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Establishing Social Justice Through Financial Inclusivity: Islamic Propagation

by Islamic Savings and Credit Cooperatives in Indonesia
Minako Sakai
TRaNS: Trans -Regional and -National Studies of Southeast Asia / Volume 2 / Issue 02 / July 2014, pp 201 222
DOI: 10.1017/trn.2014.4, Published online: 26 June 2014

Link to this article: http://journals.cambridge.org/abstract_S2051364X14000040

How to cite this article:
Minako Sakai (2014). Establishing Social Justice Through Financial Inclusivity: Islamic
Propagation by Islamic Savings and Credit Cooperatives in Indonesia . TRaNS: Trans -Regional
and -National Studies of Southeast Asia, 2, pp 201-222 doi:10.1017/trn.2014.4
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TRaNS: Trans Regional and National Studies of Southeast Asia Vol. 2, No. 2 (July) 2014: 201222.
Institute of East Asian Studies, Sogang University 2014 doi:10.1017/trn.2014.4

Establishing Social Justice Through Financial Inclusivity:

Islamic Propagation by Islamic Savings and Credit
Cooperatives in Indonesia
Minako Sakai
Abstract
Islamic nance has been growing signicantly across the globe. In Southeast
Asia, interest in Islamic nance and its growth is signicant in Malaysia. Compared with Malaysia, in Indonesia, however, the largest Muslim population
country where an Islamic resurgence has been widely taking place, the growth
of Islamic banks remains slower and on a smaller scale. Furthermore, recent
research shows that Islamic piety does not systematically translate into the use
of Islamic banks among middle-class Indonesians. Against these ndings, this
article highlights a relatively understudied Islamic nance institution, Islamic
Savings and Credit Cooperatives, in Indonesia commonly known as Baitul
Maal wat Tamwil (BMT). The BMT sector is separate from the banking sector
and as such has received little scholarly attention as part of Islamic nance in
Indonesia. The number of the BMTs in Indonesia has increased signicantly
since the 1990s and they are grass-roots Islamic nancial institutions offering
nancial services to relatively small-scale traders in urban areas. Based on
data from anthropological research in Central Java, this article argues that
Islamic propagation is an important element among the BMT founders and
workers. They perceive their economic activities as Islamic propagation by
deeds (dakwah bil hal) to achieve social justice.
KEYWORDS: anthropology of faith-based organisations, Islamic nance,
BMTs, Islamic propagation, Indonesia

INTRODUCTION
the Islamic Development Bank in 1973, both
Islamic and capitalist economies have increasingly spread to various countries
in Southeast Asia. For example, in 1983 the rst Islamic bank, Bank Islam Malaysia Berhad, was founded in Malaysia with strong government backing. This bank
has introduced Islamic nancial schemes based on Islamic jurisprudence by
replacing the existing interest-based capitalistic nancial schemes (Haneef
2005: 89). Malaysia is growing to be the worlds Islamic nance centre with 20
per cent of bank assets in the country being held by Islamic banks in 2013.

INCE THE ESTABLISHMENT OF

Minako Sakai, School of Humanities and Social Sciences, The University of New South Wales, Canberra;
m.sakai@adfa.edu.au

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Minako Sakai

This gure is much higher than the other Islamic countries where the average
asset share of Islamic banks is around 12 per cent (The Economist 2013). Following the international surge of interest in establishing Islamic nance, the largest
Muslim population state, Indonesia, also established its rst Islamic bank, Bank
Muamalat Indonesia, in 1991; a relative late comer compared to other Muslim
countries. The idea of Islamic nance was strongly supported and promoted by
Muslim intellectuals (Hefner 1996). In 1992 the state allowed other commercial
banks to start Islamic banking services while at the same time providing a legal framework for non-Islamic banks (Effendy 2005: 76). To date, Indonesia has three
types of Islamic banking: general Islamic (syariah) banks, syariah business units,
and peoples credit syariah banks. The total of these three forms of Islamic
banking grew from 91 in 2002, to 182 in 2010 (Lindsey 2012: 111). Islamic compliance has been monitored by key agencies including the National Syariah Board
of the Ulama Council of Indonesia (MUI), and Syariah Supervisory Boards (DSN).
However, the assets of Islamic banks in Indonesia remain relatively small,
and still under ve per cent of the total bank assets in 2013 (Business News,
18 December 2013). On this point, a recent study by Pepinsky (2013) has
shown that Islamic piety among Indonesian Muslims does not systematically correlate to the use of Islamic banks. This raises the question whether the development of Islamic nance in Indonesia has any links to the Islamic resurgence
taking place in Indonesia for the last 30 years. I argue that whilst the Indonesian
Islamic banks clients are not attracted to support Islamic nance solely based on
their piety, there is a growing interest among Muslims to promote Islamic nance
as part of Islamic propagation by deeds (dakwah bil hal). To demonstrate this, I
will highlight a growing number of Islamic Savings and Credit Cooperatives
known as Baitul Maal wat Tamwil (BMT) that have come into existence over
the last three decades along with the Islamic resurgence in Indonesia. The estimated number of BMTs is approximately 4000 units in 2010, with estimated
assets of three trillion Indonesian Rupiah (IDR) (Republika 2010).
While operating outside the formal Islamic banking institutions in Indonesia,
BMTs offer nancial services based on Islamic jurisprudence to small and
medium enterprises. Apart from for-prot business transactions, a social
mission wing, known as baitul maal attached to their parent BMT offers nonprot-making activities. BMTs should combine the mission of both for-prot
and not-for-prot businesses in order to redistribute wealth in a more equitable
way than conventional capitalism. Generally speaking, the majority of the BMTs
are registered cooperatives, and had no direct connections with the banking
sector in Indonesia until the recent change with the Law No. 21/2011 on Financial
Service Authority (OJK) which became effective in 2013. Until recently BMTs
enjoyed the relatively large exibility of offering both for-prot and not-forprot nancial services. This article will show that reecting this exibility, and
inspired by Islamic theological developments, the BMT movement has developed as part of new form of Islamic propagation by deeds (dakwah bil hal).

