Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia

Islamic Microfinance institution (MFI) funded either by government or private financial institutions are playing an instrumental role in discharging business fund to the eligible micro entrepreneurs (ME). The potential of micro entrepreneurs to succeed in their business is always becoming a central...

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Autores principales:	Bin Mat Isa Muhammad Pisol, Tubastuvi Naelati, Wahyuni Sri, Marimuthu Maran, Tony Ridhuan, Zulkifli Muhammad Zul Aiman, Hajar Siti
Formato:	article
Lenguaje:	EN FR
Publicado:	EDP Sciences 2021
Materias:	Social Sciences H
Acceso en línea:	https://doaj.org/article/1edf9ff1b4344a9e9a8ee513e9aecf87
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spelling	oai:doaj.org-article:1edf9ff1b4344a9e9a8ee513e9aecf872021-12-02T17:15:22ZInnovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia2261-242410.1051/shsconf/202112410004https://doaj.org/article/1edf9ff1b4344a9e9a8ee513e9aecf872021-01-01T00:00:00Zhttps://www.shs-conferences.org/articles/shsconf/pdf/2021/35/shsconf_icmesh2020_10004.pdfhttps://doaj.org/toc/2261-2424Islamic Microfinance institution (MFI) funded either by government or private financial institutions are playing an instrumental role in discharging business fund to the eligible micro entrepreneurs (ME). The potential of micro entrepreneurs to succeed in their business is always becoming a central issue, this is due to the ability to manage the business strategy in a sustainable manner. The fund transacted in micro financing industry is small in term of quantity, therefore it also generates small profit to both parties MFI and ME, it may not be profitable in the eye of financial institution such as bank or Microfinance institution such as Baitul Mal wa Tamwil, moreover the financing risk is always high because some of the financing given without proper risk mitigation could lead into financial failure. The above reasons have influenced most of the MFIs’s decision to abstain from providing equity-based financing, where the concept very much suitable and workable to bring out the groups of MEs from poverty list in comparison to debt-based financing. Equity-based financing require bigger commitment and intervention from MFI in business in term of coaching, training and managing cash flow of the business. Islamic equity-based financing is about profit and loss sharing (PLS) financing. Where both parties have to bear financial consequences in the event of business failure. The failure in business would cause non-performing financing (NPF) to the financial institution and could effect the financial position for that particular year of report. The continuous NPF to the MFI can risk the company future plan. Thus, this study aimed to explore the mechanism of risk mitigation for equity-based financing which can be adopted by Islamic microfinance institutions around the would. The mechanism used to suggest in area of governance, selection of entreprenuer, financing arrangement, payment system and business business sectors. The study applied content analysis to collect the history data of equity-based financing as offered by BMT and MFIs in Indonesia, the data informed researcher on the success and failure story, the study also applied structured interview with managers who are responsible on risk mitigation. The study found that BMT and MFIs in Indonesia are well-organized, the governance and selection of entreprenuer are palying significant role while the payment system which includes the collatoral against any negligence posits an effective way in mircofinance mitigation model.Bin Mat Isa Muhammad PisolTubastuvi NaelatiWahyuni SriMarimuthu MaranTony RidhuanZulkifli Muhammad Zul AimanHajar SitiEDP SciencesarticleSocial SciencesHENFRSHS Web of Conferences, Vol 124, p 10004 (2021)
institution	DOAJ
collection	DOAJ
language	EN FR
topic	Social Sciences H
spellingShingle	Social Sciences H Bin Mat Isa Muhammad Pisol Tubastuvi Naelati Wahyuni Sri Marimuthu Maran Tony Ridhuan Zulkifli Muhammad Zul Aiman Hajar Siti Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia
description	Islamic Microfinance institution (MFI) funded either by government or private financial institutions are playing an instrumental role in discharging business fund to the eligible micro entrepreneurs (ME). The potential of micro entrepreneurs to succeed in their business is always becoming a central issue, this is due to the ability to manage the business strategy in a sustainable manner. The fund transacted in micro financing industry is small in term of quantity, therefore it also generates small profit to both parties MFI and ME, it may not be profitable in the eye of financial institution such as bank or Microfinance institution such as Baitul Mal wa Tamwil, moreover the financing risk is always high because some of the financing given without proper risk mitigation could lead into financial failure. The above reasons have influenced most of the MFIs’s decision to abstain from providing equity-based financing, where the concept very much suitable and workable to bring out the groups of MEs from poverty list in comparison to debt-based financing. Equity-based financing require bigger commitment and intervention from MFI in business in term of coaching, training and managing cash flow of the business. Islamic equity-based financing is about profit and loss sharing (PLS) financing. Where both parties have to bear financial consequences in the event of business failure. The failure in business would cause non-performing financing (NPF) to the financial institution and could effect the financial position for that particular year of report. The continuous NPF to the MFI can risk the company future plan. Thus, this study aimed to explore the mechanism of risk mitigation for equity-based financing which can be adopted by Islamic microfinance institutions around the would. The mechanism used to suggest in area of governance, selection of entreprenuer, financing arrangement, payment system and business business sectors. The study applied content analysis to collect the history data of equity-based financing as offered by BMT and MFIs in Indonesia, the data informed researcher on the success and failure story, the study also applied structured interview with managers who are responsible on risk mitigation. The study found that BMT and MFIs in Indonesia are well-organized, the governance and selection of entreprenuer are palying significant role while the payment system which includes the collatoral against any negligence posits an effective way in mircofinance mitigation model.
format	article
author	Bin Mat Isa Muhammad Pisol Tubastuvi Naelati Wahyuni Sri Marimuthu Maran Tony Ridhuan Zulkifli Muhammad Zul Aiman Hajar Siti
author_facet	Bin Mat Isa Muhammad Pisol Tubastuvi Naelati Wahyuni Sri Marimuthu Maran Tony Ridhuan Zulkifli Muhammad Zul Aiman Hajar Siti
author_sort	Bin Mat Isa Muhammad Pisol
title	Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia
title_short	Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia
title_full	Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia
title_fullStr	Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia
title_full_unstemmed	Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia
title_sort	innovation of risk mitigation model for islamic equaty-based financing in islamic microfinance institutions in indonesia
publisher	EDP Sciences
publishDate	2021
url	https://doaj.org/article/1edf9ff1b4344a9e9a8ee513e9aecf87
work_keys_str_mv	AT binmatisamuhammadpisol innovationofriskmitigationmodelforislamicequatybasedfinancinginislamicmicrofinanceinstitutionsinindonesia AT tubastuvinaelati innovationofriskmitigationmodelforislamicequatybasedfinancinginislamicmicrofinanceinstitutionsinindonesia AT wahyunisri innovationofriskmitigationmodelforislamicequatybasedfinancinginislamicmicrofinanceinstitutionsinindonesia AT marimuthumaran innovationofriskmitigationmodelforislamicequatybasedfinancinginislamicmicrofinanceinstitutionsinindonesia AT tonyridhuan innovationofriskmitigationmodelforislamicequatybasedfinancinginislamicmicrofinanceinstitutionsinindonesia AT zulkiflimuhammadzulaiman innovationofriskmitigationmodelforislamicequatybasedfinancinginislamicmicrofinanceinstitutionsinindonesia AT hajarsiti innovationofriskmitigationmodelforislamicequatybasedfinancinginislamicmicrofinanceinstitutionsinindonesia
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Innovation of Risk Mitigation Model for Islamic Equaty-Based Financing in Islamic Microfinance Institutions in Indonesia

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