Dusuki (2008), mconducted an Islamiceconomic research, in reviewing microfinance schemes that can participate in the sustainability and sustainability of MFII urgently needs an innovative approach beyond the role of traditional financial intermediaries, such as building human resources through social intermediation and designing group-based loan programs as a tool effective to reduce the risk of the rural poor. El-Komi and Croson (2013), found a higher level of compliance with MFII by sharing results and joint ventures rather than interest-based. Hassan (2014), found that collective action in the MFII was very successful in helping to increase environmental awareness, improving member economies and managing local resources. Furqani (2015) and Wahbalbari et al. (2015) emphasize the MFII based on the principle of Islamic solidarity.
Another main concern is the financial sustainability for the Islamicmicrofinance institutions to carry on its operations as well as the source of funding to be channelled to the entrepreneurs. As Abbas and Shirazi (2015) pointed out, one of the main constraints to Islamicmicrofinance is lack of adequate loanable funds based on profit and loss sharing. The proposed model aims to gather funds from Zakat, Sadaqah and Waqf investment proceeds to be channelled as capital to the entrepreneurs. This model will need to focus on establishing strategic alliance with Zakat organizations as well as other local organizations to source the funds. The Zakat funds may be channelled to develop projects for educational or health care services as long as the beneficiaries of such projects fulfil the criteria to be recipients of Zakat. Furthermore, additional source of funding for the Mudharabah financing arrangement could be sourced from community investors who wish to partake in developing the ummah and earning profits on halal investments. According to Hassan (2014), such collective efforts to promote economic activities and regional development will affect both production and consumption of a community. However, as Haneef et al. (2015) suggested, it is important to provide educational and training programmes to the borrowers so that the borrowers are equipped with necessary know-how to run their businesses or agricultural farms.
Abstract: The purpose of this study is to formulate the development strategy of Islamic educational institution that meet good quality in establishing Islamic education by maintaining the substance of Islamic education concept. The methodology used is qualitative research intended to elaborate a social context phenomenon naturally by presenting in-depth interaction communication process between researcher and the phenomenon of study. The analysis model used is gap analysis. The research finding directed the development strategy of Islamic educational institution by sharpening the development paradigm of Islamic education that consists of strengthening the concept of integration, universality, and democracy paradigms. Strengthening the development strategy of Islamic educational institution is done through the educational principle formulation, clear and measurable vision and mission formulation, good educational goals formulation supported by the strong educational management and governance, appropriate curriculum development, and appropriate learning method and approach to the curriculum direction and orientation setting.
Empowerment process, student have the power to act effectively to change life and environment for the better (Alhifni, 2017). Muhammad (1997) explains that his law allowed, by making the dinar as a venture capital and then the profits distributed to mauquf ‘alaih. The opinion of some scholars of the Syafi’i school of thought also allows the money waqf (Kasdi, 2016). In the development of cash waqf has been developed in Indonesia one of them in financial institutions and educational institutions because it is very easy to be accessed by the community. Haura et al. (2015) Indonesia has a huge potential of cash waqf and can be managed by BMT. The management of waqf money in BMT involves 3 parties namely the Ministry of Cooperatives and SMEs, Indonesian Wakaf Board (BWI) and BMT, in this case who act as nazir is BMT. Regulation of the Minister of Religious Affairs No.4 of 2009 on the Administration of Wakaf Money Registration, in it mentioned the existence of Sharia Financial Institutions Receiving Moneywomen (LKS-PWU). So that rules can be justified if BMT manages money waqf (Ascarya, 2015; Fanani, 2011). Ascarya (2015) proposed a model that integrates between waqf and Sharia microfinance institutions. Mannan in Haura et al. (2015) initiated the money waqf by establishing Social Investment Bank Limited in Bangladesh which is packaged in Cash Waqf Certificate instrument mechanism. This model is considered very appropriate to realize social welfare and help stimulate economic growth at the bottom of the community. Products empowerment using cash waqf is a product that can be developed by BMT as well as can perform BMT function as a baitul mal institution that can act as a nazir waqf. Clearly, the flow of its application can be explained in the following explanation:
Abdul Rahman and Dean (2013) summarised four main challenges Islamicmicrofinance providers face, these are: market penetration, economic viability of Islamic finance, high transaction costs, and the effectiveness of Islamicmicrofinance in alleviating poverty. To a large extent, these challenges mirror the challenges faced by conventional microfinance providers identified by Ahmed (2002). Operating a microfinanceinstitution requires high transaction costs to maintain economic viability. However, as Smolo and Ismail (2011) pointed out, many Islamicmicrofinance providers have not used all sources of funding or Islamic financial instruments; in particular, religious endowment (waqf and zakat) could be added into the sources of funding for helping financially disadvantaged groups. Moreover, microfinance providers are created for the purpose of helping people who typically live in deprived areas with a high unemployment rate, recurring natural disasters, or a challenging macroeconomic environment (GIFR, 2016). When an entire community is below the poverty line, the major challenge for the microfinance provider is to determine which business model could sustain in such an environment.