Establishing Social Justice Through Financial Inclusivity

203

Based on anthropological accounts on BMTs this paper will illustrate that ideas of
Islamic propagation among the majority of the BMT employees are shaping the
BMT business activities.
What do anthropological studies of BMT activities contribute to broader
research development of the anthropology of Islam and Southeast Asian
studies in general? First, this research aims to enhance our understanding of
Islam and Islamic practices in contemporary Indonesia. After the September
11 terrorist attacks in the United States, mass media and government agencies
have focused on militant aspects of Islam and Islamic organisations in Indonesia.
However, the grass-roots level of Islam as a socially engaged religion including
philanthropy and social activism continues. Although Olivier Roy (1994: 36)
states that the economy and social relationships are no longer perceived as subordinate activities that grow out of pious actors or the sharia, but are considered
key areas, in reality, scholarly enquiry of socio-economic aspects of Islam in
Indonesia remains relatively limited to date (c.f. Choiruzzad 2013; Effendy
2005; Isbah 2012; Juoro 2008; Lindsey 2012; Lubis 2004; Pepinsky 2013; Rudnyckyj 2009a, 2009b; Sakai 2008, Sakai 2010a; Sakai and Marijan 2008; Seibel
2008). It is thus my intention with this article, by highlighting the socio-economic
aspects of Islamic practices in Indonesia through the study of BMTs, to enrich
our understanding of the role of Islam in contemporary Indonesia.
Linked to this, a second point of signicance in the study of BMTs is to regain
insights into Islamisation currently taking place in Island Southeast Asia today,
particularly in Indonesia. Islamisation, or to convert or bring under the inuence
of or control of Islam (Macquarie Dictionary 1991: 932), has long been the focus
of scholarly investigation as Islam spread across the Malay archipelago through
conversion, over centuries facilitated by pilgrims and Islamic scholars (Azra
2006; Roff 2009). Over the last two decades in particular, scholars have highlighted that Islam is penetrating far more deeply into peoples lives than ever
before and Muslims are expressing their faith in a multitude of ways (Fealy
2008: 16), beyond political Islam. New areas include the use of media (Eickelman
and Anderson 1999; Hefner 1997), Muslim fashion, popular culture (SmithHefner 2007; Weintraube 2011), and Islamic management and nance (Rudnyckyj 2009a, 2009b). Within these studies of the anthropology of Islam, the
concept of piety has become a dominant analytical framework (Mahmood
2005). Exclusive religious movements have increasingly been identied as
topics of scholarly investigations in the Muslim world. However, as Osella and
Soares (2009) have rightly criticised, the reality of Islamic practice is not
clearly divided into Islamists and secular people. The ndings of discussions
with BMT workers discussed below show how ordinary Muslims, committed to
solving immediate social problems through the use of Islam, have found a
middle way to live a modern life in contemporary Indonesia. The focus of
BMTs allows us to examine the ongoing Islamisation in Indonesia among the
ordinary Muslims of the lower to middle classes. This is important because

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Minako Sakai

enquiries of everyday life of lower to middle class Indonesians remain limited (c.
f. Rinaldo 2008; Sakai 2010b; Sakai and Fauzia 2014), while the representation of
Islam has increased in the public sphere (Fealy and White 2008; Hasan 2009). An
anthropological enquiry to BMTs thus enables us to look into the ongoing-Islamisation processes in Indonesia in a broader and more democratic sense.
A third point of signicance in focusing on BMTs is to engage with the
increasing scholarly enquiries of faith-based organisations (FBOs). Anthropologists have traditionally paid attention to rituals and religions as a belief system
(c.f. Bowen 1989; Mller 2005a, Mller 2005b), and less on the study of
FBOs, particularly those involved in socio-economic development. Neither
have scholars working on development policy discourses paid much attention
to FBOs as development policies have been unconsciously linked to secularism.
FBOs have thus not been clearly identied as key agents in implanting development agenda (Clarke and Jennings 2008). Responding to this shortage, Bornstein
(2005) and Occhipinti (2005) have published ethnographies of Christian and
Catholic development organisations respectively. Understanding how religious
values can shape the focus of the development policies and can give meanings
to service providers and recipients alike, and how people at the grass-roots
level can engage effectively with development projects, is of great importance.
This is particularly true when the solution to reducing poverty through sustainable business models is identied as the objective of such work. For example,
social entrepreneurship and social businesses are emerging as key to poverty
reduction (Yunus 2006, 2010). How religious values inform the aims of the
businesses of BMTs, and what success means to the users and operators of
the BMTs will shed light on alternative perspectives on social development
policy implementations in Indonesia.
In the following article the socio-political context which has encouraged the
development of Islamic theology encouraging activism in Indonesia will rst be
analysed. Following this, an overview of what BMTs are and some historical
development and regulatory frameworks in Indonesia is presented. The central
part of this article forms an analysis of the BMT founders and workers views
on their core business activities. I argue that BMT founders and managers
connect their Islamic aims to their daily business activities as an important part
of Islamic propagation by deeds (dakwah bil hal).

ISLAMIC THEOLOGICAL CHANGE

IN

CONTEMPORARY INDONESIA

During Suhartos centralistic governance, the government discouraged political

activities and civil society development. One example is Law No. 5/1985 on
social organisations, which stipulated that all the mass organisations had to be
based on the state ideology, Pancasila. All meetings and organisations, except religious gatherings, were constantly monitored. Muslims have traditionally had

