The Role of Islamic Microfinance for Enhancing Financial Inclusion
and Financial Literacy with ANP Method
Husnul Khatimah
Islamic University "45" Bekasi, Bekasi, Indonesia
Keywords: Microfinance, Financial Inclusion, Financial Literacy.
Abstract: The aims of the research are to know how to solve inclusion and financial literacy problems in
Indonesia, to know the priority of inclusion and financial literacy problems in Indonesia, and then to
develop strategies to overcome the problems in increasing inclusion and financial literacy based on
expert perspective, BaitulMaalwaTamwil (BMT) practitioner and BMT regulator. The research method
used is qualitative research using ANP (Analytical Network Process). The result of consensus from the
expert concludes thatthe strategy of increasing inclusion and financial literacy is to do it first internally
and then externally. Internal strategy by exploring the potential and resources of BMT. Meanwhile, to
support sustainability, external strategies are needed: cooperation with creative economic institutions,
cooperative ministries, and deposit insuranceinstitutions.
1 INTRODUCTION
Inclusive financial activities become one of the
important agenda in the international world.
International forums such as G20, APEC, AFI,
OECD and ASEAN are intensively conducting
discussions on inclusive finance. In addition,
inclusive finance has also been included in the
priorities of the Indonesian government. In June
2012, Bank Indonesia in cooperation with the
Secretariat of the Vice President-National Team
for Acceleration of Poverty Reduction (TNP2K)
and the Fiscal Policy Agency-Ministry of Finance
issued the National Strategy of Inclusive Finance.
Communities have barriers in accessing
financial institutions. The high number of people
that are unfit for banking or unbankable is caused
by the poverty gap between provinces, low
MSME financing, high micro credit interest rate,
asymmetric information, inadequate management
of MSMEs, bank monopoly on micro sector, and
limited distribution of financial services. This is
the reason for the importance of implementing
financial inclusion.The limited number of people
in Indonesia who know banks is ironic
considering the role of banks being 75.80 percent
of total financing assets in Indonesia. Financing of
UMKM in Indonesia is stillrelatively low, which
is 20.1 percent of total banking credit. Total
financing disbursed to MSMEs amounted to
Rp612 trillion.
The Sharia Micro Financing Institution has
now grown rapidly beyond the rapid development
ofother microfinance institutions in Indonesia.
This is acknowledged by the Ministry of
Cooperatives and SMEs, the government through
the Ministry of Cooperatives and SMEs stated
sharia financial services cooperatives (KJKS) in
the form of Baitul Maal wa Tanwil (BMT) is
developing very significantly. This is shown by
the development of performance of BMT
nationally in this year, which has reached assets of
Rp4.7 trillion and the amountof financing of
Rp3.6 trillion, BMT will play a role as a micro
finance institution capable of moving the real
sector in society (Republika, March 22, 2015).
The number of Islamic microfinance institutions
that the wider community recognizes as BMT
(Baitul Maal Wat Tamwil) has now reached over
4,000 units throughout Indonesia
(Rizki,2013).The problems of this research are:
 How is the strategy of Baitul Maal wat
Tamwil in order to increase literacy and
financial inclusion among thecommunity?
 What is the role of stakeholders in
increasing literacy and financial inclusion
inBMT?
740
Khatimah, H.
The Role of Islamic Microfinance for Enhancing Financial Inclusion and Financial Literacy with ANP Method.
In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 740-745
ISBN: 978-989-758-315-5
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

 What is the policy formulation applied in
increasing literacy and financial inclusion in
BMT?
2 THEORITICAL REVIEW
2.1 Financial Inclusion
The financial literacy and inclusion policy in
Indonesia is part of the government's efforts to
increase community involvement and knowledge on
financial institutions. It is hoped that if society gets
more understanding about financial institution, then
the utilization of financial institution products will
increase. When their usage increases, the role of
financial institutions will be more optimal. The
optimization of the role of financial institutions is
being realized with the allocation of investment
toward productive sectors so that the people
involved in development and improvement of
economic performance become more widespread.
Increasing community involvement in the form of
productive activities will provide wider employment
opportunities to working age so as to increase
income and welfare. The government and the private
sector also greatly require the involvement of the
people in the country, especially in investment
activities in financial institutions, through the role of
fund raising so that the nation is more empowered
from within the country and can reduce the burden
of debt and foreign investment flows.
Financial inclusion programs are needed for
several reasons. First, it provides financial access for
every resident, especially the low-income
population. Second, it also provides financial
products and services tailored to the needs of the
community. Third, it improves public awareness on
community finance. Fourth, it strengthens synergies
in the financial services industry including
microfinance institutions.