The first microfinanceinstitution that came into existence is Grameen Bank. The model it exercised is best known for solidarity lending. As typical bank loans, the institution gives out loans to the clients. Thus interest is charged, which is often several times higher than general bank credits, as discussed earlier. According to the model, each borrower must belong to a five-member group; the group does not need to give a guarantee for a loan. The loan is made to only one person but the whole group is to make sure that the money is repaid. Each member has to pay for their own loan but if they have problems the group may help them pay because the group would not get any more loans from Grameen if all the groups’ loans were not paid. (Seelos & Mair, 2005)
The current practice in Islamicmicrofinance is very much similar to that of Islamic banking. We explain this assertion based on previous works (Obaidullah, 2008; Obaidullah and Khan, 2008; Seibel, 2005). According to Obaidullah (2008), Islamicmicrofinance institutions (IMFIs) across the globe utilize a variety of Shariah-compliant mechanisms, such as murabahah, bay bithaman ajil (BBA), ijarah, bay al salam etc. All these modes of financing create debt. In Indonesia, even though Obaidullah and Khan (2008) reported that IMFIs there uses reasonably balanced with an array of products - based on mudarabah, musharakah, murabahah, ijarah and qard al-hasan, it is a new trend because Seibel (2005) reported that in BPRS (one of IMFIs operating in Indonesia), the main financing product is murabahah, i.e. a sales contract between bank and customer with a fixed profit margin for the bank. Flexible profit-sharing, which is cumbersome to calculate, is of minor importance. In the Middle East, the Hodeida Microfinance Program in Yemen followed the model practiced by Grameen Bank in Bangladesh, however, it uses murabahah mode of financing instead of PLS mode of financing. Obaidullah and Khan (2008) reported that in Bangladesh, the Islamicmicrofinance institutions there have been depending on deferred-payment sales (bay al mu’ajjal) mode of financing. The review of these studies has demonstrated that a study on the applicability of musharakah mutanaqisah remained limited and inconclusive. Creating an Islamicmicrofinanceinstitution on the basis of murabahah, BBA and ijarah, to mention some is not sufficient to reflect an Islamic business philosophy (Haron and Shanmugam, 2001). These principles are debt-based and tend to be burdensome to those borrowers who are viewed particularly incapable to service debts and the charges related to such debts.