Establishing Social Justice Through Financial Inclusivity

205

difculty in separating religion and state, but gradually some creative theological
thinkers emerged to cope with the situation. Nurcholish Madjid advocated that
Islam does not have to be the basis for politics by a well-known phrase, Islam
Yes, Political Party No! (Hasan and Abubakar 2011: 11). Such theological
changes, accompanied with a particular political context, have focused on teaching Islam as a way to become a better Muslim. As religious gatherings were not
sanctioned or banned, but rather encouraged to combat against the risk of emergent communism in Indonesia, Islamic study groups ourished in the 1980s.
Islam and Islamic symbols grew more visible in the public spheres (Hasan
2009). The national daily Islamic newspaper, Republika, started to circulate in
1993 to cater for the Muslim readers. It is beyond the current scope of this
article to map out how these theological changes have resulted in various
socio-religious movements in contemporary Indonesia, but it is sufce to say
that religious study group meetings have become an important venue to
discuss and share social concerns, and these meetings are mainly to teach
Islam to Muslims, rather than trying to convert non-Muslims into Muslims.1
Muslim university students started to look for solutions for social and economic
disparity in Islam in the 1980s and joined a wide range of Islamic groups and
organisations. Reducing the gap between the rich and the poor was one of the
emergent concerns by Muslims. Views on how Muslims should respond to
social disparity have varied among Muslims, yet they have shared a strong theological orientation that Muslims need to carry out good work for family members
and community through propagation by deeds (dakwah bil hal) (Meuleman
2011: 254). For example, through campus-based Islamic education (tarbiyah),
some movements turned to political Islam, which later emerged as the formation
of PKS party (Pringle 2010: 96). Others took action by joining an Islamic development organisation such as the Village Propagation Troops (Corps Dakwah
Pedesaan) in Yogyakarta to assist the poor. Another example is Muhammadiyah,
the largest Muslim modernist organisation, which has a strong commitment to
conduct common good based on Islamic teaching, and has continued their
social programs. Muhammadiyah actively uses Islamic study groups for their
members as well as for the general Muslim community to learn how to
become good Muslims (Sukaca 2007). They emphasise that Muhammadiyah
members are encouraged to take concrete action to assist the community
members and achieve social justice as exemplied by various social and philanthropic activities by the Muhammadiyah and their womens organisation,
Aisyiyah.2 They have developed hospitals and orphanages, as well as programs
to assist the poor. Similar to this response, Indonesian intellectuals Dawam
The interest in Islamic nancial institutions is linked to discussions on social justice conducted
among Muslim students in Indonesia, dating back to the 1980s after the Iranian Revolution
(Okamoto 2010).
2
Interviews with Aisyiyah members, Aisyiyah Ofce, Yogyakarta, December 2011.
1

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Minako Sakai

Rahardjo and Adi Sasono turned to Islam as the solution for economic and social
development (Hasan and Aubakar 2010: 10). They have strongly supported small
industry and the cooperative movement as a way to achieve social justice. In
addition to these responses, Islamic nance also received much interest as a possible solution to reduce social inequity.
Along with this change, the 1980s saw the new development of Islamic economic institutions in Indonesia such as BMTs, and subsequently the beginning of
Islamic banking by the establishment of the rst Islamic bank, Bank Muamalat
Indonesia (BMI) in 1991.3 The establishment of BMI was pushed by the Indonesian Muslim Intellectual Association (ICMI) including Muslim thinkers such
as Dawam Rahardjo and Amin Aziz as it was expected to strengthen economic
interests of Muslims by offering credit to Muslim-owned small businesses
(Hefner 1996: 306). However, in reality the BMI was able to offer nancial services predominantly to credit-worthy clients only because it had to operate as a
nancially sound business (Hefner 1996: 309). Based on Islamic jurisprudence,
this bank has received support from Muslim intellectuals and economists as
they were keen to found an alternative nancial institution to capitalism and
support the growth of small and medium enterprises. However, the bank had
to make prot and could not offer much assistance to small and medium enterprises (Lubis 2004). Following its establishment, other banks started offering
Islamic banking divisions, but they did not and have not received unanimous
support from the Indonesian Muslims. This is because Islamic banking is proposed to be based on the avoidance of an Arabic term, riba, mentioned in the
Quran and commonly translated as usury, but there is no accepted interpretation on what exactly constitutes riba among Muslims (Lindsey 2012: 108).
The Ulama Council of Indonesia (MUI) issued a legal opinion (fatwa) in 2004
to state that riba refers to any additional charges levied on the postponement
of agreed payments (Lindsey 2012: 109) and is prohibited. Muhammadiyah
also took the similar decision. However, the largest traditionalist Islamic organisation, Nahdlatul Ulama (NU), has a different Islamic interpretation as it does not
consider banking interest from conventional banks riba; Nahdlatul Ulama established three conventional banks during the period between 1950 and 1960
(Effendy 2005: 667; Lubis 2004: 107). I would contend that the mixed theological response among Muslims to riba is one of the reasons that explains why the
degree of Muslim piety does not correlate to types of customers of Islamic banks
as presented by Pepinsky (2013). However, this may be the case for middle-class
customers of Islamic banks, but I further contend that the original Islamic aspirations among the Muslims to assist the small and medium Muslim businesses have
not been forgotten. For example, Prof. Amin Azis, one of the strong advocators of
the establishment of the Muamalat Bank, continued to support BMTs even after
the establishment of the Muamalat Bank. It was because of the general realisation
3

See Effendy (2005) for the politics surrounding the establishment of the BMI.

Establishing Social Justice Through Financial Inclusivity

207

among the Muslim economists that the Islamic bank in reality was not fully capable
to offer much needed credit to small businesses, that it was necessary to create
nancial institutions such as BMTs which would provide capital to small businesses
in Indonesia to reduce the increasing gap between the rich and the poor (Amin
Azis pers. comm. November 2007).

