk, Operational Risk, Legal Risk, Reputational Risk, Strategic Risk,
Compliance Risk, Yield Risks, and Investment Risk. While the implementation of risk management, some steps must
be taken: risk identification, risk measurement, risk monitoring and risk control.
This study aims to investigates risk management practices conducted by Islamic-MFI. Some of the questions
raised in this study are:
a. Have Islamic-MFIs adopted the practice of risk management (understanding risk management, risk
identification, risk assessment, risk monitoring, and credit risk analysis)?
b. What type of risk faced by Islamic-MFI?
LITERATURE REVIEW
MFI is an that run the bank's business activities as collecting and distributing funds from surplus entities to
the deficit entities, although to date the legal forms commonly used in Indonesia are cooperative. In 2013, the
Indonesian government has passed a regulation for microfinance institution to regulate the operasion of MFI
In Indonesia, since 2003, through regulation by Bank Indonesia (central bank), requires all commercial banks
to implement risk management in their business activities. This suggests that concerns about the practice of risk
management in the banking industry is very important. Some research on bank risk management practices have been
carried out, including studies conducted Al Tamimi and Al Mazrooei in 2007 were conducted in the United Arab
Emirates (UAE). This study compared the risk management practices conducted foreign banks and domestic banks.
The results show that there are significant differences in risk measurement and monitoring of national banks and
foreign banks. While the identification of risk, risk management practices, and credit risk analysis is not a significant
difference. In this study also indicated that foreign exchange risk, credit risk, and operational risk is the risk types
most frequently encountered.
Other research conducted by Syafique et al. (2013) who examine differences in the risk management
practices between Islamic financial institutions and conventional financial institutions in Pakistan. The results indicate
that there are six main types of risks faced by financial institutions in Pakistan namely credit risk, equity investment
risk, market risk, liquidity risk, rate of return risk; and operational risk. In the practice of risk management, there is no
difference between Islamic and conventional financial institutions in Pakistan.
Another study conducted by Tafri et al. (2011). This study compared the risk management practices of
Islamic banks and conventional banks in Malaysia. The results indicate that there are significant differences in the
results of measuring credit risk and operational Islamic banks and conventional banks in Malaysia. Other findings
indicate that the risk management and risk management systems in banks Islam inadequate.
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Khalid and Amjad (2012) measured the risk management practices of Islamic banks in Pakistan and found
that a good understanding of risk management in Islamic banking in Pakistan and all aspects of risk management has
positive relationship with the practice of risk management. Understanding and monitoring risk are found as two most
influential aspects of risk management practices in Pakistan. This study showed results consistent with the research of
Al Tamimi and Mazrooei (2007).
Husain and Al Ajmi (2012) in his study conducted in Bahrain, stated that the banker in Bahrain are aware of
the importance of risk management practices in reducing costs and improving performance. There are three main
types of risks faced by banks in Bahrain, namely credit risk, operational risk, and liquidity risk. The practice of risk
management in the banking sector in Bahrain is affected by variables such as the understanding of risk management,
risk identification, risk measurement, monitoring and risk management. This study also found no difference between
the bank's risk management practices of conventional and Islamic banks.
RESEARCH DESIGN
Researchers used a questionnaire to determine the risk management practices have been implemented by
Islamic-MFI. The original question developed by Al tamimi and Al Mazrooei (2007) consists of 43 questions and
divided into eight questions to determine:
a) 8 items for understanding of risk and risk management,
b) 5 items for risk identification
c) 7 items for risk assessment/measurement,
d) 6 items for risk monitoring
e) 9 items for risk management practices
f) 7 items for credit risk analysis performed
To determine the types of risks faced by Islamic-MFI, researchers gave an open answer to the
manager/middle staff consisting of 10 risks faced by Islamic-MFI, namely credit risk, operational risk, liquidity risk,
legal risk, debt risk, interest rate risk, reputation risk, price risk, strategic risk, and the competition risk. These types of
risk is the kind of risk that must be considered Bank Indonesia, as a rule and obligation for commercial banks and
Islamic business units of commercial banks.
The research design used in this study is an exploratory research. Exploratory research aims to understand
the characteristics of the phenomenon or problem under study because only few literatures that addresses the issue of
risk management practices and risk management methods conducted by Islamic-MFI.
