The Role of Islamic Microfinance Institutions in Economic Development in Indonesia: A Comparative Analytical Empirical Study on Pre and Post Financing States

Different institutions are engaged in the development efforts in Indonesia by appealing to different sectors of socio-economic life. Among such institutions, BMT (Baitul Maal wa Tamweel) and BPRS (Shari’ah People Credit Bank) can be mentioned as the main players of shari’ah microfinance institution in Indonesia. However, those two institutions are different in nature; while BMT is a shari’ah cooperative with limited support, regulation and monitoring; BPRS is a bank with sufficient support, regulation and monitoring from the Central Bank. It should be noted that these institutions overwhelmingly prevail in urban and rural part of Indonesia. This study aims to explore and analyse the role of BMT and BPRS in East Java’s in economic development in Indonesia by referring to their micro-dynamics. The paper also aims to propose strategies on how to improve their roles through an informed understanding of the findings established in the empirical part of the study. For this study, primary dat