Track: Business Management

Abstract

In many countries, one strategy has emerged to resolve the challenges for improving access to credit facilities by creating a microfinance institution (MFI) that provides credit to low-income families. However, as a Muslim majority country, Indonesia has established a new form of MFI that comply with Shariah's Shariah Microfinance Institution (SMFI). Besides the shariah based product, SMFI has existed in rural areas, including Pesantren is known as Micro Waqf Bank (MWB). It has created to solve the poverty issues among low-income families that live in rural areas. Also, the main goal of MWB is to provide the convenience platform regarded as the business capital and financing to middle-lower income people and micro, small and medium enterprises (MSMEs). In line with the vital role of MWB, the present study is written to investigate the effect of MWB sector expansion in reducing the poverty issues among rural communities at 5 selected provinces, Indonesia. This study utilizes the secondary data collected from two sources, i.e. Central Bureau of Statistics (BPS) and Islamic Microfinance Institutions and Micro Waqf Banks (IMFI - BWM) for 2018 2019. This study found that MWB financing has a significant negative effect on poverty alleviation among rural communities at 5 selected provinces, Indonesia. We also found that the number of MWB does not significantly affect poverty alleviation among rural communities at 5 selected provinces, Indonesia. On the basis of the study findings, we concluded that MWB plays an important role in reducing poverty among rural communities. In contrast, increase MWB financing institution will be alleviating the poverty among them.  Also, the number of MWB has not been fully affected by the number of low-income families in rural areas, Indonesia, due to the small number of operated MWB in Indonesia.

Keywords: Shariah Microfinance Institution (SMFI), Micro Waqf Bank, Poverty Alleviation, Rural Communities Empowerment