The sample in this study was 30 Islamic-MFI in the form of BMT and KJKS that spread in Solo residency
(Karanganyar, Boyolali, Sukoharjo, Klaten and Surakarta). The sampling method used in this study was a
convenience slampling. This sampling method is choosen due to the limited information on the number of Islamic-
existing MFIs. In addition, the owner/manager of MFI usualy not transparent in providing information for researchers.
The data analysis employed in this research is descriptive statistics and univariate analysis. The method of
analysis used in this study using descriptive statistics and univariate analysis to provide information relating to the
extent to which risk management practices has been performed Islamic-MFIs and what risks faced by the Islamic-
MFIs.
RESULT AND DISCUSSION
Results of descriptive statistics in Table 1 shows that the respondents answers for Likert scale (1=very
disagreed, 7=very agreed) used to measure the agreement of statement for dimensions of risk management are over
the average value of 4 with an average span of 4.59 to 5.84. These mean that there is a tendency of respondents agreed
with the statement given. Islamic MFIs agree that they understand, able to identify, able to assess, and monitor risk
management.
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Table 1: Risk Management Practice
Description Mean Std.Dev Minimum Maximum
Dimension of Risk Management:
Understanding of Risk Management 5.84 0.88 3 7
Risk Identification 4.59 1.22 2 7
Risk Assessment and Analysis 4.81 1.07 2 6
Risk Monitoring 5.33 0.91 4 7
Risk Management Practice:
Risk Management Practice 5.44 1.01 3 7
Credit Analysis 5.55 1.31 1 7
Table 1 shows that for the dimensions of risk identification, which has the lowest average response of 4.59,
had the highest standard deviation of 1.22. This indicates that the ability to perform risk identification by the Islamic-
MFI lower than other risk management activities and there is a wide variation in the ability to identify risk between
Islamic-MFIs.
The opposite condition is indicated by the average value of the understanding dimensions of risk
management at the highest average of 5.84 with a standard deviation of 0.88. On average respondents were equally
likely to have a high understanding of risk management.
Table 1 also shows that the respondents agreement that they implement risk management practices is high
where the average of respondents' answers is 5.44 with a standard deviation of 1.01. The agreement to the statement
that Islamic-MFIs perform credit analysis showed on average higher than risk management at the average 5.55,
though with a wider standard deviation is 1.31. All respondent have implement risk management in spite of different
understanding and different emphasis of risk management activities.
Table 2: The Relationship of Risk Management Dimensions
and Risk Management Practice
Level of
Risk Management Practice
Understanding Identification Asssessment Monitoring
Low (mean=4.67) 5.25 4.40 3.75 4.58
Middle-Low (mean=5.39) 5.75 4.80 5.04 5.42
Middle-High (mean=5.61) 6.09 4.20 5.36 5.54
High (mean=6.08) 6.25 4.95 5.11 5.79
Univariate analysis is then performed to rank the level of risk management practices into four groups with
each group consist of 4 respondents from low to high. Through this ranking, the evaluation of the average response for
each dimension of the measurement is compared.
Table 2 shows that the average response for dimension of understanding increased from low to high risk
group practice management. Increasing understanding of risk management has increased the level of risk management
practices performed Islamic-MFI. The same relationship is also seen in the dimensions of assessment and monitoring.
On the dimension of risk identification, the average response rate is not consistently shown an increase.
These results indicate that the ability to understand, carry out assessment, and monitoring of risk
management are related to risk management practices in the observed sample. While the ability to identify risk
management showed no relationship with the risk management practice.
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Table 3: The Relationship of Risk Management Dimensions and Credit Analysis
Level of
Risk Management Practice
Understanding Identification Asssessment Monitoring
Low (mean=4.71) 5.25 4.10 3.68 4.67
Middle-Low (mean=5.11) 5.66 4.95 4.57 4.96
Middle-High (mean=5.68) 6.09 4.20 5.36 5.54
High (mean=6.71) 6.34 5.10 5.64 6.17
In Table 3, the same analysis was also carried out with the consent of the respondents rank the credit
analysis. Consistent with the answer on the relationship between risk management practices and dimensions of
understanding, assessing, and monitoring risk management, the increase in these dimensions also increase the credit
analysis performed. As for risk identification, analysis showed no relationship with credit.