THE DEVELOPMENT

OF THE

BMTS

BMTs have developed in Indonesia since the late 1980s by providing nancial
services predominantly to micro, small, and medium enterprises (MSMEs). As
more than 90 per cent of the workforce in Indonesia are employed in such enterprises (Tambunan 2011: 26), supporting the growth of MSMEs to create employment is an effective way to combat poverty and to reduce economic gaps. The
meaning of the Baitul Maal wat Tamwil is a house of funds and nance and
at the time of the Prophet Muhammad, this institution was responsible for
national budgeting, maintaining the stability of the money supply, and handling
domestic and international payments (Antonio 2008: 256). Maal is a house to
receive Islamic obligatory alms giving (zakat) and voluntary giving such as
infak and sedekah while Tamwil is a place for growing asset. In Indonesia this
term is used to refer to a nancial institution operating on Islamic jurisprudence
offering nancial services (Aziz 2004: 1). This term derives from the time of the
Prophet Muhammad and its use among the Muslims in Southeast Asia is rare,
thus the concept of BMT as an Islamic nancial institution was promoted by Indonesian Muslim NGO activists (Antonio 2008: 256). Hence I would argue that BMT
development is a unique grass-roots Islamic nancial movement in Indonesia.
In terms of management, each BMT is expected to have a local Islamic law
(shariah) advisory board. This board should advise the BMTs on their services
and business directions to see whether they are in line with Islamic jurisprudence. The local shariah board is in theory informed by the decisions and
advice by the national Islamic syariah council. Out of the twenty BMTs visited
during this study, their employees were all Muslims. BMTs generally offer a
variety of credit and saving services based on Islamic jurisprudence (Juoro
2008; Sakai 2008). However, this does not mean that all clients of BMTs are
necessarily Muslims.
An overview of the BMT sector in Indonesia remains sketchy. This is because
until 2013 there was no single supervisory institution for the BMTs. This situation
makes data on BMTs fragmented, and estimating the number of operating BMTs
difcult. To date there is no agreement as to when the rst BMT was established
in Indonesia. However, in 1988, 24 BMTs existed in Indonesia under the association of INKOPSYAH-BMT (Inkopsyah BMT 2006: 6). In 1995, B.J. Habibie,
the then Vice President of Indonesia, and the chair of the Indonesian Muslim
Intellectual Association, created a new foundation to support small businesses

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Minako Sakai

called PINBUK. PINBUK offered BMT training and supervision for BMTs. As
part of the launch of PINBIK, President Suharto declared 1995 the year of the
BMT movement. Muslim economists including Amin Aziz were central in the
PINBUK operations and in early 2014 he was declared the Father of BMTs
by PINBUK.4
Around that time the interest in using Islamic alms, known as zakat, for productive use and to reduce poverty also became widely promoted (Helmantita
2006; Salim 2003). One of the pioneers to promote this Islamic idea was the
Dompet Dhuafa Foundation (the Wallet of the Poor Foundation), created by
journalists working for the newly-created Islamic newspaper, Republika. Donating Islamic alms was not new to Muslims, but it was a social innovation to donate
funds to an Islamic foundation specialised in assisting the poor. The Dompet
Dhuafa Foundation promoted the concept that BMTs should conduct forprot nancial services through the tamwil business, while not-for-prot social
empowerment programs should be carried out to assist the poor through the
maal section. BMTs were seen as a way to redistribute the wealth in society in
an equitable way to achieve social justice. Supported also by PINBUK, BMTs
in Indonesia have grown signicantly since the 1990s, and a variety of Muslims
belonging to Islamic study groups, mosques, Islamic schools, and Muslim
groups at workplaces all sharing a concern for poverty among Muslims
started to establish BMTs (Rizky 2007: 5).
The common legal basis of a BMT is as a cooperative, regulated separately
from the banking sector. Until 2013 it was permissible for small BMTs to
operate without a legal basis or supervision until their assets had reached
above the required amount to register as a cooperative. Thus, the establishment
of a BMT was a relatively easy option to address economic disparity and received
much support from a variety of Muslims sharing concerns for the widening economic disparity in Indonesia. However, the fact that until 2013, the BMT sector
was relatively unregulated caused serious operational concerns and undermined
public trust in the BMT sector as some mismanagement of funds could negatively
affect the credibility of the emergent industry. In order to protect the potential
failure of BMTs, the Indonesian government took two important measures.
First, in 1999 and 2011 it regulated the zakat collection and management procedures. The 1999 law legalised private zakat collection thus assisting the
growing private zakat collection agencies by aiding the ow of zakat funds into
BMTs (Helmantita 2006; Salim 2008).5 The activities of the BMTs which this
article examines draw data mainly collected before the 2011 law revision.
4

Puskopsyah Lampung online, 4 February 2014; http://www.puskopsyahlampung.com/2014/02/

pinbuk-deklarasikan-dr-amin-aziz.html (accessed on 6 March 2014).
5
The 2011 zakat revision has introduced that the zakat funds collected by private agencies should
ow into the state-controlled zakat agency and the zakat collection by unregistered groups is illegal.
As a result, the maal section as part of the BMT should have a legal basis to conduct zakat
collections.

Establishing Social Justice Through Financial Inclusivity

209

Second, the Indonesian government introduced a new law No.21/2011 concerning the Financial Service Authority, which became effective in 2013. This law
regulates nancial services offered by both banks and non-banks, including
BMTs, in order to safeguard the funds managed by all nancial institutions in
Indonesia, as previously the Bank of Indonesia was only responsible for the
supervision of banks.
As outlined above, the BMTs have grown at the grass-roots level, and consequently the majority of the BMTs networks in Indonesia have been formed to
accommodate the origins, contacts and needs of each, separate BMT, rather
than administrative needs imposed by the state agencies. In order to make the
sector credible and professional, the leaders in the eld have built multiple professional associations and networks, none of which is exclusive (e.g. the Association of BMTs, PINBUK, The BMT Center). As the political power of the
Indonesian Muslim Intellectual Association has decreased (after Habibies political demise in early 2000s), the Dompet Dhuafa Foundation and the BMTs with
close links the Dompet Dhuafa Foundation have been BMT leaders to date. The
national meetings have been also organised by BMTs with strong afliations with
the Dompet Dhuafa Foundation.
In 2012 the estimated number of the BMTs in Indonesia was around 3900,
according to the general chairman of Pusat Perhimpunan BMT Indonesia, Joelarso. This association has 206 BMTs members, including those supported by
PINBUK and The BMT Center. The nancial size of the BMTs also varies,
and those with larger nancial assets have multiple branches. In view of recent
awards by Karim Consulting Jakarta a strong advocate for Islamic nance
BMTs with IDR 50 billion assets are considered as a large-sized BMT. The
total assets of the 96 largest BMTs in 2011 were IDR 3,6 trillion.6 (For comparison, in 2010, the assets of a leading BMT institution, Tamzis, exceeded IDR 80
billion). Because most BMTs started in early 1990s with limited funds of between
IDR 1 and 10 million, the growth of this sector since that time is signicant.
To explore the social dimensions of this diverse development and to overcome the lack of credible data on BMTs, I conducted anthropological eldwork
within 20 BMT operators in ve locations in Indonesia. The majority of the 120
days eldwork was conducted in 20072008, with follow-up research in 2010,
2011, and 2013. Data collection was conducted in stages by observations of
BMT activities, focus group discussions with BMT managers, and BMT training
institutions such as the Dompet Dhuafa Foundation, PINBUK, The BMT
Center, Pusat Komunikasi Ekonomi Islam (PKES). The data used in this
article derive from two leading BMT institutions: BMT Bina Dhuafa Beringharjo
and Tamzis in Yogyakarta. I have chosen these two institutions for three reasons.
First, both BMTs have been operating over two decades since the onset of the
6

