Sustainability of BMT Financing for Developing Micro-enterprises

The aim of this study is to analyze the sustainability of Islamic microfinancing for developing micro-enterprises (MEs). We use the example of Baitul Mal Wat Tamwil (BMT), an Islamic microfinance institution in Indonesia. Two approaches will be used to explore sustainability: data envelopment analysis (DEA) and level of outreach. Firstly, the results indicate, generally, that the efficiency of BMTs is relatively low. Scale efficiency also indicates that BMTs operate far from optimally. The results suggest that there is gap in efficiency scores obtained from CCR and BCC models. This shows that BMTs still face managerial problems. Secondly, Islamic micro-financing is useful for developing micro-enterprises and contributes great social benefits to society in many ways. Although the profitability efficiency of BMTs is relatively low, since BMTs have generally profited and made social benefit, Islamic financing can be predicted to be sustainable and be able to provide viable Islamic financi