According to Wibowo (2013), financial
inclusion and access to financial services are two
different issues. Financial inclusion is defined as the
proportion of individuals or companies using
financial services. Financial inclusion is multi-
dimensional, reflecting a wide range of financial
services, from payment facilities, savings accounts,
credit, insurance, pension funds, and capital markets.
Financial inclusion also differs between individuals
and companies.
2.2 Financial Literacy
Financial literacy can be defined as the ability to
effectively evaluate and manage finances in
achieving good finance (American Institute of
Certified Public Accountants, 2013). Conceptually,
financial literacy has two dimensions of
understanding financial knowledge in theory and
using financial knowledge possessed by application.
In table 1, the financial literacy according to
Hung et al. (2009) observations of several financial
literacy studies indicates that the definition of
financial literacy is used variably as:
Table 1: Definitions of Financial Literacy.
Definitions
Source
Knowledge
“A basic knowledge that people need in
order to survive in a modern society”
(Kim andNofsinger, 2008)
“Mathematical ability and the
understanding of financial terms”
(Worthington, 2006)
“Knowledge of basic financial concepts,
such as the working of interest
compounding, the difference between
nominal and real values, and the basics
of riskdiversification”
(Lusardi and Mitchell,
2008)
Ability
“The ability to read, analyze, manage
and communicate about the personal
financial conditions that affect material
well-being. It includes the ability to
discern financial choices, discuss money
and financial issues without (or despite)
discomfort, plan for the future and
respond competently to life events that
affect everyday financial decisions,
including events in general economy”.
(Vittet al., 2000)
“Individual’s ability to understand
financial terms and instruments”.
(Bashir et al., 2013)
Knowledge & Ability
“Individual’s are considered financially
literate if they are competent and can
demonstrate they have used knowledge
they have learned. Financialliteracy
cannot be measured directly so proxies
must be used. Literacy is obtained
through practical experience and active
integration of knowledge. As people
become more literate they become
increasingly more financially
sophisticated and it is conjectured that
this may also mean that an individual
may be competent”.
(Moore, 2003)
“The ability to evaluate the new and
complex financial instruments and make
informed judgements in both choice of
instruments and extent of use that would
be in their own best long-runinterest”.
(Mandelland Klein, 2007)
Focus on debt literacy, a component of
financial literacy, defining it as “the
ability to make simple decisions
regarding debt contracts, in particular
how one applies basic knowledge about
interest compounding, measured in
context of everyday financial choices”.
(Mandelland Klein, 2007)
“Measuring how well an individual can
understand and use personal finance-
related information”.
(Huston, 2010)
The Role of Islamic Microfinance for Enhancing Financial Inclusion and Financial Literacy with ANP Method
741

“Necessary numerical skills and basic
economic concept required for educated,
saving and borrowing decisions”.
(Kharchenko, 2011)
Source: Hidajat(2015).
Bakhtiari (2006) studied about microfinance
and poverty reduction. The resultsshow that
microfinance is an effective tool for poverty
alleviation. It also explains that microfinance
services can contribute to increased allocation of
resources, market promotion, and good
technology. Therefore, microfinance can help in
economic growth and development. The study
also shows that the informal financial sector is a
response to the shortcomings of the formal
financialsector.
Abdul and Abdul (2010) argues that Islamic
finance has an important role to contribute in
promoting socio-economic for the poor
(micro-enterprises) without involving the
elements of interest in it. In this study, the author
offers ethical schemes that can be tailored to the
goals of microfinance for the poor. Such schemes
are, qardhulhasanscheme within the scope of
capital grant, murabahascheme within the scope
of procurement of goods, and ijarahscheme
relating to lease.
From previous research, this study along with
other researches is trying to see whether the
strategies implemented by microfinance
institutions especially BMT is effective enough to
support inclusive financial policy in Indonesia by
using local wisdom and local genuine owned by
study area community.
3 RESEARCH METHODS
3.1 TypesofResearchand Approach
This research is both a qualitative and quantitative
research. In this study, the data used is the primary
data obtained from the interview (in-depth
interview) with experts and practitioners, who have
an understanding of the issues discussed. The Based
on the results of the identification of previous
research analysis reviews, literature studies and in-
depth interviews, some problems are obtained in
both internal and external nature of selection of
respondents in the study is conducted by considering
the respondents’ understanding to the problems in
the development of BMT in Indonesia. The valid
respondent requirement in the ANP (Analytical
Network Process) is that they are the people who
master or are experts in their field.
3.2 Research Model
BMT encountered in improving inclusion and
financial literacy. The identification results are then
included in the software superdecisions to obtain the
model as shown in figure 1:
Figure 1: Research model was processed with Software Superdecisions, 2017.
ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy
742

4 RESEARCH RESULTS AND
DISCUSSION
BMT have been able to act fairly inclusive in
performing its function as a microfinance
institution of sharia. This can be seen from the
number of members and customers of BMT that
experienced a good development in the number
and variety of products used. The recruitment
system of members with the member get member
(word of mouth) system and the recommendations
of the old members are able to increase the
number of members significantly. In addition, the
shuttle system in serving both in deposits and
installment payments enhances the level of
financing collectability and facilitate customers
who have limited time. This strategy can
minimize the risk of default in financing
disbursed.
Another way to increase the inclusiveness and
literacy in BMT is that managers and employees
regularly conduct socialization and training or
education cooperatives for new members. In the
training they are given an understanding of
product concepts and cooperative philosophy to
strengthen the character of the members. BMT
also developsservice products based on local
needs and in accordance with the economic
characteristics of the region in order to support the
economic activities of the members. For example,
by making a financing product with a system of
daily installment payments for traders, serving the
financing in accordance with the type of business
owned by the members. To answer the needs of
consumer financing, BMT serve financing
products for the purpose of celebration (wedding,
circumcision, or other events). Thus, the
attractiveness of BMT as an institution supporting
the economic activities of local communities more
effective and interested by thecommunity.
To see the effectiveness and problems of
inclusion and financial literacy based on expert
perspective, the authors also provide
questionnaires to expert respondents who are
considered relevant and understand the problem
of BMT development. There are five respondents
who select writers based on expertise and
experience in the management of BMT.
Based on the consensus of all respondents, the
problems faced in inclusions and financial
literacyon BMTs are, in descending order of
priority, human resources, followed by legal
issues, product problems, and the last is
infrastructure. The human resources problems
faced in inclusion and financial literacy on BMT
are expertise and ability, in descending order
ofpriority.
The main legal problem encountered in
inclusion and financial literacy in BMTs is the
transformation of BMT legal entities, the second
is the strengthening of functions, the third isthe
consistency of rules, and the last priority is the
unfairness of policies. The main product problem
encountered in inclusion and financial literacy on
BMT are product development, second is product
understanding, and the last priority is product
diversity. Problems of infrastructure encountered
in increasing the inclusion and financial literacy
on BMT is the availability of IT, the second is the
readiness of IT, the third is acceleration of
technology, the fourth is the standardization of
system, and the last is the association network
with thecooperatives.
The consensus outcomes of respondents
prioritizing the problems encountered in
increasing inclusions and financial literacy on
BMT are:
 HR issues, with priority issues: (1) ability and
(2) expertise;
 Legal issues: (1) transformation of BMT legal
entities, (2) strengthening of functions, (3)
consistency of rules, (4) policy unfairness;
 Product problems: (1) product development,
(2) product understanding, (3) product
diversity;
 Infrastructure issues: (1) IT availability, (2)
IT readiness, (3) technology acceleration, (4)
system standardization, (4) association
network with cooperatives.
Taking into account the geometric mean of all
aspects and sub-criteria in the questionnaire,
internal strategy is considered the main strategy,
beating the importance of external strategy.
Internal strategies to be performed by BMTs
based on priorities include:(1) strengthening BMT
function, (2) maintaining BMT character, (3)
human resource training, (4) changing the mindset
of managers, (5) improvement of benefit and
preparation of transformation process,(6) product
innovation.
Internal strategy will strengthen the identity
and character of BMTs as a microfinance
institution and sharia cooperative so it can be used
as capital in improving its performance in the
future. Strength of character is also one of the
The Role of Islamic Microfinance for Enhancing Financial Inclusion and Financial Literacy with ANP Method
743

advantages that distinguish BMTs with other
financial institutions,such as the model of mutual
responsibility and member empowerment.
Strengthening the quality of members through
training will increase participation and
involvement of members/customers in
maintaining the sustainability of BMTs. In order
for BMTs to have the power of competitiveness
and ability to answer the needs of customers, they
will have to change the mindset of the board who
are just waiting for opportunities and tend to be
passive towards the development of other
financial institutions both formal and informal.
The board must have the vision and the
strengthening of competing strategies to develop
moreprogressively.
Another internal factor that needs to be
strengthened is the improvement of benefits for
members/customers when they take advantage of
BMT services. Benefits given can be adjusted
with the ability of BMT and sharia conformity.
While the transformation opportunities of BMT
business entities in the form of cooperatives as
well as sharia microfinance institutions are the
authoritative rights of the board and members,
they still require a positive readiness and synergy
between BMT and stakeholders. Socialization of
the rules and legal processes needs to be improved
so that more BMTs are positioning their legal
entity firmly.
The last factor is product innovation.
Innovation ability can be improved by researching
the needs of members/customers as well as by
looking to competitors. On the other hand, in the
process of innovation the principle of prudence is
also required in order not to violate the provisions
of sharia.
From the external side, the strategies are: (1)
cooperation with Bekraf, (2) social
inclusionconcept, (3) IT standardization and
product marketing strategy, (4) innovation, fair
policy, (5) LPSsupport.
