untitled IJIBEC International Journal of Islamic Business and Economics International Journal of Islamic Business and Economics Av a i l a b l e a t h t t p : / / e - j o u r n a l . i a i n p e k a l o n g a n . a c . i d / i n d e x . p h p / I J I B E C / ISSN 255-3216 Article history: Published : 1 December 2017 Keywords: examine the main factors that hinder customers to access a the respondents. The interview involves seven experts in The study reveals that, the religious factor is perceived eligibility, and availability factors. The study indicates that Identifying Financial Exclusion and Islamic Microfinance as An Alternative to Enhance Financial Inclusion Hartomi Maulana dan Khoirul Umam Email: International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6100 heavily on informal sector for their livelihood. They are predominantly microenterprises which are Rakyat , a special loan program large enterprises followed by small enterprises This indicates that microenterprises have thus aims to empirically examine the variables that hinder customers from accessing in East Java province, Indonesia. the is an important step in The common A study in Nigeria conducted by Adewale et are perceived these barriers to validate the constructs. Also to the culture and belief systems of the poor Muslims which stunt its reach in predominantly Muslim remain, International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6 101 In terms of GDP growth, Indonesia has recorded an increasing trend over the last two the income and monetary poverty measures do not always capture the true picture of poverty in International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6102 eventually be unemployment. reduce the unemployment rate. Since the significant number of poor in Indonesia especially East Java depends heavily important role in translating into poverty reduction. These types of enterprises are dominant of the existence of MSMEs as a foundation of economy for capabilities enhancement and poverty alleviation is indisputable. Literature indicates many factors that causes financing barriers. Among the common as financing barriers factors. Some Muslim perceived that conventional financial products balances required by them to open accounts frequently are found to be too high, and also accounts International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6 103 at least four documents in order to open the accounts, such as identification card, letter of recommendation, income slip, and valid address. Another barriers to financial inclusion in in developing countries to apply loans as they are required to pledge their personal assets as secured assets. explains some factors that may . International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6104 the instruments. International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6 105 Affordability Eligibility Accessibility Availability Religious factor Financing barrier factors BMT as Islamic microfinance and its roles in addressing barrier access to finance Concept of BMT and and using The roles of Islamic microfinance in addressing barriers access to finance and , to absorb charity such as and provides for a sustainable source of funds. According to the Islamic International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6106 and as one of the way in absorbing and or or Ijarah with their client. and , to be accessed by the poor as the scheme only allocated to them. and International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6 107 and provided may contain any elements which are prohibited by Islam. These elements include as the rural clients who are predominantly Muslim women. As the religious values are contrary to the in the countries where the Muslims are predominant in society. This asserted by some Islamic scholars who argue that religious and cultural norms in Muslim countries may drive the preference may verbally express a preference for Islamic products simply to demonstrate religiousness. This International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6108 with regard to 3.1. Barrier access to finance number of strong loadings. However, there is no found for cross loading and eigenvalue indicators that contains and ‘no fairness of the product’. The nature of the highly loaded variables on this factor suggests that it can be named International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6 109 This result indicates that religious grounds appears as the most barrier factor to access some which something 1 2 Religious Accessibility Eligibilty Availability contains contains Gharar .721 No fairness of the product annual fees open & maintaining acc. Imposing high interest rate Requiring a minimum amount to open an account .722 Having no ATM outlet in nearby area Requiring complicated people below 21 years excluded Not providing loan for small amount Not providing payment services for small amount group Eigenvalue Percent of variance International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6110 interest rate, expensive fee and high minimum balance requirement. Third factor procedures’, and ‘having no ATM outlet in nearby area’. The nature of the highly loaded variables on this factor suggests that it can be labelled as ‘accessibility barrier’ factors. This factor contributes The results of the factor analysis as presented in Table 1 showed that the variables which have services. not providing loan for small amount’, 3.2. Financial inclusion and Islamic microfinance International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6 111 R1 Master Ass. Manager R2 Master Manager Master PhD 10 years in teaching and research Islamic economics PhD Manager Master research R7 PhD 10 years in teaching Islamic economics conclusion. These feature the themes that were explored from the research respondents interviewed. The themes were formed based on These themes Theme 1: Dual missions of Islamic microfinance (or BMT) establishment in Indonesia; incorporating social and commercial seeking concept of social and commercial viewpoint with regard to in accordance with Shariah is done with good governance. and social mission which as side with its is characterised as an Islamic He cited that: Such model that is worried by capitalist system small number but this involving of large International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6112 small was developed in Indonesia has two mission, social or called as mission or called as was Agreeing with the second respondent stand for . It comes from two words, namely social program and which mean is named of but actually commercial combine where itself is a process of social role which it can be collected from social fund such as , charity, etc. while has establishment which collect and distribute as well as provide missions i.e., business and social, two such as providing higher Theme 2: Suitable and acceptable alternative for enhancing financial inclusion moneylenders International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6 113 you I say yes... One is conducted to provide training program, etc in order to could He said: is not instantly process and it must be combined is concentrated I because poor people if they wish to conduct they must go to directly. On other hand, the poor is exclusively concerned course I important dealing with poor contractual. high interest This was what was said by respondent four in his words: Most are not interested to deal with them as they have no valuable collateral, have low . To strengthen the above provides stated: viewed capitalism system who has a big capital has a power. power and will be controlled Moreover, respondent seven reemphasised as follows: is interacted to microenterprises are concentrated International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6114 funds such as and funds and be distributed lending technique in order to technique repayments in order to missions, i.e., social and business can funds from Islamic philanthropy source of funds such as , and charity. transmission of poverty in Nigeria, Unpublished PhD Thesis, IIUM . The MIT Press, Cambridge, , 4 , . . . . International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6 115 Evidence from Panel Data. . London: Sage. Learning. Database. , www. . , th , CGAP , . USA: SAGE . IRTI IDB SESRIC International Journal of Islamic Business and Economics, 1(2) December 2017, 9 9 - 1 1 6116 . Open University Press, England. , . . .