Inconsistent results on the identification of risk indicates that there is still a shortage of Islamic-MFI staffs
skills in identifying the risks faced by their business. The inability to perform this activity may result in the
incapabiity to identify potential threats to their business.
Management of Islamic-MFIs need to improve the skills of their staff in risk identification periodically, so
that they do not dwell only on the risk that they understand it, but also the threat of potential risks they could not
identify. Given the vital role of MFIs in the community, especially for SMEs, it is government or policy makers that
should encourage the improvement of Islamic-MFIs’ ability and skills in risk identification.
Table 4: Perception of Risk Type Faced by Islamic-MFI
Risk Types Faced by Islamic-MFI No. I-MFI
Credit Risk 15
Operational Risk 10
Liquidity Risk 9
Legal Risk 1
Debt Risk 13
Interest Rate Risk 8
Reputation Risk 9
Price Risk 4
Strategic Risk 2
Competition Risk 2
Based on the results of the Islamic-MFI respondents about the type of risks they faced, average respondents
were able to identify that credit risk, debt risk, liquidity risk, reputation risk, and interest rate risk is the risk faced by
their businesses. Number of Islamic-MFI stated that they face credit risk, credit risk, liquidity risk, reputation risk,
interest rate risk, sequantially, are 15, 13, 9, 9, and 9 respondents. The other type of risks are less ignored. They are
price risk, strategy risk, competition risk and legal risk.
This condition is related to the ability of risk identification, where some risks not yet be considered to affect
the business of Islamic-MFIs. As rapid increase in the number of MFIs, price risk, strategic risk, and competition risk
can be more important that they can ruin their business conditions. In addition, when there are changes in govement
regulations, the impact of legal risk will increase.
Policy makers need to prepare these MFIs given their importance for community's economy, particularly in
support of SMEs who often use their services to finance the business. Moreover, in 2015 the regulatory changes and
the implementation of the ASEAN free trade area will encorage Islamic-MFI to make large adjustment of some
complience issue and competition strategy. Development through training and seminars can be done to boost the
importance of the understanding and capabilities of risk management. Guidance in the form of the legal rules and the
necessary operating standards are needed so that they are able to survice and continuously supporting the community.
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Coaching in providing an overview of the competitive landscape and regulatory changes necessary to keep them
competitive.
CONCLUSION
This study aimed to investigate whether the Islamic-MFIs have implemented risk management practices and
to identify what types of risks faced by BMT and KJKS. The conclusion of this study are as follows:
1. Average Islamic-MFI shows that they have understood, is able to measure and monitor risk management.
However, the ability to perform risk identification by the Islamic-MFIs are still weak compared to other risk
management activities.
2. The observed Islamic-MFIs have implemented risk management practices and credit analysis.
3. There are relationships between ability to understand, carry out assessment, and monitoring of risk
management and risk management practices in the observed sample, but not for the dimension of risk
identification.
4. The increase in the ability to understand, carry out assessment, and monitoring of risk management, also
increase the credit analysis performed, but not for the dimension of risk identification.
5. Risks type that perceived by Islamic-MFI indicate their view that credit risk, debt risk, liquidity risk,
reputation risk, and interest rate risk is the prominent risk faced by their businesses, but not for other risks,
such as price risk, strategic risk, competition risk, legal risk.
This study has implications both Islamic-MFI management and policy makers in order to further enhance the
ability of MFIs in conducting risk management, especially in support of SMEs in the society. As it is known that the
sustainability to face global competition and global crisis is depent on the economic fundamentals of the economy of
the society.
REFERENCES
Bank Indonesia. (2011). Penerapan Manajemen Risiko bagi Bank Umum Syariah dan Unit Usaha Syariah. Peraturan
Bank Indonesia No 13/23/2011.
Cooper dan Schindler. (2006). Bussines Research Methods 9th
Ed. McGraw-Hill International Edition.
Ferdinand. (2006). Metode Penelitian Manajemen: Pedoman Penelitian Untuk Penulisan Skripsi, Tesis dan Disertasi
Ilmu Manajemen, Badan Penerbit Universitas Diponegoro, Semarang.
Hanafi. (2009) Manajemen Risiko: 2nd
Ed., Yogyakarta: UPP STIM YKPN.
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