Cooperation with the Creative Economy
Agency (Bekraf) is one of the strategies that can
be done to make BMTs more creative and
innovative in facing competition especially at
micro level. Bekraf provides synergized programs
such as the socialization of financial technology
(fintech) as an effort to respond to the challenges
of technological development in support of
various financial transactions including in BMT.
Social inclusion as one of BMT identity. Social
inclusion or social intermediation in the
microfinance as the fulfillment of basic needs, the
formation of entrepreneurial character, and the
process of capturing the capacity of the poor so as
to be empowered to obtain commercial
transactions. Social intermediation mechanisms
generally include; introduction and self-
development as well asbasic accounting and
financial management training for members. This
is a business strategy to ensure viability and
sustainability for the financial services offered.
Increased social inclusion will also reducethe cost
of supervision and improve the efficiency and
effectiveness of better financial intermediation
(Dasuki, 2008).
5 CONCLUSIONS
Based on the results of data analysis research, the
priority strategy in improving inclusion and financial
literacy on BMTs is to use internal strategies by
exploiting the potential and resources owned by the
BMT. Meanwhile, to support the sustainability of
BMTs, external strategies are needed: cooperation
with creative economic agencies, cooperative
ministries, and deposit insurance agencies. Several
recommendations from the results of this study
require government support to improve inclusion
and financial literacy by providing cooperation
opportunities for BMTs with related institutions
such as creative economy ministries and cooperative
ministries in terms of regulations and policies that
are responsive to change as well as in banking, so
that BMTs can develop more dynamically and
professionally on the interests of SMEs.
REFERENCES
Abdul, R., Abdul, R., 2010. Islamic Microfinance: An
Ethical Alternative to Poverty
Alleviation.Humanomics. Vol.26 No.4.
American Institute of Certified Public Accountants
(AICPA), 2013. (online) available
at:www.encyclopedia.com.
Bakhtiari, S., 2006. Microfinance and Poverty
Reduction: Some International
Evidence.International Business Journal and
Economic Research. Volume 5 December.
Bashir, T., Arshad, A., Nazir, A., Afzal, N., 2013.
Financial Literacy and Influence of Psychosocial
Factors. European Scientific Journal. 9 (28).
Dasuki, A. W., 2008. Banking for The Poor: The Role
of Islamic Banking in Microfinance
Initiatives.Humanomics. Vol.24, No.1.
ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy
744

Hidajat, T., 2015. LiterasiKeuangan, STIEBank
BPDJateng.
Hung, A., Parker, A. M.,Yoong, J., 2009. Defining and
Measuring Financial Literacy(September 2, 2009),
RAND Working Paper Series WR-708. Available at
SSRN:https://ssrn.com/abstract=1498674or
http://dx.doi.org/10.2139/ssrn.1498674.
Huston, S.J., 2010. Measuring Financial Literacy.
Journal of Consumer Affairs. 44(2), p.296-316.
Kharchenko, O., 2011. Financial Literacy inUkraine:
Determinants and Implications for Saving Behavior.
Kyiv School ofEconomics.
Kim, K.A., Nofsinger, J.R., 2008, Behavioral Finance
in Asia. Pacific-Basin Fiance Journal. 16(1), p.1-7.
Lusardi, A., Mitchell, O.S., 2008, Planning and
Financial Literacy: How do Woman Fare?National
Bereau of Economic Research.
Mandell, L., Klein L.S., 2007. Motivation and
Financial Literacy.Financial Services Review.
16(2), p.105.
Moore, D.L., 2003. Survey of Financial Literacy in
Washington State: Knowledge, Behavior,
Attitudes, and Experiences, Washington State
Department of Financial Institutions.
Rizki, 2013. The Development of BMT from Yearto
Year, (online) available
at:http://www.puskopsyahlampung.com/.
Vitt, L.A., Andersen, C., Kent,
J.,Lyter,D.M.,Siegenthaler, J.K., Ward,
J.,2000.PersonalFinance and The Rush
toCompetence:FinancialLiteracyEducationintheUS
NationalFieldStudy Commissioned by
TheFannieMaeFoundation. Institute forSocio-
FinancialStudies.
Wibowo, P., 2013. Branchless Banking After
Multilicense: Threat or Opportunity for National
Banking, Bank Indonesia. Jakarta.
Worthington, A.C., 2006. Predicting Financial Literacy
in Australia.Financial Services Review. p.57-
59.Law No.01 of 2013 on Microfinance Institutions.
Republika.co.id. 2015, Sunday, March 22nd.
Indonesia BMT Assets Reach Rp 4.7 Trillion.
The Role of Islamic Microfinance for Enhancing Financial Inclusion and Financial Literacy with ANP Method
745