After the global financial crisis, global unemployment has increased to record 197 million job seekers worldwide in 2011, where 74.7 million are youth unemployed. Upward trends in both the adult and youth unemployment make estimates possible to reach 202 million in 2013 4 . The MENA region has to create up to 70 million jobs by 2020 to match the global employment rate’s pattern 5 . The OIC 6 member countries, with a population of 1.57 billion people, displayed important unemployment rate (9.4% in 2010) 7 which exceeds the global rate (6% in 2011). North African countries, which have strong direct trading and migration ties with the EU countries, have suffered from return migration from Southern Europe, leading to deeper stress to their labor markets. The lack of employment opportunities is the strike problems these countries are facing, due to demographic growth, skills mismatches, the rigidity of the labor markets, and the weakness of the private sector. In 2012, the female youth unemployment rate was estimated to 37%, six times more than the rate of adult men 8 . In the Middle Eastern countries, the unemployment rate varies cross-countries. In one hand, the economic growth of oil exporting economies (like Qatar, Kuwait and United Arab Emirates) exceeded 6% in 2012, and unemployment rates were low (0.5% in Qatar and 2.7% in Kuwait), except for countries where stability is not preserved such as Iraq and Iran. On the other hand, oil importing countries are struggling with low levels of economic growth, and double-digit unemployment rates 9 . Among the 192 member countries of the United Nation, over 130 of them are classified as developing countries which are in general not only facing high unemployment but also high rates of poverty . According to estimates by the World Bank, more than 1.6 billion people were classified as poor in 2009, with the majority of them live in rural areas. In Middle East, 30.2% of the total population was either poor or near poor 10 in 2011, a medium percentage compared with the global rate in developing world, 58.4%, while it reaches 61.1% in North Africa and 92% in South Asia. Following the success of the Grameen Bank in Bangladesh, microfinance has been considered to be a new financial model for poverty alleviation in developing countries . In 2006, Grameen Bank and its founder Mohamed Yunus were awarded the Nobel Peace Prize for “their efforts to create economic and social development from below” 11
Microfinance has emerged as an important instrument to alleviate poverty in many countries including in developing countries. Despite being able to demonstrate successes in the activity, conventional microfinance is not without controversy. The findings from the existing studies revealed that conventional microfinance is less effective, fail to reach the poorest people and generally have a limited effect on income. In addition, conventional microfinance also has highly criticized for charging excessive interest rates and fees to the poor entrepreneur. In some Muslim countries, conventional microfinance has always been rejected, due to its non- compliance with the Islamic principles, particularly on the issue related to interest or riba. Islamicmicrofinance evolved and reckoned as an alternative to its counterpart. However, the outreach of Islamicmicrofinance is very limited where only there is very few Islamicmicrofinance institutions and Islamic banks involved in microfinance activity. Also, Islamicmicrofinance is having an issue of convergence of activity with the conventional practices. Thus, this paper aims to propose to adopt Zero Interest Financing Model (ZIFM) for Islamicmicrofinance institutions. This study focuses on the case of Indonesian Islamicmicrofinanceinstitution namely Shariah People Credit Bank (BPRS) by observing their experience and some emerging issues. The proposed model is expected to address an emerging issue in Islamicmicrofinance institutions.
Before became a Koperasi Simpan Pinjam dan Pembiayaan Syariah (KSPPS) or Baitul Mal Wa Tamwil (BMT) in 1980-1990 there was the idea of stakeholder boarding school namely Ir. Yuyud Wahyudin, Drs. M. yusuf, Ir. Ade Hambali, Dra. Erna Jernawati and Yusfitriadi, MPd in giving birth to a micro-economicinstitution by collecting dues and making business capital (screen printing, book trading) as well as efforts to raise grant funds and businesses to move places. In addition, based on the government program in terms of cultivating cooperatives as a community micro-economicinstitution in Islamic boarding schools, it was easy to establish cooperatives in 1994 under the name Koperasi Pondok Pesantren (KOPONTREN) "Muallimin" which specifically design for business background in the field Islamic financing services.
We recommend more research regarding the effect of repayment performance in the microfinance banking with regards to capturing all factors which influence the repayment performance. Furthermore, in the following studies, it will be interesting to study how Variables like negative political environment and economic recession have effects on customers‟ loan default tendency. The study is subjected to limitations in that the respondents were limited to only one microfinance bank. Therefore, it is proposed to select respondents from multiple microfinance banks. This study used the logistic regression model for estimating the credit scoring model. It is suggested to use alternative models such as discriminant analysis, neural networks, survival analysis and decision trees to check if the present findings holds ground. Eight variables were studied in this study. There are other independent variables that can determine the creditworthiness of the borrower, for example, gender, household income, employee salary, etc.
The most common argument against contemporary Islamic banking in Malaysia is that there is “no difference at all”. Some people claim that Islamic banking in Malaysia merely involves change in name and documents. They argue that interest rate that being the practice in conventional banking is change of to “profit rate” in Islamic banking. Therefore, this imitation of so called ‘Islamic’ banking in Malaysia also involves an interest element that is clearly prohibited in Islam indirectly. This is because by changing names and documents, it is not enough to validate the contracts. Any excess over principle is riba, its include usury and interest. Thus no matter the interest rate is low or high, it is still considered as riba (Muhammad Musleh Uddin, 2007). Nor can there be any distinction between the interest for the productive and consumptive purposes.
