The accountability of Islamic microfinance institutions: Evidence from Indonesia

Islamic Saving and Loan Cooperatives or BMTs in Indonesia have undergone exceptional development. This paper investigates and provides information regarding the accountability of BMTs in Indonesia as the development of reporting regulation and accounting standards has not followed the rapid development of BMTs. Due to a lack of a supervisory board and a low demand for audited financial statements, there is little incentive for BMT managers to have independent auditors audit their financial statements. Only 7-20% of BMTs, statistics reveal, are audited by independent auditors. The reasons for BMT managers’ decision not to opt for a process of audit and transparent reporting services are explored in the paper.