Aset BMT Tumbuh Signikan, Tempo. Co. bisnis, 07 November 2012: http://www.tempo.co/read/
news/2012/11/07/089440268/Aset-BMT-Tumbuh-Signikan (accessed on 7 March 2014).

210

Minako Sakai

BMT movement in Indonesia. Second, the founders of both are active at the
national level of the professional BMT associations, feeding their visions for
the future directions of the BMTs, They also have close associations with zakat
foundations such as the Dompet Dhuafa Foundation to actively conduct notfor-prot activities. And third, and most importantly, these BMTs generously supported this research and allowed access to their business activities, without which
this study would not have been possible. As this eld of study does not have much
data based on ethnographic eldwork, access to these institutions was crucial for
my eldwork on BMTs in Indonesia.
BMT Bina Dhuafa Beringharjo (BMT to Lead the Poor at Beringharjo) was
established in 1994 in Yogyakarta with the funding of two million rupiah (equivalent to USD 1,000) as initial capital by two female Muslims including the current
managing director, Mursida Rambe. Their main motivation was to combat illegal
money lenders by offering transparent and fair loans to small business traders
who did not have access to banks. By 2013, BMT Beringharjo had grown its
assets to IDR 55 billion, and was employing 117 employees. Their business has
expanded beyond Yogyakarta and now has 12 branches in Java and recently
received an award as the Best Micronance Institution Award by Karim Consulting
in Jakarta in February 2014.7 The BMT leader, Rambe has held a number of
executive positions at the local and national levels of Islamic economic and BMT
associations including the secretary of the BMT Association, BMT Center, Masyarakat Ekonomi Islam (Islamic Economy Society), and has been known for her
commitment to promote BMTs mission for both for-prot and not-for prot
through the maal. In 2010, Rambe received the prestigious Kartini award, from
the popular womens magazine of the same name, as an inuential female leader.
Tamzis was established in 1992 in an agricultural town of Wonosobo in
Central Java by Muslim activities with a background in Muhammadiyah. One
of its co-founders was Saat Suharto, who later left Tamzis to run a mutual fund
company Ventura for their member BMTs in Jakarta. The other original founders
of Tamzis are still involved in the management of Tamzis. Tamzis has also
received prestigious awards as one of the leading Islamic micronance institutions in Indonesia. Tamzis runs a separate foundation called Tamaddun as a
foundation based on its cooperate social responsibility funds, and Muslim alms.
These funds are used to run social programs for the needy.
Founders Visions and Islam
How do the BMT founders see the business activities of BMTs differently from
conventional business nancial institutions? During my research since 2008,
Mursida Rambe, the co-founder of BMT Bina Dhuafa Beringhajo, often told
me that she never imagined that she would run nancial businesses. She was
7

Award category for institutions with assets of IDR 50 billion; http://www.bmtberingharjo.com/post333-BMT%20Beringharjo%20Berprestasi%20%28lagi%29.html (accessed on 7 March 2014).

Establishing Social Justice Through Financial Inclusivity

211

born in Medan in North Sumatra and lived close to a market where she saw the
rst-hand impact of money lenders on their clients. Here she came to understand
how inhumane it was to be in debt and to lose all ones assets for defaulting small
payments. This later made her conscious of the need to reduce economic disparity in Indonesia and to establish social justice in line with Islamic teaching.
Later she moved to Yogyakarta and was determined to propagate Islamic
values and majored in Islamic propagation at the Muhammadiyah University in
Yogyakarta. During her time at university, she became involved in a local community development program to provide sanitation and clean water to the poor in
Yogyakarta with fellow activists of the Village Propagation Troops. She preached
the importance of Islamic values through her oratory, but did not seem to get her
messages heard in community development programs. She recounts that people
were easy to lose their temper and did not change their way of life when they
were short of daily needs. She realised that the people rst need to come out
of poverty before they can become better Muslims. She also analysed why
some people had remained poor. They had debts to money lenders and she
saw people losing their houses to money-lenders in the case of defaulted loans.
She felt strongly that prot-driven attitude of money lenders represented speculative capitalism and looked for solutions in Islam. One day her brother showed
an advertisement for a training program to use zakat funds for productive purposes. She was aware of the establishment of the Muamalat Bank the rst
Islamic bank in Indonesia and was curious to explore what this could entail.
This was the beginning for her journey as a co-founder for BMT Bina Dhuafa
Beringharjo. Together with her university friends, she had training from the
Dompet Dhuafa Foundation on the productive use of Islamic alms. After her
training she managed to raise IDR 1 million and asked for a grant of another
IDR 1 million from the Dompet Dhuafa Foundation. This seed money has
since grown to become one of the most successful BMTs in Indonesia. After
nearly two decades, in addition to her position as the BMT director, she also
leads a local BMT association in Yogyakarta, and directs BMT Center, a training
institution for BMTs.
Using her oratory skills, in her regular training sessions Rambe emphasises
the importance to ght against the lure of money. She also stresses the importance of people who live under the poverty line. As the director of BMT Bina
Dhuafa Beringharjo, she usually leads BMT Beringharjos business directions
to assist the poor and trains her workers not to be controlled by solely material
and nancial desires. She rmly believes that being accountable in front of
God allows people to be honest, caring, and compassionate, and thus to avoid
being driven by speculative approaches to life. She has been frequently invited
to train aspiring BMT and cooperative managers in Indonesia, and I attended
several of her training sessions during eldwork. One of her key messages in
these sessions has been that money is a tool to assist the poor or the needy. In
other words, accumulating wealth for itself cannot and should not be a goal,

