Murabahah mode of financing for micro and medium sized enterprises: A case study of baitul mal wattamwil (BMT), Yogyakarta, Indonesia

The murabahah mode of financing as an Islamic instrument and contract for MMEs (Micro and Medium sized enterprises) in the working of Baitul Mal Wattamwil (BMT), Yogyakarta, Indonesia is investigated in this study. BMT is a unique Islamic micro finance institution. The practice of murabahah financing products, its procedures and its applications in the BMTs in the light of shari’a rules is examined. The study evaluates the method of marking up price in murabahah financing products to discuss the similarities or differences between this method and the determining of interest rates in conventional banks. The policies and actions of BMTs’ management in case of defaults is also evaluated.