Analysis of the Role of Baitul Maal Wat Tamwil in Microeconomic Empowerment: A Case Study of Entrepreneurship Using Microeconomic Theory

Abstract

This study examines the approach Baitul Maal Wat Tamwil (BMT) used based on the microfinance institution approach theory. Conducted in 2023, this research utilized a non-reactive (unobtrusive) method. The study is crucial as, in 2022, 26.16 million people in Indonesia were still living below the poverty line. To alleviate poverty, Indonesia has implemented various methods, including micro-enterprise programs to empower small businesses. Microfinance institutions, regulated by Undang-Undang Nomor 1 Tahun 2013 Tentang Lembaga Keuangan Mikro (Undang-Undang LKM), are considered humanitarian service organizations (HSOs) because they empower individuals through social intervention processes that encompass both economic and social aspects. This study employs the microfinance institution approach theory by Ledgerwood, which categorizes microfinance institutions into two types of empowerment: minimalist and integrated approaches. The classification is based on the forms of assistance the microfinance institution provides, including financial intermediation, social intermediation, business development services, and social services. A microfinance institution is considered to use a minimalist approach if it only offers financial intermediation and limited social intermediation. Conversely, an integrated approach is used when the institution combines various forms of assistance. The results of this study, conducted on six BMTs in six cities, reveal that BMTs provide all four forms of assistance, thus categorizing them as microfinance institutions that use an integrated approach.