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and will result in greediness. She links greed to the practice of maximising prot
as promoted by capitalism, and highlights that greed will cause misery and suffering to fellow human beings. She thus advocates the importance of establishing
social justice by fair business transactions based on Islamic jurisprudence. Thus
when her BMT runs business training sessions for their clients, one of the key
messages is to promote them to have compassion for others, and assist the
needy when their business is growing. To implement this, BMT Beringharjo
has a company motto that emphasises her philosophy of growing together
(sama-sama tumbuh), which she sees as a just and fair business transaction in
line with Islam.
A similar tone is also found in a prole of one of the co-founders of Tamzis,
Saat Suharto. In one of my interviews, he told me that in early 1990s he was
curious to learn about the concept of banks without interest. He grew up as a
child of a relatively large textile shop in Wonosobo, Central Java. In front of
his shop he regularly saw money-lenders charging high-interest, and the life of
the borrowers never seemed to get better. When he heard that it is a possible
to run a bank without charging interest, he was intrigued and attended a training
workshop on this. Afterwards, he started an Islamic credit and savings cooperatives with other fellow Muhammadiyah youth activists in Wonosobo. After some
time, their nancial institution was renamed as TAMZIS and has grown to be one
of the largest BMTs in Indonesia with assets over IDR 80 billion in 2010. After
leading Tamzis successfully, Saat has left Tamzis to start a new nancial institution
BMT Permodalan Ventura in 2006. The new company aims to assist in strengthening the institutional capacity of the BMTs as an alternative nancial institution
for the small and medium businesses in Indonesia. BMT Ventura is a company
which provides money to afliated BMTs. Located in the business district of
Jakarta, BMT Ventura aims to attract funds from investors from Jakarta for
investment in the peripheries of Indonesia through the businesses of afliated
BMT members. Saat takes pride in his task to change the ow of money from
Jakarta to the marginalised and underdeveloped areas of Indonesia. He told
me in one conversation that I am changing the ow of money. In the past all
the money was collected from the periphery to the centre, now I am here in
Jakarta to collect funds from Jakarta to the peripheries, to change the situation
a bit.
These views of two key BMT gures echo the typical aspirations shared by
many Indonesian Muslims in the 1990s. They tried to use Islam as a tool to
solve widening economic gaps and perceived social injustice upon Muslims
caused by Indonesias economic development based on capitalism. Although
the poverty rate between 1990 and 1993 fell from 15.1% to 13.5%, there was
a growing perception in Indonesia that ethnic Chinese Indonesian businessmen,
not indigenous Muslims, were beneting from economic growth led by the then
President Suharto in the early 1990s (Hill 2000: 198203).

Establishing Social Justice Through Financial Inclusivity

213

It was possible for both leading gures of the BMT industry to pursue a political position to implement their aspirations. Both of them have tried once to
become a local parliament representative, but they were not successfully
elected. Both of them explained that they were asked to represent the interest
of the people in the BMTs and BMT clients, but they did not particularly see
their political role as necessary to achieve their goals. They rather prefer
working to establish the BMT sector through their professional involvement
and see most of the politics and politicians driven by popularity and electoral successes. They thus perceive their socio-economic roles much more effective than
taking up a political role in achieving their commitment to the concept of propagation by deeds. They both share some connections with Muhammadiyah but
the development of the BMT industry is not clearly linked to the organisational
backing of Muhammadiyah. BMTs have not particularly thrived under the traditionalist Muslim organisation such as the Nahdlatul Ulama (Isbah 2012; Sakai and
Marijan 2008).

BMT BUSINESS ACTIVITIES, CLIENT SERVICES

AND

RESPONSES

What then are the concrete examples that BMTs promote as social justice in
Indonesia? First, BMTs emphasise the small-sized loans offered to their clients
as a way to promote inclusive nancial services as part of social justice. From
the perspective of nancial efciency, lending a larger sum of funds to one particular client might be considered optimal and time-saving. However, because
small loans are hard to obtain from the banks, Tamzis made the commitment
to offer small loans up to IDR 5 million to clients. Whilst both conventional
and Islamic banks have started to offer small-sized loans to small business
owners, BMTs continue to offer loans between IDR 1 million and IDR 5
million. If their credit-worthy clients ask for a larger amount, in principle,
BMTs will assist these clients in introducing them to Islamic banks through
their connections. Offering credit to as many small businesses is still the core
business principle for Tamzis. In reality, this view is not necessarily shared by
all the BMTs, but Tamzis promotes this model as spreading risks and offering
more services of much-needed credit for small businesses. To increase nancial
security, Tamzis also places a compulsory Islamic insurance policy against default
to each loan. This insurance policy covers the clients who may suddenly lose their
businesses by accidents such as res and illnesses. The insurance is also used to
give a small cash back payment if the borrower pays off the loan earlier than
scheduled. Such a nancial safety net is hardly offered by opportunistic money
lenders.
BMT Beringharjo also places an emphasis on treating clients with respects at
the time of default payments. Contrary to traditional ways of using threat and
possible violence to receive repayments from defaulted clients as commonly

