Risk management practices of Islamic microfinance institutions to improve their financial performance and sustainability: a study on Baitut Tamwil Muhammadiyah, Indonesia
Qualitative Research in Financial Markets
ISSN: 1755-4179
Article publication date: 18 March 2022
Issue publication date: 22 September 2022
Abstract
Purpose
This study aims to explore the risk management practices of Islamic microfinance institutions (IMFIs) to increase their financial performance and sustainability.
Design/methodology/approach
This research used a qualitative approach to increase financial performance and sustainability. The study population comprised the Baitut Tamwil Muhammadiyah (BTM) in Central Java Province, Indonesia. The data collection techniques included questionnaires and an in-depth interview, and the framework was validated by the main participants.
Findings
This study showed that BTMs have implemented risk management using different standards. However, such risk management is carried out partially while prioritising certain risks and using different methods. The risk of Sharia compliance is the most recognised risk, while financing and operational risks are the most anticipated, because these two risk types directly impact financial performance and sustainability. In general, a risk management model can improve financial performance and sustainability. Nevertheless, there are obstacles in implementing risk management at BTMs, which include weak human resources, the employee selection process, human resource development and a good control system.
Originality/value
This research explored best practices for risk management in IMFIs and may contribute to the development of risk management in such institutions to maintain the financial performance and sustainability of their services.
Keywords
Acknowledgements
I would like to express my special thanks of gratitude to respondents of this study and also the Master of Management, Faculty of Economics, Universitas Islam Sultan Agung, Indonesia for the support and permission to conduct this study. Funding: This study was funded by Master of Management, Faculty of Economics, Universitas Islam Sultan Agung, Indonesia.
Citation
Mutamimah, M., Zaenudin, Z. and Bin Mislan Cokrohadisumarto, W. (2022), "Risk management practices of Islamic microfinance institutions to improve their financial performance and sustainability: a study on Baitut Tamwil Muhammadiyah, Indonesia", Qualitative Research in Financial Markets, Vol. 14 No. 5, pp. 679-696. https://doi.org/10.1108/QRFM-06-2021-0099
Publisher
:Emerald Publishing Limited
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