It is important to note that market orientation was first conceptualize as having an effect on organizational performance by Kohli and Jaworski (1990) and Narver and Slater (1990). However, many studies have also empirically tested the relationship between market orientation and organizational performance and also found a positive significant relationship between market orientation and organizational performance (Boso, Story, & Cadogan, 2013; Gaur et al., 2011; Gholami & Birjandi, 2016; Gruber-Muecke & Hofer, 2015) . Kohli and Jaworski viewed MO as a behavioral aspect and defined market orientation as a process in which a firm generates market intelligence which pertains to customer present and future needs, disseminate the information gathered to different departments of the firm and responding to the information gathered by various departments. While Narver and Slater (1990) in contrast view MO as an organization culture that focuses on the creation of superior values for customers which leads to achieving competitive edge and superior performance of the firm.
Portfolio of the IslamicMicrofinanceInstitution will be at risk due to asymmetric information because principle or capital provider has limited or imperfect information. On the contrary, borrower of the money i.e. agent has exact and full information. Thus this gives rise to the concept of moral hazard for the lending party i.e. Islamic MFI. Research in the field of Islamic finance has outlined few factors that can reduce agency problem for Profit and Loss sharing contracts. These are business skill, business reputation, business commitment, financial health of the project, length of the project.
UNCDF (2004) study identified three key roles played by the microfinance schemes on development; helping the poor household to meet basic needs and safeguards against uncertainties; improvement in household economic welfare and economic empowerment of the women and promotion of gender equality. The findings of Otero (1999) reveal that micro finance creates productive capital for the poor and low-income earners. However, such credit programs were characterised by high loan defaults (Robinson, 2001). Obaidullah (2008) elucidates that many elements of microfinance in a broad sense have fundamental similarities with the principle of Islam, which emphasizes ethical, moral, and social ingredients in promoting equality and fairness for the society at large.
Since the requirements to become a member or obtain financing from Islamic MFIs are less complicated than other financial institutions (e.g. banks), they enable people in the rural areas to access financing. Islamic MFIs’ major advantage is they operate with shari’a principles. This gives more options for sourcing financing to Indonesians, especially to those who are concerned with their religion. Moreover, most Muslims prefer using financial products which do not contravene their beliefs (Ahmad & Ahmad, 2009; Akhter et al., 2009; Karim et al., 2008; Seibel, 2008). A study by Honohan (2008) cited in Karim et al. (2008) found that 72 percent of people in Muslim majority countries do not use formal financial services even if they are available in their area, because they believe that conventional financial institutions do not follow Islamic principles that contravene their religious beliefs.
A network is a collection of nodes, some of which are connected by edges. In a social network, a node represents an entity and an edge represents the ties between those entities. In this model, we construct a social network based on the trust that community members have for other households in the community. Let n denote the number of households in the community. Each household is represented by a node, N i , for 1 ≤ i ≤ n. An edge, E i,j , connecting nodes N i and N j , with i 6= j,
Historically,the term of microcredit and microfinance are relatively new in the field of development, first coming to prominence in the 1970s. Previously, from the 1950s through to the 1970s, the provision of financial services by donors or governments was mainly in the form of subsidized rural credit programs. These often resulted in high loan defaults, high lose and an inability to reach poor rural households as cited . In the 1980s was the defining moment in the historical backdrop of microfinance in that MFI, the Garment Bank and BRI started to demonstrate that they could give little advances and funds benefits gainfully on a substantial scale. They received no proceeding with appropriations, were monetarily supported and completely manageable, and could achieve a wide effort to customers . Thus, it was additionally as of now that the expression "microcredit" came to noticeable quality being developed with demanded reimbursement, on charging loan fees that took care of the expense of credit conveyance and by concentrating on customers who were subject to the casual division for credit . The 1990s was the fastest development in the number of microfinance foundations and an expanded accentuation on achieving scale , as the microfinance decade .