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Minako Sakai

employed by money lenders, BMT Beringharjo uses a legal ofcer who explains
the consequences of defaults to their clients in crisis, and assists in nding a new
schedule for repayment. Sometimes collaterals have to be sold to compensate the
defaulted loans, but they are processed in accordance with the procedures
without threat and physical abuse. Such transparency and fairness are presented
as proof for establishing social justice in human relations in accordance with
Islamic teaching.
The leaders of the BMTs advocate that by running innovative business
schemes they assist the needy who have been neglected by other agencies.
Although the BMTs are business entities and have to compete against each
other to make prot, they need to have concerns to assist the needy in line
with Islamic teaching. After the mid-2000s, when the Government and
banking sectors started to offer small loans similar to those from BMTs, the
BMTs started to look into new areas outside the small business sector to
extend their market. One of the emergent areas where BMTs are extending
out their nancial products is the welfare of Indonesian migrant workers overseas. In 2008 the Indonesian government estimated that there were at that
time more than six million migrant workers overseas sending vital remittances
back to their families in Indonesia to the tune of USD 6.8 billion.8 Most of
them are unskilled women, and they work in countries such as Malaysia, Singapore, Taiwan, Hong Kong, Japan, and Saudi Arabia (Anggraeni 2006). They
usually work overseas for ve to ten years separated from their family
members. During their overseas employment, abuse by employers and emotional
disturbance of the migrant workers have been reported in mass media, and the
hardship of female migrant workers in Hong Kong was portrayed in the 2010
Indonesian lm, Minggu Pagi di Victoria Park (Sunday Morning at Victoria
Park) directed by Lola Amaria. Because of the administrative complications
and unfamiliarity of the foreign banking systems for the majority of unskilled
migrant workers overseas, the remittance money is usually sent home and
spent, leaving little for the workers future plans. In order to address the nancial
needs for saving and remittance, in 2008 the BMT Beringharjo started a BISA
scheme which allows migrant workers to put aside their savings as investmentterm deposits. The funds are matched with funding from the BMT Beringharjo
to start a new BMT in an area where migrant workers originated from or are
closely associated with (Sakai 2010a). In this way, the savings of the migrant
workers can be invested in their home town, and they will have their savings
when they return to Indonesia. In addition, BMT also offers a scheme called
Musyarokah Investasi Buruh Migran Harjo (Misbah), which is a prot sharing
credit scheme between IDR 1 million and IDR 9 million for venture capital
for migrant workers (Tribune News 2011). According to my focus group discussions in November 2013 with former migrant workers in Madium, Hong Kong,
8

http://www.worldbank.org/en/country/indonesia (accessed on 29 November 2011).

Establishing Social Justice Through Financial Inclusivity

215

where the migrant workers can have a Sunday off, they do not know what to do
and often were tempted to spend their time shopping or buying snacks. Over the
last two years, the Indonesian government has been making efforts to assist the
migrant workers by providing them with easier access to nancial services. As
part of this scheme, BMTs are forming partnerships with the government
agencies to offer nancial services and planning in the destination countries of
migrant workers. In 2011, IDR 1.5 billion was invested into BMTs by 350
migrant workers in Hongkong, which constituted approximately 6.2 per cent of
the migrant workers in Hongkong (Tribune News 2011).
The BMTs also have the capacity to offer not-for-prot social programs through
their maal section, different from other for-prot only nancial institutions.
However, in reality, the BMT leaders concede that in the majority of BMTs, the
maal section has been ironically neglected. The majority of the BMTs visited
during this study did not have a designated staff member to run social programs
because it was not nancially viable to allocate resources in a small BMT. Thus,
their programs were, if offered at all, generally limited to not-for-prot credit
scheme called Qurdul Hasan to a small number of clients in need. At BMT Beringharjo, arguably the most established maal as part of a BMT, between 20082013
they had two permanent staff members and two contract staff members and offered
a variety of programs including scholarships, business capital credit and entrepreneurship training for small businesses, and health clinic services. It was decided
that the program should not duplicate those already (and increasingly) offered by
government agencies. In some regions, as part of their social activities, BMT Beringharjo funded the cost of circumcision for young boys mandatory for Muslim
men at puberty but the high costs often delay the procedure.
After the zakat law revision in 2011, the BMT Beringharjo Baitul Maal was
registered as an afliate with the Dompet Dhuafa Foundation to gain a legal
status. The funds for the activities of the baitul maal came from donations from
the BMT, Islamic alms received from Islamic groups and individuals. Some companies also donated their corporate social responsibility funds in recognition that BMT
Beringharjo had become a credible zakat agency in the region. However, having
not-for-prot operations within a BMT could create confusion among the clients.
Consequently, TAMZIS has decided to abolish their maal section and hence does
not use the word of BMT as part of its company name. Instead, TAMZIS runs
an Islamic philanthropic organisation using a separate name as a necessary decision
for running a sustainable business with a social mission. However, in order to
promote the importance of baitul maal as part of the BMTs, the BMT Association
has made a mandate for 2014 that all BMTs should have an active baitul maal as
their core business (Rambe pers. comm. November 2013).
Moving onto the forth example of how BMT leaders view they work as promoting social justice, BMTs offer sessions to study Islam for employees and to some
extent their clients. In addition to professional nancial training required to run professional businesses, training sessions to deepen Islamic understanding are usually

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Minako Sakai

offered as part of the standard human resources training. For example, Islamic
study sessions among employees are regularly held to motivate the employees
and strengthen their commitment to social mission and professionalism in Tamzis
and Beringharjo. As BMT employees deal with money every day, honesty and integrity are essential to run successful businesses. This is particularly challenging in
Indonesia, as high-prole corruption cases have been common occurrences.
During eldwork I observed regular Islamic study sessions at BMT Beringharjo
and TAMZIS. BMT Beringharjo employs an Islamic cleric as an Islamic adviser for
their shariah board. Every Saturday morning, employees of BMT Beringharjo
spend between one and two hours studying Islamic teaching and its relevance to
everyday life. The aim of such sessions is to stress the desire not to be driven by
pure greed, and to build compassion with each other, and the clients. Muamalat,
the Islamic concept of social and business relations, is thus interpreted not just as
business relations, but for building general human relations to strengthen a brotherhood (ukhuwah). Thus marketing and client relations are seen as part of disseminating Islamic values. BMT employees see that they are fortunate to have opportunities
to gain Islamic knowledge at work. They commented that they receive both nancial gain and religious blessings at work, and have opportunities to become a better
Muslim through their work, and are keen to work for a BMT for an extended
period. In fact, the lure of better nancial pay from other Islamic and conventional
banks to BMT employees is becoming stronger and some BMT workers have been
head-hunted by aggressive banks which are pursuing micro-credit as it has proved to
be lucrative and more stable amid the global nancial crisis in Indonesia. Some
BMT workers, however comfortable they are with their colleagues, and however
important Islamic values are, also need to meet their material and nancial needs
in contemporary Indonesia by taking up a job outside BMTs. The process of Islamisation and its location within society is not clear cut between the secular and pious,
rather it is fragmented in a globalised way of life, as Schielke (2009) has shown for
the Muslim youth in the Middle East during the fasting month.
In order to promote Islamic values to clients, many BMTs organise Islamic
study groups or preaching sessions with clients. In the case of BMT Beringharjo,
they organise a monthly study group with the Islamic group located at the Beringharjo market and invite engaging speakers to talk about others in need and
encourage people to pay alms to assist the poor in need. Running a business is
inherently driven by prot-making. BMTs promote the view that taking some
time to think about those in need is highly valued. Collected Islamic alms are
often donated to orphanages or to assist the poor in their neighbourhood, as
an act of earning merit. In addition, the BMTs organise series of Islamic propagation sessions in relatively impoverished areas in partnership with their own
maal and gradually roll out their social programs to motivate people to
improve their spiritual life and well-being.
Compared with the strong missionary visions and Islamic values of the BMTs
founders and managers, not all BMTs workers share such missionary views. I

Establishing Social Justice Through Financial Inclusivity

217

spoke with eight new recruits of TAMZIS in Yogyakarta in February 2010. Half of
them chose to work for a BMT as they were committed to promote Islamic ideas
and value through their work. Contrary to these committed Islamic economic
activists, some new graduates were not so keen to stay in the BMT sector as
their social standing is low, and they were keen to work in the Islamic banking
sector in the near future. However, their interest in the Islamic nancial institutions was reasonably strong in our conversations. At the same time, as the
BMT sector has gained some recognition, the interest to apply for vacancies
within a BMT has skyrocketed. In 2010, it was common to receive 1000 applications for a position within BMT Beringharjo and the Director herself usually
tries to see the applicants in the nal interviews (Rambe pers. comm. February
2010). As Islamic values are fundamental to BMT operations, the recruitment
and HR development are central to nourishing and growing the spirit of
Islamic development of the institutions.
Interestingly, contrary to the internalisation of Islamic values among the
employees, approximately 50 clients I met in 2008 in Yogyakarta did not cite
Islamic nancial transactions as a main reason to use BMTs. They normally
have conventional nancial services and see BMTs as an alternative source of
funding and savings. Some BMT clients are non-Muslims and they do not
seem to worry about the Islamic jurisprudence, rather view it as a nancial
product. But they generally value the personalised services offered by a BMT
and the attention paid to individuals and their needs. Some clients appreciate
networking opportunities provided by BMTs. Some clients see BMTs important
as they teach Islamic values and to care for each other; such views were expressed
by organisers of a female Islamic study group at the Beringharjo market in Yogyakarta. Most of the participants run businesses in the nearby market and some
work as manual labourers. As markets are driven by desire to generate money,
taking time off to learn about care and empathy for others through Islamic
study group meetings is highly valued. Particularly, most of the participants
only have limited education and Islamic study groups are one of the few opportunities for self-improvement. Different from the Islamic bank users who are
middle class income earners, BMT clients in Yogyakarta do not seem to be concerned about theoretical debates regarding the Islamic compliance of nancial
transactions by the BMTs. Rather, they are looking for business partners who
understand their business needs and offer credit.

CONCLUSIONS
This article has highlighted perceptions of BMT founders and workers towards
Islamic nancial activities in Indonesia. With the desire to reduce economic disparity and to offer inclusive nancial services to small businesses the BMTs have
developed new Islamic nancial schemes over the last two decades. The ndings

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Minako Sakai

in this article demonstrate that BMT founders and employees are committed to
deepen their knowledge about Islam and to use Islamic knowledge to solve social
problems in their everyday life. Propagation by deeds is a dominant shared
concept among the BMT founders and employees as BMTs offer ample opportunities to deepen their knowledge about Islam in everyday life. This situation is
suitable for Indonesian Muslims who are seeking opportunities to become good
Muslims in their daily life within the broader context of the ongoing Islamisation
taking place in the country in general (Sakai 2012a).
However, in reality, the BMTs core activities are modern nancial transactions based on Islamic jurisprudence and their clients do not have to agree
with the BMTs perceptions. In fact, BMTs are open and used by non-Muslim
clients who see BMTs as a handy business partner in addition to other sources
of business capital. In view of these facts it would be appropriate to state that
BMTs are growing as a convenient middle way to accommodate Muslims aspirations to propagate Islam and for people to become good Muslims, whilst small
business partners are seeing BMTs as one of their business partners to supply
much-needed capital. The current Islamisation in Indonesia among ordinary
Muslims is that they are embracing Islam in varying degrees and advocating
Islam in their own deeds (Kailani 2012; Sakai 2012b).
I would like to suggest that more research is needed to understand Islamisation in Indonesia to complement existing studies on political Islam. As recent
studies have shown (Ismail 2007; Sakai and Fauzia 2014), the interest in political
Islamic movements is not necessarily the only indicator for Islamisation in
Muslim countries, but rather Muslims are increasingly more concerned with cultural and social articulations of Islamic values in the public sphere. In this light,
building upon the preliminary study outlined in this article, Islamic propagation
by deeds among the Muslims outside formal politics requires further exploration.
An equally important development is that Muslim women are actively participating in Islamic study groups in Indonesia. Women are also dominant players in
growing small businesses (Tambunan 2011). Recently, female Muslim entrepreneurs are frequently meeting through Islamic study groups to gain Islamic knowledge and to run successful businesses. A future study exploring the link between
Islamic piety and business development among Muslim women would constitute
an interesting topic which would shed light on how Muslims are embracing
Islamic values to respond to an increasingly globalised Indonesia.

Acknowledgements
This research was generously supported by research grants from UNSW and the Australia-Indonesia Governance Research Partnership (2008). The author acknowledges the
kindness and support from participating BMTs to support this research, particularly
the Dompet Dhuafa Foundation, BMT Center, Tamzis, and BMT Beringharjo.

Establishing Social Justice Through Financial Inclusivity

219

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